Recent immigrant is a person who leaves his country to settle permanently in another country. Mr. Jain who intends to migrates to USA, for permanent residence is called a Recent Immigrant.
1. Jain is keen to know the points to be kept in mind by a person leaving India.
Mr. Jain 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.
Open NRE a/c while in India. Alternatively, take necessary forms for opening the account from the Bankers to be sent after going abroad.
2. What is the best time for Mr. Jain to depart from India?
Mr. Jain should leave India on or before 28th September to have the status of a NR Indian for that FY.
Is Mr. Jain permitted to retain his assets in India even after he leaves India for permanent settlement?
All kind of assets in India such as immovable properties, bank deposits, stocks and securities, life insurance policies, loans, company deposits, debentures, bonds etc. acquired, held or owned by a him while he was a resident in India can be continued to be so held and dealt in any manner even after Mr. Jain leaves India for permanent settlement. 3. How can Mr. Jain hold and operate Resident banking accounts once he leaves India?
Mr. Jain, a recent immigrant, on his leaving from India has to designate his resident accounts in India. Resident savings / current / fixed deposits a/c are to be designated to NRO savings/ current / fixed deposits a/c respectively. He shall be eligible to open and maintain NRE Bank a/c and FCNR Deposit a/c only after becoming an NRI. 4. Jain will undertake employment in USA and earn income outside India. Is the foreign income earned by Mr. Jain outside India, be taxed in India?
In case Mr. Jain leaves India on or before 28th September, he shall be a NRI (as per the Income-tax Act) for that FY. As an NRI, the income earned by Mr. Jain outside India shall not be taxed in India. 5. Can Mr. Jain continue holding shares and securities in Indian Companies on leaving India?
As a recent immigrant, Mr. Jain is required to inform all the companies, fund houses, depository participants, etc. as to change of his residential status from resident to non-resident. Mr. Jain is permitted to make further investments in stock market through route of Portfolio Investment Schemes. (Refer Q. 78) 6. Jain is a Partner in a Registered Firm in India. Since he intends to shift to USA can he continue as a partner of the firm?
RBI has not prescribed clear guidelines on continuation as a partner. But, Mr. Jain can continue as a Partner of his firm in India in general. However, it shall be ensured that the firm is not engaged in any agricultural / plantation activity or real estate business. Mr. Jain shall obtain required permission from RBI in cases where the activities are prohibited / restricted to be undertaken by NRIs. 7. 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/PIO. The sale proceeds may be credited to NRO a/c of the NRI /PIO. 8. 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 and payment of applicable taxes. 9. Sagar has been 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 Public Provident Fund (PPF) a/c. Can he continue contributing to that account now? If so, what will be the tax implications?
PPF a/c can be opened only by an Indian resident. However, if an Indian resident after opening a PPF a/c becomes a NR, he can still continue to contribute to the account. The contribution can be made from either a NRO or a NRE a/c. On completion of the period of 15 years, if he is a NRI he will be unable to extend the PPF a/c and will need to mandatorily close the account and withdraw the sum.
Mr. Sagar can continue to contribute to the PPF a/c and get the benefit of deduction under section 80C of the Income-tax Act out of his Indian income. The interest on PPF a/c would continue to be exempt under the Indian income tax laws. 10. From which account can Mr. Sagar invest in PPF a/c?
Mr. Sagar can use funds in the NRE a/c / 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 Mr. Sagarfaila to make the minimum investment in a year or years his account will be considered dormant. Subsequently, when Mr. Sagar 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. 11. What happens when Mr. Sagar on maturity of PPF Account is an NRI?
If you are an NRI at the time the deposit matures, you would need to withdraw the balance. An NRI is not eligible for extension on the PPF account. What happens if you 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,” says Shanbhag adding, “We hear of 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.”