Can Recent Immigrant continue to hold Indian Assets?
All kind of assets in India such as properties, bank deposits, stocks and securities, life insurance policies, loans, company deposits, debentures, bonds etc. acquired, held or owned by an individual while he/she was in India can be continued to be so held and dealt in any manner even after the individual leaves India for permanent settlement.
In view of the above, a Recent Immigrant on leaving India has to deal with his/her various accounts/activities in India in the following manner:
What shall be the impact on Indian Assets:
Resident Savings Bank Account: Designate the Resident Savings Bank Account to Non-resident Ordinary (NRO) Bank Account
Resident Current Account: Designate the Current Account to NRO Bank Account
Resident Fixed Deposit (FD): 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 open new NRO FD.
Shares, Debentures, Bonds, Units of Mutual Funds, etc.: A Recent Immigrant is required to inform all the companies, funds etc. as to change of his/her residential status from Resident to non- resident.
NRO Bank Accounts can be opened in the form of Savings, Current, Recurring, Fixed Deposit Accounts.
Recent Immigrant have an option to open and maintain NRE a/c and FCNR a/c only after becoming a NRI.
Business in India:
RBI has given general permission to NRIs 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. However, the firm or proprietary concern should not be engaged in any agricultural/plantation activity or real estate business or print media.
Any receipt or payment of funds from / to Residents should be in accordance with the provisions of FEMA, i.e.
Providing guarantee to any person
Taking loans from any person
Acquisition and/or transfer of shares and securities
Granting loans and advances.
Points to Remember:
NRIs are eligible to repatriate income earned in India from rupee assets held in India up to USD 1 million per FY.
Recent Immigrant may opt to give a general / specific Power of Attorney (POA) to a close relative to take certain actions on his behalf while he is outside India.
NRI may be eligible to avail benefits of lower rates of taxes as may be prescribed by the DTAA entered into between India and his country of residence. He may also be eligible to claim foreign tax credit in his country of residence for the taxes paid in India.
Frequently asked questions
What are the points to be kept in mind by a person leaving India?
The person is required to intimate his Bankers about the change in the status as “Non Resident” under FEMA.
He may opt for giving a general / specific POA to a close relative to do things on his behalf during his stay abroad.
Intimate the companies, firms where he is a shareholder, partner, and deposit holder about the change in his status as non-resident under FEMA.
Retire from the firm / company if it is carrying on business of real estate, nidhi, lottery, betting, gambling, manufacturing of cigars, etc., trading in TDRs etc.
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).
Taxability of Income earned in and outside India in the year of departure and in the subsequent period.
Application of Double Taxation Avoidance Treaty, where applicable.
Advice / information on various aspects of Tax Laws / FEMA, 1999 in respect of holding of assets in and outside India / earning income in and outside India and its taxability.
When filing return of income in India, he should state his residential status as ‘NRI’ instead of resident.
Can an NRI hold and operate Resident banking accounts once he leaves India?
Can a person continue holding shares and securities in Indian Companies on leaving India?
What shall be the taxability of a Recent Immigrant who earns income outside India?
A Recent Immigrant shall have to determine his residential status for the year. In case he is a ROR, his income outside India shall be taxable. However, in case he is a non-resident for the financial year, income outside India shall be outside the scope of taxability and the income earned outside India shall not be taxable in India. He can avail the benefit of DTAA entered into between India and his home country to avoid double taxation.
Where a person is a Partner in a Registered Firm in India and intends to shift to another country can he continue as a partner of the firm?
Can a person who had bought immovable property, when he was a resident, continue to hold such property even after becoming an NRI/PIO? In which account can the sale proceeds of such immovable property be credited?
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 the approval of RBI even after becoming an NRI. The sale proceeds may be credited to NRO a/c of the NRI.
Can the sale proceeds of the immovable property referred to in above question be remitted abroad?
Yes, from the balance in the NRO a/c, NRI/PIO may remit up to USD 1 Million, per FY, subject to the satisfaction of AD Bank and payment of applicable taxes.
Consider a person living in US on H1B work visa for the past two years. Prior to that he lived and worked in India and had opened a PPF a/c. Can he continue contributing to that account now? If so, what will be the tax implications?
From which account can the person who left India invest in PPF a/c?
The person can use funds in the NRE a/c or NRO a/c to make investments in the PPF a/c. As per the PPF rules an individual is required to at least invest Rs.500/- per FY in the PPF a/c. In case he fails to make the minimum investment in a year or years his account will be considered dormant. Subsequently, when the he wants to revive the account, he will have to invest Rs.500/- for each year for which he did not make investment plus a penalty.
What happens on maturity of his PPF Account is an NRI?
A NRI is not eligible for extension on the PPF a/c. Hence, at the time of maturity the NRI is required to withdraw the balance from the PPF a/c. There is no tax implication in India on maturity of PPF a/c. The amount in the PPF a/c can be transferred to the NRO a/c.
What happens if the NRI leave the account unattended past the maturity date?
In such cases the account will be considered ‘extended without contribution’ in blocks of 5 years for an unlimited period of time. Extended without contribution means that the NRI will not have to make the minimum yearly investment of Rs.500/-. His account will continue to earn interest at the prevailing rate. There are instances where banks allow NRIs to extend the PPF account only for 2 blocks of 5 years or 3 blocks of 5 years. But according to the rule book the extension can be made for an unlimited period of time.