NRI Desk

The answer to this is absolutely yes! India welcomes NRIs to invest with open arms. It's like getting an invitation to the biggest financial party. You can park your money in bank accounts, stock markets, real estate, and even join the startup fiesta! Just remember, your investments are perfectly safe and legal. Now let’s explore the regulatory framework and the taxation aspects:

Investment in India is allowed for:

NRI i.e. an Indian Citizen having Indian passport who is not resident in India
OCI (Overseas Citizen of India) Person with Indian origin having OCI Card but not holding Indian passport.
PIO - Person of Indian origin i.e. a foreign citizen (except Bangladesh or Pakistan) having foreign passport

Residential Status in India FEMA vs. Income Tax Act

In India residential status is determined by 2 different Laws and having a basic knowledge of both is very important.

Residential status in India, as per the Foreign Exchange Management Act (FEMA), and for income tax purposes, are two distinct concepts, each governed by its own set of rules and criteria. Let's understand the difference between the two:

Income tax Act is a revenue law which impacts the calculation of tax liability, exemptions available etc. whereas FEMA is a stricter regulatory law which governs the foreign exchange transactions.
Think of FEMA as the gatekeeper to India's financial playground. It's all about who can swing on the forex swings and who can't. Income tax, on the other hand, is like the bill collector at the party. It wants a slice of your income cake, no matter where you're coming from.
In Income tax, Residential status is determined by the number of days stayed in India in the previous financial years. E.g. A person is Resident for Previous Year (last financial year) if he is in India for 182 days in the Previous Year or 60 days in the Previous Year + 365 days in 4 preceding Financial Years.

As per FEMA “Person resident in India” is a person residing in India for more than 182 days (i.e. 183 days or more) in the Preceding Financial Year. If a person leaves India for the purpose of employment, business or for any other purpose that indicates his intention to stay outside India for an uncertain period, then he becomes a non-resident from the day he leaves India for such purpose.

Residential status is checked every year at the time of filing income tax return (for the previous financial year) whereas for FEMA Residential status has to be checked as on the date of the financial transaction taking place.
During a particular year, the residential status can either be resident, non resident or R-NOR as per income tax but as per FEMA, the residential status can vary as per the date so the status can be multiple in one year.

Becoming Resident outside India (NRI) as per FEMA? Know your obligations

No permission from RBI / Income tax authorities needed
Not allowed to maintain resident saving account. Convert it to NRO accounts by completing KYC as NRI with banks
Convert all resident demat accounts to Non Resident demat accounts
While filing income tax return for subsequent period, report residential status properly as per Income Tax Act

When should an Indian citizen leaving for their first overseas job depart to optimize tax strategies?

If an Indian citizen is leaving India for employment abroad for the first time, they will only become a resident for tax purposes if they stay in India for 182 days or more during the financial year (01 April to 31 March). To maintain non-resident status for that year, they should leave India on or before September 28 without returning until the end of the financial year. Failing to do so will classify them as a Resident and Ordinary Resident (ROR), subjecting them to taxation on global income and the obligation to report foreign assets in India. Therefore, careful planning of departure and subsequent visits is necessary to adhere to income tax regulations.

When is the optimal time for an overseas-settled Indian citizen to return permanently to India?

Non Resident for last 4 years with cumulative stay exceeding 365 days in last 4 Financial Years - To be able to qualify as a non resident in the year of relocation - on or after February 1 (or February 2 in case of a leap year)
Non Resident for last 4 years with cumulative stay less than 365 days in last 4 Financial Years - To be able to qualify as a non resident in the year of relocation - on or after October 2 (or October 3 in case of a leap year)

Bank Accounts for NRIs

Here we have covered three main type of accounts:

NRO Account: is a Rupee denominated - Non-repatriable account. As soon as KYC is updated as NRI status, the existing Saving accounts / current accounts get converted to NRO accounts. An NRI Can also open new NRO account. NRO Account helps an NRI to manage their income earned in India. A Non-Resident Ordinary (NRO) Account is a popular way for NRIs to manage their deposits or income earned in India such as interest, dividends, pension, rent, etc. This account allows you to receive funds in either Indian or foreign currency. However, only Indian currency can be withdrawn as NRO Accounts are kept in Indian currency and cannot be freely repatriated into any foreign currency.
NRE Account: As an NRI, you might feel the need to have an account in an Indian Bank where you can deposit and keep all your foreign currency savings in Indian denomination. In such a case, an NRE Account is an ideal fit for you. An NRE Account or Non-Resident External Account offers you this facility. Here, your money is converted into Indian Rupee or INR at the time of deposit. This means that you can deposit money in any foreign denomination, e.g. GBP and withdraw it in Indian Rupees. Based on your personal requirements, you can choose from various types of NRE Accounts. These include Savings, Current, Recurring or Fixed Deposit Accounts. The principal amount invested from NRE account is freely repatriable.
FCNR Deposits: Forex denominated – Repatriable Account. FCNR Accounts are Term Deposit Accounts and not a Savings Account. The interest you earn on your deposits on FCNR Accounts is tax-free, i.e., it is not taxable in India.

I am an NRI holding savings account in India. Do I need to close my saving account in India or get an NRO Account?

If your residency status has changed to NRI, then having your savings account converted to an NRO account within a reasonable time is mandated by the law (FEMA Act). There are severe penalties levied if you fail to ensure timely conversion of the savings accounts to an NRO account. What is a reasonable time is however not defined.

Repatriation vs. Remittance

Repatriation and remittance are two distinct concepts governed by FEMA.

Repatriation is sending money abroad which was originally remitted from abroad by converting foreign exchange. Such amount received from abroad can be credited to NRE account and is freely repatriable. This amount alongwith income generated thereon can be sent outside India without any restrictions. (TDS gets deducted from investments at the relevant rates before net proceeds are credited to NRE account).
On the other hand, remittance refers to the transfer of money by NRIs to India for taking care of family members in India or any expenses in India. Transferring funds from NRE to NRO loses repatriability. Funds on non repatriable basis cannot be remitted abroad. The income generated on such funds can be credited to NRO account only.

Can funds from NRO Account repatriated? What is the 1 Million Dollar Scheme?

Funds held in NRO accounts are not freely repatriable. However, in practice, there are provisions for repatriation, albeit with certain limitations. Non-Resident Indians (NRIs) are allowed to remit assets up to US $1 million per financial year (approximately INR 8.5 crore annually). This allowance covers balances maintained in NRO accounts, which may include proceeds from the sale of immovable property purchased by the NRI using funds from India or other investments made within India. These remittances are subject to fulfilling specific regulatory and tax obligations. We offer assistance in ensuring compliance with the requisite regulations and documentation for facilitating such transactions.

What are Form 15 CA - Form 15 CB?

Form 15CA-CB are the forms which required to be submitted to Authorised dealer / banker to repatriate the amount form India to overseas account. For payments made to NRO account of NRI Form Nos. 15CA & 15CB are not required. These forms are for remittance outside India only.

As per Section 195, every person making a payment to Non-Residents (not being a Company), or to a Foreign Company shall deduct TDS if such sum is chargeable to Income Tax and the details are required to be furnished in Form 15CA. Form 15 CA is not required if payment is not chargeable to tax. A person responsible for making such remittance (payment) has to submit the form 15CA, before remitting the payment. This form can be submitted both online and offline mode. In certain cases, a Certificate from Chartered Accountant in form 15CB is required before uploading the form 15CA online.

Form 15CB is an event-based form to be filled only when the remittance or aggregate of remittance amount exceeds Rs. 5 Lakhs during a financial year and a certificate from the AO u/s 195 / 197 is not obtained and you are required to furnish a certificate from an accountant defined as per Section 288. In form 15CB, a CA certifies the details of the payment, TDS rate, TDS deduction, and other details of nature and purpose of remittance. In other words, Form 15CB is the Tax Determination Certificate in which the CA examines a remittance with regard to changeability provisions.

No time limit is prescribed for filing Form 15 CA or Form 15CB. However, it should be filed before the remittance is made. Upload of Form 15CB is mandatory prior of filling Part C of Form 15CA. To prefill the details in Part C of form 15CA, the Acknowledgement Number of e- Verified Form 15CB should be provided.

Form 15CA can be withdrawn within 7 days from submission date.

About Income Tax Portal

Income tax department has become very tech savvy. The e-filing portal of Income tax department aims at providing taxpayer convenience and a modern seamless experience. The average time taken to process income tax returns is just a few days now. Almost all interactions, ITR filings and communications from department, Income tax forms, submitting response to notices, faceless scrutiny etc. can be accessed through this dashboard. Therefore keeping the contact details properly updated on the portal is advisable.

Annual Information Statement (AIS) & Taxpayer Information Statement (TIS)

Income tax department is constantly tracking information for all taxpayers – irrespective of whether you file ITR or not. Annual Information Statement and Taxpayer Information Statement are the 2 annual reports which show details of all transactions carried out during the year. AIS displays details of property purchases, high-value investments, and TDS/TCS transactions carried out during the financial year. AIS additionally includes savings account interest, dividend, rent received, purchase and sale transactions of securities /immovable properties, foreign remittances, interest on deposits, GST turnover etc. Any information reported here if gets omitted in the income tax return, can attract a notice.

Income Tax - Best Practices for NRIs

Update your address, residential status and contact details on the E filing portal
Provide email address and mobile number on which you can access any notifications issued by IT Dept
Keep filing your return of income in India on a regular basis
Disclose all bank accounts, assets held and income generated in India in your ITR

I don’t have access to my Income Tax portal. How do I check?

Your bank accounts are mapped with PAN card. All you need to do is to login to your net banking and search for the option of “Income Tax E-filing”. This will directly take you to your Income Tax portal. Once you login, just click on your name on top right side which will take you to “My Profile” section. Here you can change your contact details and password.

Special facilities for NRIs

NRIs are not required to link Aadhaar card with PAN card
NRIs are not required to disclose their overseas bank accounts in their tax returns unless they are claiming refund and they do not hold any Indian account.
NRIs are not required to disclose their foreign assets

PANs of many NRIs are inoperative

Many NRIs are facing problems since their PAN has become inoperative on account of Non Linkage with Aadhaar. As per Section 139AA of the Income Tax Act, 1961, assessees having Aadhaar are required to link their PAN with Aadhaar. The due date for linking PAN with Aadhaar was 30th June, 2023.

However this section exempts linking of PAN with Aadhaar for Non-resident assessees. However in case if you have not filed any returns in last 3 years, then your PAN may have become inoperative and needs immediate attention. You can get in touch with us if this is true in your case as well.

Should you file Indian tax returns, even if income falls below the specified thresholds?

Despite various reasons that may deter NRIs from filing returns, such as low income, busy schedules, or perceived redundancy due to Tax Deduction at Source (TDS), adhering to this legal requirement can offer significant benefits. Listed here are a few reasons why NRIs should file their Indian tax returns, even if their income falls below the specified thresholds.

Substantiating Residential Status and Income Sources so that foreign income is not taxed in India 2.
Facilitating Property Transactions
Claiming Refunds for TDS Deductions
Carry-Forward of Losses for Future Set-Off – only available if the ITR is filed before the due date
Enhanced Financial Eligibility for taking loan and credit history
Reporting Financial Transactions and Exempt Income to avoid potential scrutiny notices
Establishing Transparency with Tax Authorities

Can NRIs hold Aadhaar Card

Yes, NRIs are also eligible to enroll for Aadhaar. An NRI (whether minor or adult) with a valid Indian Passport can apply for Aadhaar from any Aadhaar Kendra. While enrolling as an NRI, Indian passport is a mandatory “Proof of Identity”. However please note that international mobile numbers are not allowed and only Indian mobile number can be provided. So if you are an NRI holding an Aadhaar card you can use Aadhaar linked mobile OTP for e-verification of ITR.