Returning Indian

Who are Returning Indians?

Ans.

Returning Indian are those Indians who are likely to return to India for good from the country where they were resident.

Can a Returning Indian hold Overseas Assets?

Ans.

Yes, Returning Indians 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 them when they were a non-resident or were inherited from a non-resident person.

Is RBI permission required by Returning Indians for retaining their overseas assets after their return to India?

Ans.

No, RBI permission is not required.

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            

What is a RFC a/c and who can open it?

Ans.

RFC a/c is known as Resident Foreign Currency a/c and a person resident in India including Returning Indians may open, hold and maintain such account with an AD Bank in India. Funds held in RFC a/c are fully repatriable and denominated in forex.

Is Non Resident Indian required to inform anyone when he returns to India permanently?

Ans.

Upon return to India for good, Returning Indian 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/LLPs 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.

Returning Indians 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 return of income with the Income Tax Department.

Further, Returning Indians upon becoming ROR as per The Act is required to report their Overseas Assets in their ROI to be filed in India annually in Foreign Asset (FA) Schedule. However, they are not required to report about their overseas assets to RBI.

What shall be the tax implications on the income earned by a Returning Indian as per The Act?

Ans.

The scope of taxable income for a Financial Year (FY) would depend upon the Residential Status (RS) of Returning Indian under The Act. The RS depends on the physical presence of the Returning Indians in India during the FY and prior 10 FYs.

Accordingly, taxability of income earned by Returning Indian shall be as under:

• if his/her RS is as a Non Resident in the year of return to India, then income earned outside India shall not be taxable in India in that year. 

• if his/her RS is as a RNOR then income earned outside India shall not be taxable in India as long as his RNOR status is achieved in the year of return and later years by restricting number of days stay in India (Generally one can achieve RNOR status for a period of two years subsequent to the year of return upto FY 2019-20. Further, as per the changes proposed in the Budget 2020, one may achieve RNOR for a period of three years subsequent to the year of return from FY 2020-21 onwards if number of days of stay is planned carefully).  

• if his/her RS is as ROR in the year of return to India then income earned in India and outside India shall be taxable in India the year of return. 

Returning Indian should carefully plan his stay in India in the year of return and subsequent years to take the benefit of Non Resident/ RNOR status and protect the exposure to tax in India of the income outside India.

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 Non Resident 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).

Whether Returning Indians are allowed to keep balances held in NRE / FCNR a/c on their return to India?

Ans.

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

What shall be the tax treatment of interest earned on NRO a/c and NRE a/c held by Returning Indian upon his/her return to India?

Ans.

• Interest income on NRO a/c / term deposits in NRO a/c – 
A Returning Indians, upon return to India for good will have to re-designate such NRO account to resident rupee account and interest income earned on such rupee a/c shall be taxable. 

• Interest income on NRE A/c/ term deposits in NRE A/c- 
A Returning Indian, upon return to India for good will have to either re-designate such NRE account to resident rupee account or transfer the balance to RFC a/c.

The interest income from NRE A/c is exempt in the hands of person resident outside India as per FEMA. As the Returning Indian (person who has come to India for good) will no longer be person resident outside India as per FEMA, accordingly interest earned on such re-designated rupee a/c will be taxable from the year of return. However, interest earned on RFC A/c deposits (approved by RBI) is exempt from taxes till the time the Returning Indian qualifies as RNOR as per The Act. Returning Indians upon becoming ROR as per The Act, the interest income earned on RFC A/c shall be taxable in India subject to the provisions of Chapter XIIA as mentioned in FAQ r.

What is the tax treatment of the interest on FCNR deposit held by Returning Indian on their return to India?

Ans.

Interest earned on FCNR deposit is exempt from tax in the hands of Returning Indian till the time the Returning Indian is NR or RNOR as per The Act. Returning Indian upon becoming ROR, it shall be at the discretion of Returning Indians to avail the benefits of concessional rate of tax on meeting all the prescribed conditions.

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

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 IT Act.

What are permissible transactions in RFC a/c?

Ans.

Permissible credits

Permissible Debits

·         Foreign exchange received as pension / superannuation / other monetary benefits from the employer outside India

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

•    Balances in NRE/ FCNR (B) accounts on change in residential status  from Non-Resident to Resident

·         Foreign exchange acquired before 8th July, 1947 or any income arising on it which is held outside India with RBI permission

•     No restrictions on utilisation in/ outside India. 

Whether funds in RFC a/cs can 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 Indians residential status under The Act is “RNOR”.

What are the benefits of RFC accounts?

Ans.

The benefits of RFC accounts are:

·   Returning Indian may safely park their foreign currency funds on returning to India and such funds (including interest) shall be freely repatriable.

·   In case there is change in your RS status to Non Resident Indian, the funds parked in RFC account can be transferred to NRE/FCNR account.

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

Ans.

Non Resident Indians are taxed at concessional rate on certain specified assets subject to specified conditions. Returning Indian may continue to get the benefit of such concessional tax rate till the transfer / conversion (otherwise than by transfer) into money of such


Any additional compliance required by Returning Indian on their return to India?

Ans.

•Resident Indians are mandatorily required to quote Aadhar Number/ Enrolment ID of Aadhar in ROI in India and hence Returning Indian must obtain the same before the due date for filing the ROI.

 

•Asset Liability (AL) is a Schedule of the ROI which is required to be mandatorily filled by Individuals and HUFs, if their total income exceeds Rs. 50,00,000/- in a FY. The said Schedule requires reporting of specified Indian Assets and corresponding Liabilities at the end of the FY. Thus, Returning Indian will need to comply with such reporting requirements if their income exceeds Rs. 50,00,000/- in a FY.


Should foreign coins be surrendered to AD Bank on return from abroad?

Ans. The residents can hold foreign coins without any limit.