NRI Related Services

Not just to the local client base, PRAKASH K PRAKASH offers a complete range of NRI services in India for foreign client also. From handling NRI investment related queries, to provide solution for setting up business in India, 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 experience in providing a multitude of services to diverse client profile as under:-

  • Non resident Indians who have/ intend to have investments in India
  • Non resident Indians who inherit assets in India
  • Non resident Indians/Non-residents who have intention to set up a business in India
  • Returning NRI.
  • Emigrating Indian/New NRI
  • NRI Intending to remit funds from India to Abroad.

WHO is NRI

An Indian residing abroad is popularly known as Non-Resident Indian (NRI). However, the term NRI has been defined in different ways under the Foreign Exchange Management Act, 1999 (FEMA) and the Income Tax Act, 1961(IT Act).

 

NON RESIDENT UNDER FEMA:

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 is called NRI. RBI has further clarified that students studying abroad are also to be treated as NRIs under FEMA.

 

NON RESIDENT UNDER INCOME TAX ACT, 1961:
Under the Income tax act, there are following types of the Resident:

  1. Resident –Ordinary Resident
  2. Resident but not ordinary resident
  3. Deemed Resident
  4. Non-Resident

Residential status as mentioned above is determined upon number of days a person is physically present in India. It is pertinent to note that person who are “Non Resident”, “Resident but not Ordinary” and “deemed Resident” are liable to pay Tax only on their India Source of Income whereas a “Resident – Ordinary” is liable to pay tax on its global Income.

 

Resident –Ordinary Resident

As per General provision of the Act, an Individual is said to be Resident in India, in a financial years, if he/she:

  1. is in India for a period of 182 days or more OR
  2. has been in India for a period of 60 days or more in during the previous financial year AND 365 days or more during the 4 years preceding to previous year

Exceptions:

Regulation provide certain concession in number of the days stays in India to Indian citizen , person of Indian origin and Indian citizen who leaves India in any previous year as a crew member or for the purpose of employment outside India. The concession in stays in number of the days are as under:

  • By substituting 60 days as mentioned in conditions (b) with 182 days in case of Indian Citizen who goes out of India as a crew member or for employment
  • By substituting 60 days as mentioned in conditions (b) with 182 days if , Total Income of the Indian Citizen/Person of Indian Origin who visits India is less than Rs. 15 Lakh (other than foreign sources)
  • By substituting 60 days as mentioned in conditions (b) with 120 days if , Total Income of the Indian Citizen/Person of Indian Origin who visits India is more Rs. 15 Lakh (other than foreign sources)

Meaning thereby , in case of Indian Citizen, person of Indian origin and crew member who left India for employment , instead of checking criteria of 60 days , criteria of 182/120 days need to test .

 

Exceptions:

Regulation provide certain concession in number of the days stays in India to Indian citizen , person of Indian origin and Indian citizen who leaves India in any previous year as a crew member or for the purpose of employment outside India. The concession in stays in number of the days are as under:

  • By substituting 60 days as mentioned in conditions (b) with 182 days in case of Indian Citizen who goes out of India as a crew member or for employment
  • By substituting 60 days as mentioned in conditions (b) with 182 days if , Total Income of the Indian Citizen/Person of Indian Origin who visits India is less than Rs. 15 Lakh (other than foreign sources)
  • By substituting 60 days as mentioned in conditions (b) with 120 days if , Total Income of the Indian Citizen/Person of Indian Origin who visits India is more Rs. 15 Lakh (other than foreign sources)

Meaning thereby , in case of Indian Citizen, person of Indian origin and crew member who left India for employment , instead of checking criteria of 60 days , criteria of 182/120 days need to test .

 

Resident but not ordinary resident

A person is said to be "Resident but not ordinary resident” in India, if such person is:

  1. non-resident in India in 9 out of the 10 previous years preceding that year, or
  2. during the seven previous years preceding that year been is in India for a period, 729 days or less; or
  3. Citizen of India, or a person of Indian origin, having total income, other than the income from foreign sources, exceeding Rs. 15 lakh during the previous year, and who has been in India for a period of more than 120 Days and less than 182 days
  4. A citizen of India who is deemed to be resident in India under clause (1A).

If any of the above conditions fulfilled, the person shall be treated as “Resident but not ordinary resident” otherwise “Resident –ordinary resident”.

 

Deemed Resident

Finance Act, 2020 has inserted a new clause (1A) to section 6 of the Income-tax Act. As per this new clause, an individual shall be deemed to be Indian resident under the new provision only when he is not liable to tax in any country or jurisdiction by reason of his domicile or residence or any other criteria of similar nature and its total Income from other than foreign sources exceeds Rs. 15 Lakh.

 

PERSON OF INDIAN ORIGIN (PIO)

A Person of Indian Origin (PIO) is simply a person of Indian origin who is not a citizen of India. However, 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 –

  • He at any time held Indian passport or
  • He or either of his Father or any of his Grandfather was a citizen of India by virtue of the Constitution of India of the Citizenship Act, 1955.

Likewise, 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-

  • He at any time held Indian passport or
  • He or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India of the Citizenship Act, 1955 or
  • The person is a spouse of an Indian citizen or a person referred to in above sub-clauses.

RETURNING NRI

A returning NRI would generally be assessed as a Resident (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 uptill two years after his return to 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.

 

Therefore Immaculate tax planning, 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

 

NRI who return to India for permanent settle in India, 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:

  • What is your residential status under:

Foreign Exchange Management Act, 1999

The Income Tax Act, 1961

  • Compliance of Baggage Rules in India regarding repatriation of overseas assets.
  • Re-designation of all Indian bank accounts as Resident accounts and Holding and operating the non-resident Banking accounts on your return to India and Taxability thereof.
  • Taxability of Income earned in and outside India

In the year of return to India.

In the subsequent years.

  • Compliance in respect of the Indian income-tax Act, 1961 e.g. application for PAN in case you do not have a PAN
  • Application of Double Taxation Avoidance Treaty, if any applicable
  • 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.

WHERE WE CAN HELP

 

TO NRI

  • Determination of your residential status in India
  • Interpretation of DTAA with a view to reduce tax liability in India
  • Handling of issues relating to inheritance, will, etc.
  • Compliances with respect to the income-tax Act, 1961.
  • Application for Permanent Account Number (PAN).
  • Filing of India tax return.
  • Advising suitable tax saving investments
  • Representation before tax authorities, In case required
  • Opening of bank accounts and compliances thereon
  • Various compliances in regard to repatriation of funds/investments/property, etc.
  • Issuance of CA Certificate like 15CA & 15CB for remittance of funds outside India.

 

TO NRI WHO HAVE / INTENDS 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:

  • Monitor, record and periodically report on his investments.
  • Facilitate liquidation/lease of property through a top-notch property consultant.
  • Facilitate repatriation of sale proceeds of investment and property.
  • Facilitate repatriation of income from investments and rent from the property let out.
  • Complete banking and other regulatory formalities.
  • Plan financial transactions to minimize tax liability in India.
  • File Income Tax & GST return.

 

TO NRI 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, RBI and other regulatory authorities.

 

TO NRI / NR 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:

  • Develop an entry strategy and a financial model.
  • Undertake location studies and recommend the ideal location.
  • Identify and evaluate potential partners including due diligence reviews
  • Arrange for complete set of regulatory approvals.
  • Arrange finance for the project by preparing a detailed project report and liaison with banks/ financial institutions/ joint venture partners.
  • Facilitate incorporation of a company / LLP / Firm in India.
  • Organize office infrastructure and manpower during the “in-transit period” of the start up or operate as a representative office.

 

TO RETURNING NRI

  • Planning the date and month of return to India so as ensure minimum tax liability in the year of return (i.e. April to March)
  • Compliances regarding repatriation of assets to India
  • Procedure for re-designation of all Indian bank accounts
  • Opening of ‘Resident foreign currency’ (RFC) account
  • Information to all companies, funds, etc., of whom shares and securities are held by the non-resident, regarding the change of residential status/relocation to India
  • Compliance in respect of the Indian income-tax Act, 1961 e.g. application for PAN in case you do not have a PAN.
  • Repatriation of legacies/inherited assets and taxability in India thereon
  • Facilitate clearance required under FEMA from RBI to continue to hold assets outside India.
  • Facilitate re-investment of sale proceeds of assets acquired outside India.
  • Plan residential status under FEMA and Income Tax Act.
  • Plan tax liability in India.
  • Make fresh investments in business outside India.
  • Investment and business consultancy in India.
  • Assistance in Filing Return of Income.

TO EMIGRATING RESIDENT INDIAN

An emigrating Indian wants to retain/ disinvest assets (property, investments, and business) acquired in India and repatriate the income/ sale proceeds thereof. We enable them to do so as follows:

  • Obtain clearance required under FEMA from RBI to continue to hold certain assets in India.
  • Facilitate repatriation of sale proceeds and income of assets held in India
  • Plan his tax liability in India.
  • Monitor, record and report on his investments in India.

BANKING ACCOUNTS

An NRI can have ‘Rupee Account’ or ‘Forex Account’.

 

Rupee Account can be

Forex Account can be

Non-resident External A/c (NRE A/c)

Foreign currency non-resident A/c (FCNR A/c)

Non-resident ordinary A/c (NRO A/c)

 

Non-resident (special) rupee (NRSR) account scheme

 

WHERE WE CAN HELP

  • Opening of various bank accounts in India viz Rupee account, Forex account.
  • Monitoring of your bank accounts with regard to various compliances as also effective tax planning viz crediting the sale proceeds of immovable property in India and repatriation of the same, current income repatriation, legacy, inheritance, etc.

 

FAQ’s

 

Q1

Who can purchase immovable property in India?

 

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.

Q2

Can NRI/PIO acquire agricultural land/ plantation property / farm house in India?

 

No

Q3

Are any documents required to be filed with the Reserve Bank after the purchase?

 

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

Q4

How many residential / commercial properties can NRI / PIO purchase under the general permission

 

There are no restrictions on the number of residential / commercial properties that can be purchased.

Q5

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?

 

(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.

Q6

Can a non-resident inherit immovable property in India?

 

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.

Q7

From whom can a non-resident person inherit immovable property?

 

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.

Q8

Can an NRI/ PIO/foreign national sell his residential / commercial property?

 

(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

Q9

Can a non-resident owning / holding an agricultural land / a plantation property / a farm house in India sell the said property?

 

(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.

Q10

Can a non-resident gift his residential / commercial property?

 

Yes.
(a) NRI / PIO may gift residential / commercial property to –
(i) person resident in India or
(ii) an NRI or
(iii) PIO.
(b) A foreign national of non-Indian origin requires the prior approval of the Reserve Bank for gifting the residential / commercial property.

Q11

Can an NRI / PIO / foreign national holding an agricultural land / a plantation property / a farm house in India, gift the same?

 

(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

Q12

How can an NRI / PIO make payment for purchase of residential / commercial property in India?

 

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.

Q13

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?

 

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.

Q14

Can NRI / PIO repatriate outside India the sale proceeds of immovable property held in India?

 

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 will allow repatriation of the sale proceeds outside India, provided 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

Q15

Can an NRI/PIO repatriate the proceeds in case the sale proceeds were deposited in the NRO account?

 

NRI/PIO may repatriate up to USD 1 million per 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

Q16

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?

 

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 million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes

Q17

Can NRI / PIO rent out the residential / commercial property purchased out of foreign exchange / rupee funds?

 

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

Q18

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, 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

Q19

Can the sale proceeds of the immovable property referred to in Q. No. 17 be remitted abroad?

 

Yes, from the balance in the NRO account, NRI/PIO may remit up to USD 1 million per financial year, subject to the satisfaction of Authorized Dealer and payment of applicable taxes

Q20

Can a NRI transfer money from NRO to NRE Account or to home country?

 

Yes, the Reserve Bank of India (RBI) has permitted transfer of funds from NRO to NRE account or home country subject to payment of applicable taxes within the overall ceiling of USD 1 million in a financial year and production of Certificates like 15CA & 15CB from Chartered Accountant

Q22

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?

 

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.

Q23

If a nonresident 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?

 

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.

Q24

Is an NRI/PIO is liable to pay taxes and file its Income Tax Return on Sale of Immovable property in India?

 

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.

Q25

Whether dividend income earned by a non – resident individual from an Indian Company is taxable?

 

The dividend income earned by a non – resident individual from an Indian Company is taxable in India as per recent amendment in the Act as passed by Indian Parliament in the month of February, 2020. However, rate of taxation of such dividend income will be as per the rate mentioned in DTAA Agreement or tax rates as provided in the Income Tax Act, 1961 whichever is beneficial to the assesse. Generally, the rate of taxation for NRI varies from 5-10% on dividend income.

Q26

How can a NR file his return of income even if he is not physically present in India?

 

As per the provisions of the Income Tax Act, 1961, a non – resident can file his/ her return of income through authorizing another person after executing a power of attorney to sign his/ her return of income on his/ her behalf. However, a non‐resident, even though he/she is not physically present in India, can himself/ herself file return of income by furnishing the same electronically on the website of Directorate of Income Tax by following the procedure mentioned .

Q27

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?

 

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.

Q28

Is there any withholding tax out of remittance from India?

 

Yes, as per amended Indian Income tax laws funds can only be remitted out of India after withholding Tax either as TDS or TCS (Applicable w.e.f 01.10.2020) as per Rules & Regulations.

Q29

At present rate of withholding tax is 20% + surcharge + cess of gross value of sale consideration of property being sold. Is there any means to reduce rate of withholding tax (TDS) by the buyer of the property?

 

Yes. One can apply to Income tax department for NIL/ Lower deduction certificate. The department after verification of proposed capital gain liability of the seller may direct to the buyer to deduct tax at Nil rate or lower rate.

Q30

Is there any tax planning to reduce to burden on account of capital gain liability being arised on sale of property?

 

Yes. It depends upon various factors like holding period of the property, nature of property inherited or self-acquired & ownership of the property etc.

Q31

Can a NRI sale immovable property in India without visiting India?

 

Yes, NRI can do so by way of executing power of attorney in favor of person residing in India. Such POA must be legalized & appostile in home country & thereafter it must be registered in the state in which the property is located.

Q32

Is the valuation of immovable assets is required at the time of Sale for calculation of capital gain tax?

 

Yes, if the same is purchased before 01.04.2001 or if it acquired by way of gift / will / settlement etc & the original purchaser has purchased before 01.04.2001

Q33

Can NRI claim credit against such withholding tax against their tax liability if any, in India /abroad?

 

Yes, certainly an NRI can claim credit of such tax in India by way of filing ITR in India. He can also claim credit of such tax in abroad as per applicable DTAA with respective country. Meaning thereby there will not be double taxation of same income in two countries

Q34

Can NRI claim refund of withholding tax if no tax liability is there or the tax liability is lesser than the amount of withholding tax in India?

 

Yes. One can do so by filing tax return in India

Q35

How do NRI get refund of withholding tax - in paper mode or online?

 

 

 

Contact PKP for NRI Related Services
 

Contact Person : Mr. Prakash k Gupta

Email -  pgupta@pkpconsult.com, pkpconsult1977@gmail.com

Telephone Numbers : +91-11-23382207/ 23388753

Mobile Number : +91-9811031841