Taxation & Invesetment Services for Non Resident Indian (NRI)
Who is a Non resident Indian NRI?
Generally An NRI is a person resident outside India who is a citizen of India or is a person of Indian origin.However there are different definitions of NRI under FEMA and Income Tax Act.
Definition of NRI under FEMA:
Under the Foreign Exchange Management Act (FEMA), generally, a person is resident outside India if he is in India for less than 182 days during the course of the preceding financial year and also includes any person who stays abroad:
– For the purposes of carrying out employment or any business or vocation;
– Under circumstances indicating an intention to stay outside India for an uncertain duration;
– Any Indian citizen deputed outside India for a temporary period in connection with employment for education
How do I know if I qualify as a Non-Resident Indian?
If you have gone out of India for any of the following purposes, you qualify to open a Non-Resident Account
- Taking up employment
- Business or vacation
- Any other purpose, in such circumstances as would indicate your intention to stay outside India for an uncertain period
- Indian citizens working abroad on assignments with foreign Governments/Non Government organisation
- Indians settled abroad permanently
- Indians gone abroad on immigration
- Crew-members of Indian nationality or Indian origin employed by foreign airlines / shipping companies, if they are based at foreign ports and reside abroad
Non-Resident Indians become Indian residents only when they come back to India for employment or for carrying-on any business in India or vocation or for any other purpose indicating an indefinite period of stay in India.
They are not regarded as Resident Indians during their short visits to India on holiday, leave etc
Who is a Person of Indian Origin PIO?
You are a Person of Indian origin [PIO] if you are a citizen of a foreign country (other than a citizen of Bangladesh or Pakistan) and:
– You have at any time held an Indian passport OR
– You or either of your parents or any of your grandparents were citizens of India by virtue of the Constitution of India or the Citizenship Act, 1955 OR
– You are the spouse of an Indian citizen or of a person of Indian origin (other than of Pakistan or Bangladesh )
Who is resident per Income Tax Act definition?
The Income Tax Act of 1961 defines a resident as follows..
– A person is a resident who has stayed equal to more than 182 days of current financial year in India OR
– if he stayed in India for 60 days or more in previous financial year and 365 days or more in four years before that financial year under consideration.
Exceptions to the above:
The 60-day period mentioned above will be substituted for 182 days in case of the following persons:-
• A citizen of India who leaves the country as a crew member of an Indian ship or for the purposes of employment outside India
If you satisfy either of above definition, then you’re an Ordinary resident of India for that financial year and must pay taxes in India. As per Section 6 of the Income Tax Act, If you don’t satisfy above conditions for a resident, then you’re an NRI- Non Resident Indian.
Are you an NRI-Non Resident Indian?
FAQ 1: Mr Sunil has stayed in India from 01 April 2014 to 31 October 2014. He leaves India to work in US on 01st Novemeber 2014. Is he an NRI for FY 2014-15. Is he an NRI?
Ans: No. Since he has stayed for more than 182 days in previous financial year in India. So his global income for 01 November 2014-31st March 2015 is taxable in India including what he earned from April-October. However, he can use DTAA and avoid double taxation if he paid taxes in US.
FAQ 2: Mr. Sunil leaves to work in US on 15 August 2015. He stays there for remaining period of that year. Is he an NRI?
Ans: Yes. In this case , his period of stay is less than 182 days in India and for major part of year he was abroad. So he will be deemed as NRI for FY 2014-2015 and will be exempt from paying taxes in India on his income generated outside india
Resident but Not-Ordinary Resident (RNOR) :
There is one more class that is slightly different from Resident and NRI. They’re called ‘Resident and Not Ordinary Resident'(RNOR). You classify as an RNOR Indian if you satisfy below requirements.
– The person has been an NRI for last 9 out of 10 years OR
– The person has lived in India for less than 730 days in preceding 7years.
But what is the use of this RNOR category?
– RNOR citizen has to pay tax only on income accrued / generated in India. The foreign income earned by that person is exempt from tax.
– It is primarily used by returning NRIs.
– A person can be classified as an RNOR for usually 2 years after their permanent relocation to India. In some cases, if they travel intermittently abroad and based on the date of relocation, it may be for 3 financial years.
– Returning NRIs must use this RNOR status to set things in order and get ready to be taxed as Indian citizens in future.
FAQ 3: Mr.Deep returns to India from US or UK after 10 years in 01st Novemeber 2015 with an idea to settle in India. He again leaves to be in US for 3-4 months in 2016 due to work. So he will be classified as an RNOR for FY2015, 2016,2017 considering he was less than 730 days in India in last 7 years.
Ans : In case he did not do the abroad trip, he will have RNOR status for two years. He need not pay tax on his US/UK income for those two years alone. After two years, he will be taxed as per Indian tax laws even on what he earns in US/UK.
However, he can again use DTAA between India and UK/US to avoid paying tax at both US/UK and India.
What are the types of bank accounts available to NRIs?
Non-Resident External [NRE] Rupee savings account
Your funds in NRE savings accounts are held in convertible rupees – principle and interest are fully repatriable. Interest income is fully exempt from tax in India. The savings account can be opened jointly with a Non-Resident individual.
Non-Resident External [NRE] Rupee fixed deposit
Fixed deposit in Indian rupees where the principle and interest are fully repatriable. All interest earned is fully exempt from tax in India. The account can also be opened jointly with a non-resident.
Non-Resident Ordinary [NRO] Rupee savings account
Your funds in Non Resident Ordinary (NRO) savings account are held in India, in Indian rupees. The NRO account can be funded through NRI income in India. Only the interest in an NRO account is repatriable. Interest income on this account is liable for Indian Income Taxes. Non-Resident Ordinary [NRO] Rupee fixed account
Fixed deposit in Indian rupees where the earnings in India can be deposited. The interest is repatriable [after payment of tax].
Foreign current Non-residents [FCNR] deposit
The FCNR Deposit is a fully repatriable foreign currency deposit available in major currencies: US Dollars, Pound Sterling, Euros, Australian dollars and Canadian dollars.
Your funds in FCNR Deposits are maintained in foreign currency and are fully repatriable, including the interest you earn. All interest earned is fully exempt from tax in India.
Can I open these accounts in any convertible currency?
Yes, you can remit funds for opening the account in any convertible currency.
The NRO / NRE accounts are maintained in rupees and the funds remitted will thus be converted into India rupees at the spot exchange rate.
Deposits can be maintained in the currency of your choice i.e. USD, GBP, EUR, AUD and CAD etc.
Can an NRI invest in Mutual Funds?
Yes, an NRI can invest in Mutual Funds without any prior permission from RBI. The offer document should clearly state the NRIs could invest in the scheme. Please contact us and we will be glad to assist you.
How do I invest in Mutual Funds?
You can invest by issuing a cheque against your NRO/NRE Accounts. If you invest from funds in your NRE/FCNR Accounts then you will be able to repatriate income on Mutual Fund earnings abroad. Please contact us and we will be glad to assist you.
SERVICES OFFERED BY SGA TO NRI’s :
Non-Resident Taxation and FEMA
– Tax Advisory Services and filing of e-Tax returns
– Setting up a Branch office/ Liaison office/ Project office in India
– Banking and Remittances
– Investment advisory support
Wealth Management For NRI’s:
SGA. Wealth Management services bring to you a premier, personalized investment experience based on a careful understanding of your diverse needs as a Non Resident Indian (NRI) – before you leave India, while you are abroad and when you plan to return to India.
Our associates and our research desk help us provide you a panoramic view of international markets and a strong approach to investing in India, profitably. We provide you sound wealth management advice, across asset classes and market cycles to maximize your growth opportunities and enhance your wealth, while ensuring that you can continue to pursue your own goals in life without a worry.
Collaborators with an existing business or merger with an existing one to create a synergistic effect, could drive your continued success. You can trust on our expertise for the right consultations and strategies. We help you devise a strategic plan to successfully manage and integrate your new plan of action and review the operational process.
Further, we simplify your task by completing all the legal formalities, checking and preserving the documents and do the filling in an organized way. The financing solutions offered are customized to suit your requirements
Start Up Ventures
We suggest practical suggestions in start-up ventures for various businesses. We have rich experience as business advisors and financial consultants, from planning till implementation of plans. We cover the following areas in start-up ventures. Identifying appropriate entry route: Formation of Legal Entity in India i.e. Incorporation of a company and preparation of Memorandum and Articles of Association and other legal support.