Returning Indian

Can a Returning Indian hold Overseas Assets?

Ans.

A Returning Indian may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such assets were acquired, held or owned by him when he was a non-resident or were inherited from a non-resident person.

What shall be the impact on Indian Assets?

Ans.

Asset

Treatment to be given

Non-Resident Ordinary (NRO) A/c

Re-designate to Resident a/c

Foreign Currency Non-Resident (FCNR) A/c

Hold upto maturity; Upon maturity should be converted into Rupee Account or RFC a/c

Non-Resident External (NRE) A/c

 

Re-designate to Resident a/c or transfer balance to RFC a/c*

Shares and Securities

Returning Indian is required to inform the Depository/ Companies about change of his/her residential status from non-resident to resident            

*RFC a/c:
• Returning Indians, on becoming residents and subject to fulfillment of conditions for opening RFC a/c can open and maintain such accounts with AD Bank
• Funds held in RFC a/c are fully repatriable and denominated in forex

Is NRI required to inform anyone when he returns to India permanently?

Ans.

Upon return to India for good, an NRI ought to inform the following persons about the change in their residential status:
i. AD Bank with whom they hold banking accounts 
ii. Depository participant with whom they hold DEMAT accounts
iii. Companies where NRIs are Shareholders / Debenture holders and firms where they are partners.

Whether a Returning Indian is required to inform Government Authorities about his change in residential status and overseas assets that he holds?

Ans.

A Returning Indian is not required to report about his change in residential status to RBI. However, he is required to mention his revised status while filling his return of income.

Further, a person who is ROR as per Act is required to report his Overseas Assets in his ROI to be filed in India annually in Foreign Asset (FA) Schedule. However, he is not required to report about his overseas assets to RBI.

What shall be the tax implications on a Returning Indian as per the Act?

Ans.

i. The tax liability of a person returning to India would depend on the Residential Status of a person as per the Act.

ii. Under the Act, income earned outside India is liable to tax in India only if the person is ROR. 

iii. A returning Indian who has been a NR as per the Act for 9 years or more or whose stay in India was less than 729 days in preceding 7 years, then generally for 2 successive years he may be considered as a RNOR.

iv. Interest paid by schedule banks to NRI or to a RNOR on RFC deposits is exempt from tax under the Act. The exemption, in respect of RFC a/c, continues till such time as the account holder continues to be a RNOR.

v. Pension from NRI’s former employer after return to India may be liable to tax in India, subject to provisions of the Double Taxation Avoidance Agreement between India and the country from which the NRI is receiving such amount (and was resident in).

What is the best time for Returning Indian to move to India for good?

Ans. A Returning Indian should come back on or after February 1 (or February 2 in case of a leap year) of a FY in order to ensure NR status in the year of return. However, if stay in India in prior 4 previous FYs does not exceed 365 days then one may return after 2nd October (or October 3rd in case of a leap year).

When non-residents return to India for good, are they allowed to keep foreign currency balances held in NRE / FCNR a/cs?

Ans.

Returning Indians, i.e. those Indians, who were non-residents earlier, and are returning now for permanent stay, are permitted to open, hold and maintain with an AD Bank, RFC a/c to keep their foreign currency assets. Assets held outside India at the time of return can be credited to such accounts. The funds in RFC a/c are free from all restrictions regarding utilization of foreign currency balances including any restriction on investment outside India. The facility is also available to residents provided foreign exchange to be credited to such account is received out of certain specified type of funds/accounts.

It shall be noted that Returning Indians are required to re-designate their NRE a/c to Resident a/c immediately on their return to India. However, FCNR a/c may be held up to maturity.

What are permissible transactions in RFC a/c?

Ans.

Permissible credits

Permissible Debits

·         Foreign currency received as pension / superannuation / other monetary benefits from his employer outside India

·         Foreign currency received on sale of overseas assets /  gift or inheritance / proceeds of life insurance policy and repatriated to India

·         Foreign currency acquired or received before 8th July, 1947 or any income arising or accruing thereon which is held outside India or acquired as gift or inheritance.

·         RFC a/c shall be free from all restrictions regarding utilization of foreign currency balances including any restriction on investment in any form, by whatever name called, outside India.

 

Can funds in RFC a/cs be remitted abroad?

Ans. Balance in RFC a/c can be utilized without any restrictions for remittance and/ or investment abroad. It can also be utilized for maintenance of dependents or any other personal purposes outside India.

What is tax treatment of interest on RFC a/c?

Ans. Interest on RFC a/c will be exempt from tax as long as Returning Indian’s residential status under the Act is “RNOR”.

Is RBI permission required by NRI for retaining assets abroad after his return to India?

Ans. RBI permission is not required.

Can benefit of concessional tax treatment under chapter XIIA of the Act comprising sections 115C to 115L be continued after NRI returns to India?

Ans.

The benefit of concessional tax treatment under chapter XIIA may continue even after NRI becomes a resident subject to conditions specified in the Act.

Can RFC a/c be opened only by a Returning Indian?

Ans. RFC a/c can be opened by both a Returning Indian as well as a RI. However, the RI shall open RFC (Domestic) account.

Is Income from assets held outside India taxable for a Returning Indian?

Ans. Income earned from assets held outside India by a Returning Indian will not be taxable till his residential status will be RNOR under the Act.