Returning Indian – G.P.K. Tax Consultants
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Returning Indian

1. Mr. and Mrs. Shah have been working in USA since past 30 years. They have now retired and intend to settle in India along with their family. They hold assets in India and in USA as well.and Mrs. Shah are returning to India for good. Is he required to inform anyone on his return to India permanently?

Once they return to India for good they ought to inform the following persons about the change in their residential status:
their all bankers with whom they hold banking accounts and get it redesignated,
their depository participant with whom they hold DEMAT accounts,
Companies where he and his wife are Shareholders / Debenture holders, firms where they are partners.
2. How can one hold and operate NRI Banking accounts on his return to India?

Returning non-resident, upon his return to India has to deal with his various accounts in India in the following manner:

Account Description Treatment to be given
NRO A/c Re-designate to Resident A/c.
FCNR A/c Hold upto maturity. Upon maturity should be converted into Rupee Resident A/c or RFC A/c.
NRE A/c Re-designate to Resident A/c orTransfer balance to RFC A/c.

On account holder’s return to India for the purpose of employment, conducting business or any other purpose indicating his intention to stay in India for uncertain period, his NRE a/c is to be redesignated to Resident a/c or RFC a/c. In case the account holder comes for a short visit to India he can continue to hold NRE a/c.
3. Are Mr. and Mrs. Shah, permitted to retain their assets abroad even after their return to India?
All kind of foreign exchange / overseas assets such as properties, bank deposits, stocks and securities, life insurance policies, loans, company deposits, debentures, bonds etc. acquired, held or owned by a NRI while he was abroad can be continued to be so held and dealt in any manner even after the NRI’s return to India for permanent settlement.RBI permission is not required.
4. What shall be the tax implications on a returning Indian as per the Act?

  1. The tax liability of a person returning to India would depend on the ResidentialStatus of a person as per the Act.
  2. Under the Act, income earned outside India is liable to tax in India only if the person is ordinarily resident in India (ROR).
  3. A returning Indian who has been a NR as per the Act for 9 years or more, then for 2 successive years he shall be considered as a resident but not ordinarily resident (RNOR).
  4. Interest paid by schedule banks to NRI or to a RNOR on RFC deposits is exempt from tax under the Act. The exemption, in respect of RFC account, continues till such time as the account holder continues to be a RNOR.

5. What is the best time for Mr. and Mrs. Shah to move to India for their permanent return?
As a NR, Mr. and Mrs. Shah should try to come back on or after February 1 (or February 2 in case of a leap year).
6. What shall be the tax implications on a returning Indian as per the Wealth Tax Act, 1957?

  1. Assets located outside India of NRI /RNOR are exempt from wealtht
  2. If a NRI returns to India with the intention to permanently reside in India, the assets brought by him will be exempt. Also, the money and the assets acquired from the money, brought by NRI within one year after his return, will be exempt. This exemption is available to NRI for a period of seven years after his return to India.

7. When non-residents return to India for good, are they allowed to keep foreign currency balances held in NRE / FCNR (B) a/cs?

Returning Indians, i.e. those Indians, who were non-residents earlier, and are returning now for permanent stay, are permitted to open, hold and maintain with an Authorized Dealer in India a Resident Foreign Currency Account (RFC a/c) to keep their foreign currency assets. Assets held outside India at the time of return can be credited to such accounts. The funds in RFC a/c are free from all restrictions regarding utilization of foreign currency balances including any restriction on investment outside India. The facility is also available to residents provided foreign exchange to be credited to such account is received out of certain specified type of funds/accounts.

It shall be noted that returning Indians are required to re-designate their NRE / FCNR a/c to Resident / RFC a/c immediately on their return to India.
8. What are permissible transactions in the RFC a/c?

Permissible credits Permissible Debits
a.    FCY received as pension / superannuationor other monetary benefits from his employer outside India;

b.    FCY received on sale of the overseas assets / as gift or inheritance / proceeds of life insurance policy and repatriated to India;

c.    FCY acquired or received before 8th of July 1947 or any income arising or accruing thereon which is held outside India or acquired as gift or inheritance therefrom.

 a.    RFC a/c shall be free from all restrictions regarding utilization of foreign currency balances including any restriction on investment in any form, by whatever name called, outside India

b.    can be remitted abroad for any bonafied purpose of the account holder or his dependants.

 

9. Can funds in RFC a/cs be remitted abroad?
Balance in RFC a/c can be utilized without any restrictions for remittance and / or investment outside India. It can also be utilized for maintenance of dependants or any other personal purposes outside India.
10. What is the tax treatment of interest on RFC a/c?
Interest on RFC a/c will be exempt from income tax so long as returnee NRI’s residential status under the Act  is determined as “Non-Resident” or “RNOR”.