Recent Immigrant

Who is a Recent Immigrant?

Ans. Recent Immigrant is a person who leaves India to settle permanently in another country.

Can Recent Immigrant continue to hold Indian Assets?

Ans. Yes, Recent Immigrant may hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such assets were acquired, held or owned by him/her when he/she was residing in India or it were inherited from a person who was resident in India.

Is RBI permission required by Recent Immigrant for retaining their Indian assets after they leave India?

Ans. No, RBI permission is not required.

What shall be the impact on Indian Assets?

Ans.


Asset

Treatment to be given

Resident Savings Bank a/c

Re-designate to NRO Savings a/c

Resident Current a/c

Re-designate to NRO Current a/c

Resident Fixed Deposit (FD)

Re-designate the Resident FD to NRO FD.

Further it is to be noted that depending on Bank’s policy and procedures, FD may be directly designated to NRO FD or may be pre-matured and then a new NRO FD may be opened.

Shares, Debentures, Bonds, Units of Mutual Funds, etc.

Inform all companies, funds etc. as to change of his/her residential status from Resident to non- resident.

Note:

i. NRO Bank a/c can be opened in the form of Savings, Current, Recurring, Fixed Deposit  
ii. Recent Immigrant has an option to open and maintain NRE a/c / FCNR a/c only after becoming a NRI

Can a person continue to hold and operate Resident banking a/c once he leaves India?

Ans.

Recent Immigrant on leaving India has to re-designate his/her resident a/c. Resident savings / current / fixed deposit a/c respectively.

Recent Immigrant shall be eligible to open and maintain a NRO a/c, NRE a/c and FCNR Deposit account only after becoming Non-resident.

Can a person continue to hold shares and securities of Indian Companies on leaving India?

Ans.

Yes, Recent Immigrant can continue to hold the shares and securities in Indian Companies. However, he/ she is required to inform all the companies, fund houses, depository participants, etc. as to change of residential status from resident to “Non Resident”. 

Recent Immigrant on becoming Non-resident can make further investments in shares and securities of Indian Companies through stock market under PIS route and on non-repatriation basis but subject to fulfilment of stipulated conditions.

Is an individual required to obtain any certificate from Indian Income Tax Department while departing India for good?

Ans.

A person leaving India for good is required to make an application to the Indian Income Tax Department before leaving India for Tax Clearance Certificate/ No Objection Certificate. The type of form and related documents differ based on whether the individual is domiciled in India or not.

• Individual domiciled in India  -  Form 30C should be filed along with necessary supporting documents

• Individual not domiciled in India -  Form 30A should be filed along with necessary supporting documents

Generally, the Income Tax Department does not issue such Tax Clearance Certificate/ No Objection Certificate. However, an acknowledgement of the submission filed may be carried by the individual while departing India.

Can Recent Immigrant continue to operate his/her business in India or continue to be a partner in a Registered Firm in India?

Ans.

RBI has given general permission to Non-resident’s to invest on non-repatriation basis by way of capital contribution in any proprietary or partnership concern engaged in any industrial, commercial or trading activity in India, subject to FEMA provisions.

RBI has not prescribed clear guidelines on continuation of proprietary concern or as a partner in a firm in India. In general, it may be considered that, a person leaving India can continue his/her business operations in India and continue to be a partner in a firm in India. However, it shall be ensured that the firm or proprietary concern is not engaged in any agricultural in any agricultural/plantation activity or real estate business or print media.

If existing business activity is specifically prohibited for Non-resident’s, then Recent Immigrant will have to either discontinue the business operation or obtain required permission from RBI for the same.

Can a person who had bought immovable property, when he was a resident, continue to hold such property even after becoming a Non-Resident? In which account can the sale proceeds of such immovable property be credited?

Ans. Yes, a person who had bought the residential / commercial property / agricultural land/ plantation property/ farm house in India when he was a Resident can continue to hold the immovable property without approval of RBI even after becoming Non-resident. The sale proceeds may be credited to his/her NRO a/c.

Can the sale proceeds of the immovable property referred to in above question be remitted abroad?

Ans. Yes, from balance in NRO a/c, Non-Resident may remit up to USD 1 million per FY, subject to the procedure mandated by AD Bank and payment of applicable taxes.

What are points to be kept in mind by a person leaving India?

Ans.

i. Planning the date and month of departure out of India so as ensure minimum tax liability in the year of departure (i.e. April to March).
ii. Taxability of Income earned in and outside India in the year of departure and in the subsequent period.
iii. Advice / information on various aspects of Tax Laws / FEMA in respect of holding of assets in and outside  India / earning income in and outside India and its taxability.
iv. When filing ROI in India, he should state his residential status as “Non Resident” instead of resident.
v. The person is required to intimate his Bankers about the change in the status as “Non Resident” under FEMA.
vi. He may opt for giving a general / specific POA to a close relative to do things on his behalf during his stay abroad.
vii. Intimate the companies, firms where he is a shareholder, partner, and deposit holder about the change in his status as “Non Resident” under FEMA.
viii. Retire from firm/company if it is carrying on business of real estate, nidhi, lottery, betting, gambling, manufacturing of cigars, trading in TDRs etc.
ix. Application of Double Taxation Avoidance Treaty (DTAA) between India and country of new residence, where applicable.

What shall be the tax liability of a Recent Immigrant in India on income earned in and outside India?

Ans.

Recent Immigrant shall have to determine his residential status for the relevant FY as per the Income-tax Act, 1961. 

If he/she is a ROR in the year of departure, both income earned in and outside India shall be taxable in India and if he/she is a Non-Resident/RNOR for the FY, only income which is received, earned or accrued outside India shall be taxable in India.

Any individual whose taxable income in India for the relevant FY exceeds the basic exemption limit (i.e. Rs. 2,50,000/- for FY 2018-19 and FY 2019-20, is liable to file ROI in India before the prescribed due date.
 
While filing the ROI, one may avail the benefit of DTAA entered into between India and country of his residence to avoid any double taxation. In case of double taxation, credit of taxes paid in the country other than his resident country may be availed subject to prescribed conditions of such DTAA.

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

Ans.

Recent Immigrants are not required to report about their change in residential status to RBI. However, they are required to mention his revised status while filling his ROI with the Income Tax Department.

Further, Recent Immigrants on becoming Non-resident are no more required to report their overseas assets in their ROI to be filed in India in Foreign Asset (FA) Schedule. They are also not required to report about their overseas assets to RBI.

Consider a person living in US on H1B work visa for the past 2 years. Prior to that he lived and worked in India and had opened a PPF a/c. Can he continue contributing to that a/c now? If so, what will be the tax implications?

Ans.

PPF a/c can be opened only by an Indian resident. However, if an Indian resident after opening a PPF a/c becomes a Non-resident, he can still continue to contribute to the account from his/her NRO or a NRE a/c. On completion of period of 15 years, if he is a Non-Resident he will be unable to extend the PPF a/c and will need to mandatorily close the a/c and withdraw the sum.

Non-resident can continue to contribute to the PPF a/c and get the benefit of deduction under section 80C of the Act. The interest on PPF a/c would continue to be exempt under the Act. The minimum contribution amount is Rs. 500 and the maximum PPF limit is Rs. 1.5 lakh.

What happens on maturity of his PPF a/c (if he is an NRI)?

Ans. Non-Resident is not eligible for extension on PPF a/c. Hence, at time of maturity Non-Resident is required to withdraw balance from the PPF a/c and transfer to NRO a/c. There is no tax implication in India on maturity of PPF a/c. However, non-resident shall have to check the tax implications of such maturity in his resident country and applicable DTAA provisions.

Can relative of NRI take actions on behalf of NRI while he is outside India?

Ans. Yes, relative can act as long as NRI has given a general/ specific POA to take certain authorized actions on NRI’s behalf while he/she is outside India.

How much jewellery can be carried while going abroad?

Ans.

Taking personal jewellery out of India is as per the Baggage Rules, governed and administered by Customs Department, Government of India. While no approval of the Reserve Bank is required in this case, approvals, if any, required from Customs Authorities may be obtained.

Can a Resident use the limit of USD 2,50,000/- per FY under LRS for the purpose of emigration?

Ans.

Yes. A Resident may use his/her LRS limit of USD 2,50,000/- per FY to remit funds to his/her Overseas bank a/c to meet emigration expenses. Further, upon becoming a Non-resident, such recent immigrant may also remit up to USD 1 million per FY to Overseas bank a/c, subject to the procedure mandated by AD Bank and payment of applicable taxes.