Not just to the local client base, PRAKASH K. PRAKASH offers a whole spectrum of NRI Services in India for foreign clients also. From handling NRI investment related queries, to providing excellent solutions to NRIs regarding setting up business in India to NRI Banking Solutions to assisting returning/emigrating Indians- our NRI Consultancy Services involves all these aspects & many more. Being an experienced NRI Legal Consultant, our dedicated team has successfully provided effective solutions to many foreign clients over the years.
We have creditable experience of providing multitude of services to a diverse client profile. Non resident Indians comprise a substantial portion of our client base.
We provide a range of services to our NRI clients. Our client profile includes :
But foremost, it is very important to understand that who is considered NON-RESIDENT in India ?
WHO is NRI
An Indian residing abroad is popularly known as Non-Resident Indian (NRI). However, the NRI status is legally defined under the Foreign Exchange Management Act, 1999 and the Income Tax Act, 1961 for applicability of respective laws.
Non Resident under FEMA 1999 :
Person resident outside India means a person who is not resident in India and Non Resident Indian is a person of Indian origin resident outside India who is either a Citizen of India or a person of Indian Origin.
RBI has further clarified that students studying abroad are also to be treated as NRIs under FEMA and accordingly will be eligible for Foreign Investment and FCNR accounts.
Person resident in India means:
(i) A person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include—
(A) A person who has gone out of India or who stays outside India, in either case—
(a) For or on taking up employment outside India, or
(b) For carrying on outside India a business or vocation outside India, or
(c) For any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
(B) A person who has come to or stays in India, in either case, otherwise than—
(a) For or on taking up employment in India, or
(b) For carrying on in India a business or vocation in India, or
(c) For any other purpose, In such circumstances as would indicate his intention to stay in India for an uncertain period;
(ii) Any person or body corporate registered or incorporated in India,
(iii) An office, Branch or agency in India owned or controlled by a person resident outside India,
(iv) An office, Branch or agency outside India owned or controlled by a person resident in India.
Non resident under income-tax act, 1961/wealth tax
The term non-resident is negatively defined under section 6 of the Income-tax Act. An individual who is not a resident under the Income-tax Act is a non-resident (generally, termed NRI). Thus, One should know the definition of a resident and if he is not a resident then he is a non-resident.
The status of a person as a resident or non-resident depends on his period of stay in India. The period of stay is counted in number of days for each financial year beginning from 1st April to 31st March (known as previous year under the Income-tax Act). The definition is explained in pictorial term as under:-
*Not applicable to a resident going outside India for employment, A resident who leaves India as a member of crew of an Indian ship, An Indian citizen or person of Indian origin who is abroad and comes to India for a visit i.e. If such a person stays in India for less than 182 days, he would be a non-resident.
In the case of a ROR, his global income is taxed in India while in case of a Non-resident; only the income earned or received in India is taxed in India.
A returning NRI would generally be assessed as a R but NOR on his return to India. Up to financial year 2002-03, in a given specific situation, a returning NRI was assessed as a R but NOR on his return to India for nine years i.e. income earned on overseas assets or income accruing outside India (unless it is derived from a business controlled in or a profession set up in India) was not taxed in India for 9 years. However, with effect from financial year 2003-04, this particular benefit has been curtailed from nine years to two years i.e. income earned on overseas assets or income accruing outside India (unless it is derived from a business controlled in or a profession set up in India) would now be taxable in India from the third year itself. Accordingly, ‘A’ would now pay tax on his world income sooner than he would have hitherto done.
The impact of R but NOR status is that foreign passive incomes likes interest, dividend, royalty etc. would not be taxable in India in respect of a person who is R but NOR. Even share of profit of a partnership firm or any other business income would not be taxable in India, if the business in respect of which such income arises is not controlled from India. In other words, all foreign sourced income of a R but NOR is not normally taxable in India unless it is derived from a business controlled in or a profession set up in India.
Income accruing outside India would be taxed outside India as well in most cases in accordance with the tax laws of the foreign country and the Double Tax Avoidance Agreement (DTAA) signed between India and the foreign country. He would be entitled to seek relief under the relevant DTAA i.e. avail credit for foreign taxes paid against income tax paid in India. However there are certain practical difficulties associated with the availing credit for foreign taxes paid such as a possible difference in accounting year of the foreign country and India.
Immaculate planning of income tax implications in advance i.e. prior to return to India holds paramount significance for NRIs intending to return to India. An individual who is non-resident for 9 consecutive years, shall remain RNOR for 2 subsequent years and as such his foreign income is not taxable in India while his status is that of RNOR. The status of RNOR renders certain income of such individual non-taxable as explained in Tax liability of NRIs
Where can we help?
PERSON OF INDIAN ORIGIN (PIO)
A Person of Indian Origin (PIO) is literally, simply a person of Indian origin who is not a citizen of India.
PIO for the purpose of acquisition and transfer of immovable property in India : PIO means a citizen of any country other than Bangladesh or Pakistan or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan if –
PIO for the purpose of investment of shares in India / opening non-resident account in India/ remittance of assets, PIO means a citizen of any country other than Bangladesh or Pakistan, if-
PIO CARD SCHEME -2002
The new PIO Card Scheme, 2002, is in operation since 15th September, 2002. All persons of Indian origin who are in possession of the passport of any other country except Pakistan, Bangladesh, Afghanistan, Nepal, Bhutan, China, Sri Lanka or any other country specified by the government, are eligible for PIO Card if:
Foreigners holding PIO cards-
Foreigners holding PIO cards can travel to India on their new passports with the valid PIO card having endorsement of the old passport on it, even if they are not carrying their old passports.
However, such foreigners are advised to have necessary endorsement of the new passport from the competent authority on their PIO cards to avoid any inconvenience in future.
The scheme is broad-based, covers up to four generations and also the foreign spouse of a citizen of India or a PIO.
The benefits accruing to a PIO card holder:
Where can we help ?
Non resident Indians who have/ intend to have investments in India
For Non resident Indians who have certain investments, property and bank accounts in India, we manage their financial affairs in India in its entirety as follows:
Non resident Indians who inherit assets in India
A NRI inherits assets in the form of investments, property etc in India and intends to either liquidate them and repatriate the sale proceeds of the same or manage the same in most tax efficient manner. We enable him to achieve these objectives by facilitating the clearance from Income Tax Services, RBI and other regulatory authorities.
Non resident Indians/ other Non-residents who have/ intend to set up a business in India
A NRI/ other non-resident businessman intends to set up business in India. We enable him to do so by providing the following services:
NRI who return to India for good, should know various aspects of Foreign Exchange Regulations (FEMA), Indian Taxation and Banking Regulations in order to rearrange his financial affairs in India and outside India.
When relocating to India, the following aspects should be taken care of :
Where can we help ?
Emigrating Indian/ New NRI An emigrating Indian/ new NRI wants to retain/ disinvest assets (property, investments, business) acquired in India and repatriate the income/ sale proceeds thereof. We enable him to do so as follows:
Banking accounts can be ‘Rupee Account’ or ‘Forex Account’.
Rupee Account can be:
Forex Account can be:
Where can we help ?
Q.1 Who can purchase immovable property in India?
Ans. Under the general permission available, the following categories can purchase immovable property in India:
Non-Resident Indian (NRI)
Person of Indian Origin (PIO)
The general permission, however, covers only purchase of residential and commercial property and is not available for purchase of agricultural land / plantation property / farm house in India.
Q.2. Can NRI/PIO acquire agricultural land/ plantation property / farm house in India?
Q.3. Are any documents required to be filed with the Reserve Bank after the purchase?
Ans. No. An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents/reports with the Reserve Bank.
Q.4. How many residential / commercial properties can NRI / PIO purchase under the general permission?
Ans. There are no restrictions on the number of residential / commercial properties that can be purchased.
Can a NRI/PIO acquire immovable property in India by way of gift? Can a foreign national acquire immovable property in India by way of gift?
Ans. (a) Yes, NRIs and PIOs can freely acquire immovable property by way of gift either from
i) a person resident in India; or
ii) an NRI; or
iii) a PIO.
However, the property can only be commercial or residential in nature. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift.
(b) A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of gift.
Q.5. Can a non-resident inherit immovable property in India?
Ans. Yes, a person resident outside India i.e. i) an NRI ii) a PIO and iii) a foreign national of non-Indian origin can inherit and hold immovable property in India from a person who was resident in India.
Q.6. From whom can a non-resident person inherit immovable property?
Ans. A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from
(a) a person resident in India
(b) a person resident outside India
However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange law in force or FEMA regulations, applicable at the time of acquisition of the property.
Q.7. Can an NRI/ PIO/foreign national sell his residential / commercial property?
Ans. (a) NRI can sell property in India to
i) a person resident in India; or
ii) an NRI; or
iii) a PIO.
(b) PIO can sell property in India to
i) a person resident in India; or
ii) an NRI; or
iii) a PIO – with the prior approval of the Reserve Bank
(c) Foreign national of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan can sell property in India with prior approval of the Reserve Bank to
i) a person resident in India
ii) an NRI
iii) a PIO
Q.8. Can a non-resident owning / holding an agricultural land / a plantation property / a farm house in India sell the said property?
Ans. (a) NRI / PIO may sell agricultural land /plantation property/farm house to a person resident in India who is a citizen of India.
(b) Foreign national of non-Indian origin resident outside India would need prior approval of the Reserve Bank to sell agricultural land/plantation property/ farm house in India.
Q.9. Can a non-resident gift his residential / commercial property?
(a) NRI / PIO may gift residential / commercial property to –
(i) person resident in India or
(ii) an NRI or
(b) A foreign national of non-Indian origin requires the prior approval of the Reserve Bank for gifting the residential / commercial property.
Q.10. Can an NRI / PIO / foreign national holding an agricultural land / a plantation property / a farm house in India, gift the same?
Ans. (a) NRI / PIO can gift an agricultural land / a plantation property / a farm house in India only to a person resident in India who is a citizen of India.
(b) A foreign national of non-Indian origin would require the prior approval of the Reserve Bank to gift an agricultural land / a plantation property / a farm house in India.
Q.11. How can an NRI / PIO make payment for purchase of residential / commercial property in India?
Ans. Payment can be made by NRI / PIO out of:
(a) funds remitted to India through normal banking channels or
(b) funds held in NRE / FCNR (B) / NRO account maintained in India
No payment can be made either by traveller’s cheque or by foreign currency notes or by other mode except those specifically mentioned above.
Q.12 Is repatriation of application money for booking of flat / payment made to the builder by NRI/ PIO allowed when the flat or plot is not allotted or the booking / contract is cancelled?
Ans. The Authorised Dealers can allow NRIs / PIOs to credit refund of application/ earnest money/ purchase consideration made by the house building agencies/ seller on account of non-allotment of flat/ plot/ cancellation of bookings/ deals for purchase of residential, commercial property, together with interest, if any, net of income tax payable thereon, to NRE/FCNR account, provided, the original payment was made out of NRE/FCNR account of the account holder or remittance from outside India through normal banking channels and the Authorised Dealer is satisfied about the genuineness of the transaction.
Q.13. Can NRI / PIO repatriate outside India the sale proceeds of immovable property held in India?
Ans. (a) In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by a NRI / PIO, the Authorised Dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely:
(i) the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations;
(ii) the amount to be repatriated does not exceed:
(iii) in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.
For this purpose, repatriation outside India means the buying or drawing of foreign exchange from an authorised dealer in India and remitting it outside India through normal banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorised dealer from which it can be converted in foreign currency.
(b) in case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India (as defined in Section 6 of the Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account.NRI/PIO are also allowed by the Authorised Dealers to repatriate an amount up to USD 250000 per financial year out of the balance in the NRO account / sale proceeds of assets by way of purchase / the assets in India acquired by him by way of inheritance / legacy. This is subject to production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and a tax clearance / no objection certificate from the Income Tax Authority for the remittance. Remittances exceeding US $ 250000 in any financial year requires prior permission of the Reserve Bank.
(c) A person referred to in sub-section (5) of Section 6 of the Foreign Exchange Management Act 3 or his successor shall not, except with the prior permission of the Reserve Bank, repatriate outside India the sale proceeds of any immovable property referred to in that sub-section.
Q.14. Can an NRI/PIO repatriate the proceeds in case the sale proceeds were deposited in the NRO account?
Ans. NRI/PIO may repatriate up to USD 250000per financial year (April-March) from their NRO account which would also include the sale proceeds of immovable property. There is no lock in period for sale of immovable property and repatriation of sale proceeds outside India.
Q.15. If the immovable property was acquired by way of gift by the NRI/PIO, can he repatriate abroad the funds from sale of such property?
Ans. The sale proceeds of immovable property acquired by way of gift should be credited to NRO account only. From the balance in the NRO account, NRI/PIO may remit up to USD 1.25 million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes
Q.16. Can NRI / PIO rent out the residential / commercial property purchased out of foreign exchange / rupee funds?
Ans. Yes, NRI/PIO can rent out the property without the approval of the Reserve Bank. The rent received can be credited to NRO / NRE account or remitted abroad. Powers have been delegated to the Authorised Dealers to allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs/PIO who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.
Q.17. 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?
Ans. Yes, A person who had bought the residential / commercial property / agricultural land/ plantation property / farm house in India when he was a resident, continue to hold the immovable property without the approval of the Reserve Bank even after becoming an NRI/PIO. The sale proceeds may be credited to NRO account of the NRI /PIO.
Q.18. Can the sale proceeds of the immovable property referred to in Q. No. 17 be remitted abroad?
Ans. Yes, from the balance in the NRO account, NRI/PIO may remit up to USD 1.25million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.
Q.19 Is an NRI/PIO is liable to pay taxes and file its Income Tax Return on Sale of Immovable property in India?
Ans. Yes, There exist a liability to file Income Tax Return and pay due taxes, if any, arising out of Sale of Immovable property in India. Further, other Income like Interest, rent, dividend, if any, arising in India will also be included in filing Income Tax Return and will be taxed according to Income Tax Act, 1961.
Q.20 Can a NRI transfer money from NRO to NRE Account?
Yes, the Reserve Bank of India (RBI) has permitted transfer of funds from NRO to NRE account subject to payment of applicable taxes within the overall ceiling of $ 250000 in a financial year and production of Certificates like 15CA & 15CB from Chartered Accountant.
Q. 21. If an individual of Indian origin staying abroad has to remit some money to his parents in India, will such repatriation of money to India affect the taxability of the parents?
Ans.: Repatriation of money to parents of an individual will not be liable to be taxed in India in the hands of the parents. This is because gifts made to relatives are not taxable as per the Income‐tax Act.
Q. 22 If a non resident is willing to invest in the Equity Shares or debentures of an Indian Company by utilizing its foreign currency as a medium of purchase, then are there any specific provisions relating to the taxability of such shares?
Ans.: In case of non‐resident capital gains arising from the sale of shares, or debentures of, an Indian company shall be computed by converting the cost of purchase, and the sale consideration received as a result of sale of such shares and debentures, into the same foreign currency as was initially utilized in the purchase of the shares or debentures, and the capital gains so computed in such foreign currency shall be reconverted into Indian currency. Moreover the aforesaid manner of computation of capital gains shall be applicable in respect of all capital gains arising from every reinvestment thereafter in sale of shares or debentures of an Indian company.
Q. 23 Whether dividend income earned by a non – resident individual or foreign company from an Indian Company is taxable?
Ans.: The dividend income earned by a non – resident individual or foreign company from an Indian Company is exempt from tax in India.
Q. 24 Can a Non‐Resident become a shareholder or a director in an Indian Company?
Ans.: Yes, a Non‐Resident can become a shareholder or a director in an Indian Company.
Q. 25 How can a NR file his return of income even if he is not physically present in India?
Ans.: As per the provisions of the Income Tax Act, 1961, a non – resident can file his/ her return of income by authorizing another person through a signed power of attorney to sign his/ her return of income on his/ her behalf.
A non‐resident, even though he/she is not physically present in India, can himself file his return of income by furnishing the same electronically on the website of Directorate of Income Tax by following the procedure mentioned therein.
Q. 26 If a Non Resident individual of Indian origin is returning back to India with all his assets including money, then what are the tax implications on his income and assets?
Ans.: If a non‐resident individual is returning back to India then for the purpose of Income Tax his residential status shall be computed as discussed above and accordingly his/her income shall be taxed. While for the purpose of wealth Tax a non‐ resident individual returning back to India will not have to pay Wealth Tax for seven successive years after his return to India on money and assets which have been acquired outside India one year before his return to India.
Contact PKP for NRI Consultancy Services
Contact Person : Mr. Prakash k Gupta
Telephone Numbers : +91-11-23382207/ 23388753
Mobile Number : +91-9811031841