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Nri guide 2012 ver 2.00  23 03-2012
 

Nri guide 2012 ver 2.00 23 03-2012

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A Comprehensive Guide for Indians residing outside India ...

A Comprehensive Guide for Indians residing outside India
(NRI)
This Free NRI guide has been compiled with the help of information available in official website of various government departments like Reserve Bank of India, Income Tax Department, various State Governments, Department of Oversea Affairs, Ministry of Home Affairs, SEBI, and other reliable website sources. I have taken adequate care to provide current and authentic information. This NRI Guide is intended to serve as a ready reference book to guide NRIs on various matters affecting their financial and other related subjects. This does not purport to be a legal document. So I am not sure that, any errors occurred while compiling this reference guide. In case of any variation between what has been stated in this NRI Guide and the relevant Act, Rules, Regulations, Policy Statements, Government Orders/Circulars etc., the latter shall prevail. Kindly note that, rules related to NRIs are subject to change. Errors and omissions are expected.

This free e-book is circulated with the understanding that, neither the author nor the publisher will be responsible for any action taken on the basis of contents of this book whether directly or indirectly for any error or omission to any person whether a user of this e-book or not. The persons willing to accept this disclaimer only required to read this e-book.

The Honorable Finance Minister of India presented the Union Budget 2012-2013 on 16thMarch 2012, and thereafter presented the Finance Bill, 2012 before the Parliament. For the easy reference and information important budget proposals mostly affecting NRIs and common men are also included in this guide at the relevant places. As of date, these are proposals only and if adopted by the Parliament and passed as Finance Act; will come into force for and from Assessment Year 2013-2014 relevant to Financial Year 2012-13, unless specifically provided otherwise.


Prakash Nair Prakash @yourownadviser.com www.yourownadviser.com

PLEASE VISIT www.yourownadviser.com to download this NRI Guide

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    Nri guide 2012 ver 2.00  23 03-2012 Nri guide 2012 ver 2.00 23 03-2012 Document Transcript

    • 1|Page
    • NRI GUIDE 2012 (Ver 2.00) (A Comprehensive Guide for Indians residing outside India) Prepared by Prakash Nair Prakash@yourownadviser.com www.yourownadviser.comJoin Kerala Syndicate Social Network Group http://groups.google.com/group/kerala-syndicate/ l syndicate/Follow me on Face book http://www.facebook.com/groups/254162078 http://www.facebook.com/groups/254162078010895/Website: www.yourownadviser.com2|P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • PREFACEThis Free NRI guide has been compiled with the help of information available in official websiteof various government departments like Reserve Bank of India, Income Tax Department,various State Governments, Department of Oversea Affairs, Ministry of Home Affairs, SEBI, andother reliable website sources. I have taken adequate care to provide current and authenticinformation. This NRI Guide is intended to serve as a ready reference book to guide NRIs onvarious matters affecting their financial and other related subjects. This does not purport to be alegal document. So I am not sure that, any errors occurred while compiling this reference guide.In case of any variation between what has been stated in this NRI Guide and the relevant Act,Rules, Regulations, Policy Statements, Government Orders/Circulars etc., the latter shallprevail. Kindly note that, rules related to NRIs are subject to change. Errors and omissions areexpected.This free e-book is circulated with the understanding that, neither the author nor the publisherwill be responsible for any action taken on the basis of contents of this book whether directly orindirectly for any error or omission to any person whether a user of this e-book or not. Thepersons willing to accept this disclaimer only required to read this e-book.The Honorable Finance Minister of India presented the Union Budget 2012-2013 on 16thMarch2012, and thereafter presented the Finance Bill, 2012 before the Parliament. For the easyreference and information important budget proposals mostly affecting NRIs and common menare also included in this guide at the relevant places. As of date, these are proposals only and ifadopted by the Parliament and passed as Finance Act; will come into force for and fromAssessment Year 2013-2014 relevant to Financial Year 2012-13, unless specifically providedotherwise. Prakash Nair Prakash @yourownadviser.com www.yourownadviser.comDate: 22-March-2012The greatest reward the author can get the feedback good or bad from the readers. Anysuggestions for improvement are most welcome. In case I missed some important informationor provided wrong information, please let me knowYour suggestions, comments, criticism may send to Prakash@yourownadviser.com orpnair1966@yahoo.com The decision whether to reply to any query or not lies with the AuthorTo receive regular update on NRI related matters, please send a request and register your e-mail id3|P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • INDEX Sl Nos Chapters and contents Page Nos Abbreviations 16 -17 CHAPTER - 1 18-19 Residential Status 1 A Non Resident Indian (NRI) 2 A Person of Indian Origin (PIO) 3 A Person of Indian Origin 4 What is India DIASPORA CHAPTER - 2 20-37 1 Various Types of Bank Account - NRIs are permitted to Open 2 Non-Resident Ordinary/ Rupee Account (NRO Account) 3 Non-Resident (External) Rupee Account (NRE Account) Foreign Currency Non Resident (Bank) Account – FCNR (B) 4 Account 5 NRE Current Accounts 6 NRO Current Account 7 Resident Foreign Currency Accounts (RFS Accounts) 8 Foreign Currency Account CHAPTER -3 38-41 1 Facilities Available to NRIs/PIO 2 Investment facilities for NRIs 3 NRI may, without limit, purchase on repatriation basis: 4 NRI may, without limit, purchase on non-repatriation basis : An individual resident can borrow money from his close relatives 5 outside India Repayment of Housing Loan of NRI / PIOs by close relatives of 6 the borrower in India Foreign Exchange Management (Deposit) Regulations, 2000 - Credit 7 to Non Resident (External) Rupee Accounts Loan given to non-resident 8 Facilities to returning NRIs/PIO CHAPTER - 4 42-44 NRIs are not permitted to invest in small savings or Public 1 Provident Fund (PPF). 2 PPF (Public Provident Fund) 3 NSC (National Savings Certificate) – 5 years and 10 years 4 Senior citizens savings account 5 Tax saving infrastructure bonds under section 80CCF 6 Post office time deposits are not available for NRIs. FEMA Circular related to restircation for NRIs for Opening Small 7 Savings Accounts4|P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER - 5 45-46 NRIs Investments in Immoveable Properties CHAPTER - 6 47-64 NRI Taxation 1 Expatriates Working Abroad – Tax Provisions 1a How to determine Residential Status Income Tax Rates proposed in Union Budget 2012 for the 2 financial year 2012-2013 3 Particulars of Income Tax Incidence for various tax status 4 Tax Exemptions from Income Tax available for NRIs 5 Other Tax Aspects related to NRIs 6 Special Provisions Relating to Non-Residents 7 Income Tax Clearance Certificate 8 Tax Exemption Certificate - Lower or Nil Rate of TDS: 9 Renting out of Property by an NRI in India 9a Remittance of Rent 9b Tax treatment of rental income 9c Deemed rental income Service Tax applicable to renting out of residential properties for 9d commercial use NRI and Senior Citizen status for Income Tax calculation 10 purposes 11 Tax Liabilities related to NRIs investments made in Joint basis 12 Bank Term Deposits - Tax aspects 13 Property Rental income – Tax Aspects 14 Mutual Fund/Equity Investments – Tax Aspects 15 NRI income and Applicability of TDS on the same 16 Tax Treatment of overseas Financial Assets. Other Tax Aspects related to NRIs including Immovable 17 Properties 18 Tax Treatment of selling property abroad 19 Tax Treatment of Rental Income Earned Abroad 20 Tax Treatment of Dividend on overseas Investments 21 One Time Financial Settlement 22 Capital Gains – earned abroad CHAPTER - 7 65-77 Budget 2012 Proposals CHAPTER - 8 78-79 1 Interest on Investments 2 Rental Income 3 Dividend Income 4 TDS on salary payments to Non Residents & Expatriates5|P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 5 Capital Gains on Securities Deduction of interest paid on more than one loan borrowed for 5 purchase or construction of same house CHAPTER - 9 80-87 Double Taxation Avoidance Agreements (DTAA) CHAPTER -10 88-89 From 15G & Form 15H - NRIs are not eligible to submit these forms CHAPTER 11 90-107 Capital Gain Tax 1 Capital Asset 2 Short Term Capital Gain (STCG) 3 Long Term Capital Gain (LTCG) 4 Computation of Indexation Benefits 5 What is the indexed cost of acquisition? 6 Cost Inflation Index Form 1981 to 2011 7 Capital Gain Exemptions can be availed What are the consequences if a new house is transferred within 8 3 years? Exemption available on capital gains that arise from transfer of 9 house property 10 How to avoid paying capital gains tax Exemption of long term capital gains on transfer of residential property if invested in plant machinery through small/medium 11 enterprise, for 5 years (Budget 2012 proposal) Relief from long-term capital gains tax on transfer of residential property if invested in a manufacturing small 12 or medium enterprise 13 Capital Gains Accounts Scheme 14 Who are eligible to take the advantage 15 List of Banks who can Accept Deposit 16 Opening a bank account for Capital Gains Account Scheme- 17 Capital Gain treatment of Inherited or gifted properties Please note that the long-term capital gains earned by you from inherited shares sold on any recognized stock exchange in India 18 by paying the applicable STT are exempt from tax provided CHAPTER - 12 108-111 Wealth Tax Implications of NRIs CHAPTER - 13 112-117 Guide on filing of Income Tax Return by NRIs CHAPTER - 14 118-120 Clubbing of Incomes6|P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER - 15 121-122 Tax on Gifts - the facts need to know CHAPTER -16 123-125 What is Advance Tax CHAPTER - 17 126-130 General Tax Deduction available for NRIs 1 NRI Tax-saving tips 2 Section 80C of Income Tax Act 2.a Life Insurance and Retirement/Pension Plans 2.b Investment in House property 2.c ELSS (Tax saving Equity Mutual Fund schemes) 3 Section 80D - Health Insurance Premium 4 Deductions u/s 80 G 5 Deduction under 80E 6 Bank Deposits and applicable tax - Sect 80TTA 7 Rajiv Gandhi Equity Savings Scheme CHAPTER - 18 131-144 NRI Welfare Schemes 1 Budget 2012: Rs 50 crore to be spent on overseas Indians 2 Pravasi Bharatiya Bima Yojana 3 Deserted NRI Women Welfare Scheme 4 Indian Community Welfare Fund (ICWF) 5 Facilitating investment in India 6 Know India Program (KIP) 7 Scholarship Programme for Diaspora Children 8 Migrant Resource Center, Kochi 9 NRIs - Facilities for Returning Indians 10 Investment facilitation and knowledge networking 11 Bilateral Labour Co-operation 12 Global Indian Network of Knowledge (Global Ink) 13 India Development Foundation of Overseas Indians 14 Scholarship Programme for diaspora Children (SPDC) 15 Direct Admission to Students Abroad (DASA) 16 Reservation for NRIs at Indian educational institutions 17 Assistance for problems relating to Overseas Indian Marriages 18 Voting Rights to Non-resident Indians 19 Double Taxation related maters 20 Recruitment of maid for Oman CHAPTER 19 145-152 State Governments Welfare Schemes 1 Government of Assam7|P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 2 Government of Bihar 3 Government of Gujarat 4 Government of Karnataka 5 Government of Kerala 5.a Pravasi Pension Scheme for Non-Resident Keralites 5.b Pravasi Identity Card 6 Government of Orissa 7 Government of Rajasthan CHAPTER 20 153-166 NRI Investment Options Investments in Shares and Securities listed in Indian Stock 1 Market 1.a Portfolio Investment Scheme (PIS) for NRIs 1.b IPO Electronic Mode and Electronic Voting 1.c Securities Transaction Tax (STT) (2012 Budget proposal) 2 NRIs investment in Mutual Funds Schemes FDI (Foreign Direct Investment) in Partnership Firm / Proprietary 3 Concern 4 Company Fixed Deposit Investments for NRIs 5 Non-Banking Financial Company (NBFC) Deposits 6 Investment in Commercial Papers (CD) by NRIs CHAPTER 21 167-174 National Pension System (NPS) - NRIs are eligible to invest CHAPTER - 22 175-182 PAN ( Permanent Account Number) 1 NRIs and PAN 2 Advantages of Having a PAN 3 How to apply for PAN 4 New PAN Application From 49A and 49AA w.e.f 01/11/2011 5 INSTRUCTIONS FOR FILLING FORM 49A 6 GENERAL INFORMATION FOR PAN APPLICANTS CHAPTER - 23 183-186 Know Your Customer (KYC) Requirements 1 Background 2 Key Changes in KYC Norms 3 Impact on investors 4 Who can carry out uniform KYC: 5 Impact on current arrangements with CVL: 6 Due diligence in the KYC process CHAPTER - 24 187-191 NRIs Guide to deal the inherited properties 1 Inheriting immoveable properties8|P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 2 Inheriting Financial Assets and Investments in India 3 Remittance Exchange Control Regulations 4 Inheritance and Gifting rules in India 5 Exclusions to taxing of gifts in the hands of recipient - CHAPTER 25 192-194 How its useful for NRIs to use Power of Attorney (POA) in India CHAPTER 26 195-199 Top 10 Home Buying tips for NRIs NRIs Tips to buy properties CHAPTER - 27 200-204 Facilities for Returning NRIs CHAPTER - 28 205-207 NRIs guide to selling property in India CHAPTER - 29 208-222 CUSTOMS AND BAGGAGE RULES REALTED TO INTERNATINAL PASSENGERS 1 Clearance of arriving passengers: 2 Green Channel or Walk through Channel 3 Red Channel 4 Passenger crossing Green Channel with Dutiable Goods 5 Clearance of arriving passengers 6 Duty free allowances and entitlements for Indian Residents and 6.a Duty Free Entitlements 6.b Tobacco, Alcoholic liquor 6.c Not Allowed Items 6.d Applicable Customs Duty 6.e Duty Allowance applicable for Professionals 7 Import of jewellery/gold/silver: 8 Duty free allowances and entitlements for tourists 9 Item Permitted Quantity Present Duty 10 Category of Tourist Duty Free Allowance 11 Allowances and entitlements on Transfer of Residence (TR): 12 Import of baggage of deceased person 13 Import of unaccompanied baggage 14 Aircraft Crew Members 15 Import of foreign exchange/currency 16 Import of Indian currency 17 Import of fire arms as baggage 18 Import of pet animals as baggage 19 Detained baggage 20 Mishandled baggage9|P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 21 Clearance of departing passengers 22 Export of gold jewellery as baggage 23 Export of currency 24 International Passenger Facilitation 25 Import and Export through Courier 26 Categories of goods allowed import through courier: 27 Categories of goods allowed export through courier 28 Import and export of gems and jewellery 29 Import and Export through Post 30 Procedure in case of postal exports 31 Procedure for claiming Drawback on exports through post 32 Drawback in respect of goods re-exported through post: 33 Re-export of partial consignment CHAPTER- 30 223-250 Baggage Rules at a Glance CHAPTER - 31 251-306 All About Indian Passport CHAPTER - 32 307-309 Home Loans for NRIs CHAPTER - 33 310-319 Overseas Citizenship of India (OCI) CHAPTER - 34 320-321 Person of India Origin (PIO) Scheme Person of Indian Origin Card (PIO Card) 321-322 CHAPTER - 35 322-333 1 Non-Resident Indian (NRI) Pensioners: Savings Bank account maintained by residents in India – non- resident close relative allowed as jointholder A.P. (DIR Series) 2 Circular No.12 dated September 15, 2011 Account Scheme (NRE)/ Foreign Currency (Non-Resident) 3 Account (Banks) Scheme (FCNR(B)) Foreign Investments in India – increase in limit for transfer of 4 security by way of gift A.P. (DIR Series) Circular No.14 dated September 15, 2011 5 Gift in Rupees by Resident Individuals to NRI close relatives Meeting of Medical expenses of NRIs close relatives by Resident 6 Individuals FEMA – Repayment of loans of Non-resident close relatives by 7 residents MASTER CIRCULAR ON ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA BY NRIs/PIOs/FOREIGN 8 NATIONALS OF NON-INDIAN ORIGIN10 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER -36 334-354 Emigration Clearance – Indian and foreign persons All About Emigration 1 What is Emigration 2 Statutory Framework 3 Salient Features of the Act 4 Instructions for Indian Passengers 5 Instruction For Foreigners Coming To India 6 Requirements concerning stay of Foreigners in India 7 Guidelines for Emigration Clearance System 8 Who Needs Emigration Clearance 9 Insurance policy- Pravasi Bhartiya Bima Yojana 10 ECNR/ECR/POE 11 Employment Guidelines for Emigrants 12 List of Registered Agents 13 Abolition of ECRS 14 How can one seek employment abroad 15 Guidelines for Departure to a foreign country for employment 16 CUSTOMS FORMALITIES CHAPTER -37 355-363 1 Inheritance Certificate 2 International Driving Licence 3 International Passport CHAPTER -38 364-366 Islamic Fund -Sharia Law and Investment Structures CHAPTER - 39 367-437 Master Circular on Foreign Investment in India CHAPTER - 40 438-447 Forex Facilities for Residents (Individuals) CHAPTER - 41 448-453 Air Travel Tips for NRIs CHAPTER - 42 454 Baggage Insurance Policy 1 Loss of Checked Baggage – Checked Baggage 2 Delay of the checked Baggage CHAPTER - 43 455-458 Different Modes of Money Remittance - NRIs CHAPTER - 44 459-460 P Notes (Participatory Notes) and NRIs CHAPTER - 45 461-463 Passive Foreign Investment Company - PFIC11 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER - 46 464-472 The Foreign Contribution (Regulation Act, 2010) CHAPTER - 47 473-479 Wills CHAPTER 48 480-483 ADMISSION TO UNDERGRADUATE ENGINEERING PROGRAMME CHAPTER 49 484-485 Exchange Earners Foreign Currency (EEFC) Account CHAPTER 50 486 EXIM Policies CHAPTER 51 487 Compounding of Contraventions under FEMA, 1999 CHAPTER 52 488-489 What is Consumer Court CHAPTER 53 490 Duty Free Shops CHAPTER 54 491-493 Import of Gold and Silver by NRIs CHAPTER 55 494-501 Acquisition of Indian Citizenship (IC) CHAPTER 56 501-507 GENERAL REQUIREMENTS FOR REGISTRATION OF A FOREIGN NATIONAL CHAPTER 57 508- 512 What is AADHAAR ? CHAPTER 58 513-515 PROCEDURE FOR THE ADOPTION OF AN INDIAN CHILD BY A FOREIGNER OR NRI CHAPTER 59 525-516 Employment Guidelines for Emigrants CHAPTER 60 517 NRIs properties disputes settlement CHAPTER 61 518-520 Right to Information Act 2005 CHAPTER 62 521-541 NRIs and Financial Planning 1 Ten Tips for a good Financial Planning & Investments 2 Why you need an Emergency Saving Fund 3 How to plan for your Child’s Higher Education 4 Victims of Bad Financial Advises 5 Impact of inflation in Retirement Planning12 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 6 Why Health Insurance is important 7 How to choose the right Life Insurance Policy 8 Insurance cover for your bank deposits 9 13 Tips to avoid Investment Fraud CHAPTER 63 542-543 Impact of proposed Direct Tax Code on NRIs13 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Abbreviations AD - Authorized Dealer ADR- American Depository Receipts BPO- Business Process Outsourcing CBDT- Central Board of Direct Taxes CBSE -Central Board of Secondary Education CII- Confederation of Indian Industry COC -Certificate of Coverage DASA- Direct Admission to Students Abroad DIN- Director Identification Number DIPP -Department of Industrial Policy and Promotion DMRC - Delhi Metro Rail Corporation DP - Partner DSC - Digital Signature Certificate DTAA - Double Taxation Avoidance Agreement DTC - Direct Taxes Code ECNR - Emigration Check Not Required ECR- Emigration Check Required EdCIL- Education Consultants India Limited EP -F Employees’ Provident Fund ESIC- Employees’ State Insurance Corporation ESOP - Employees’ Stock Option Plan FCCB- Foreign Currency Convertible Bonds FCNR -Foreign Currency (Non Resident) Account FDI - Foreign Direct Investment FEMA - Foreign Exchange Management Act FRRO - Foreigners’ Regional Registration Office GDR - Global Depository Receipts ICWF - Indian Community Welfare Fund IIM- Indian Institute of Management IIT- Indian Institute of Technology IPICOL -Industrial Investment Promotion Corporation of Orissa Limited ISCE - Indian School Certificate Examination IT - Information Technology ITC -Industrial Training Centre ITI - Industrial Training Institute IW - International Worker JV - Joint Venture KYC - Know Your Customer LLP - Limited Liability Partnership LRS- Liberalized Remittance Scheme14 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • MCA - Ministry of Corporate Affairs MHA - Ministry of Home Affairs MNC - Multinational Company MOIA - Ministry of Overseas Indian Affairs MOU - Memorandum of Understanding MRTS - Mass Rapid Transit System NCR- National Capital Region NGO - Non-Government Organization NOR - Not Ordinarily Resident NORKA- Non Resident Keralites Affairs Department NR - Non Resident NRB- Non Resident Bihari NRE - Non Resident External account NREGA- National Rural Employment Guarantee Act NRG - Non Resident Gujaratis NRGF- Non Resident Gujaratis Foundation NRI- Non Resident Indian NRK- Non Resident Keralites NRO - Non Resident Ordinary Rupee account NROFC - Non Resident Oriya Facilitation Centre NSC - National Savings Certificate OCI - Overseas Citizen of India OIFC - Overseas Indian Facilitation Centre OWRC - Overseas Workers Resource Centre PAN- Permanent Account Number PF- Provident Fund PIO - Person of Indian Origin PIS - Portfolio Investment Scheme PPF- Public Provident Fund PSU - Public Sector Company RBI- Reserve Bank of India RFC - Resident Foreign Currency ROR - Resident and Ordinarily Resident SEBI - Securities and Exchange Board of India SME - Small and Medium Enterprises SPDC - Scholarship Programme for diaspora Children SSA - Social Security Agreement STT - Securities Transaction Tax TAN - Tax Deduction Account Number VAT- Value Added Tax15 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER – 1 Residential StatusIn terms of the Foreign Exchange Management Act (FEMA), 1999 a person resident outsideIndia means a person who is not resident in India. 1. A Non Resident Indian (NRI) - is a person resident outside India, who is a citizen of India or is a person of Indian origin. 2. A Person of Indian Origin (PIO) - is defined in Regulation 2 of FEMA Notification ibid as a citizen of any country other than Bangladesh or Pakistan, if (a) he at any time held if Indian passport; or (b) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (c) the person is a spouse of an Indian citizen or a person referred to in sub- citizen sub clause (a) or (b). 3. A Person of Indian Origin - means an individual (not being a citizen of Pakistan or Bangladesh or Sir Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who (i) at any time, held an Indian Passport or (ii) who or either of whose father or mother or Passport whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).The residential status of a person as refered in Sec. 2(31) of the Act. for each assessment year ofunder consideration to determine the scope of total income.Importance• Total income of an assessee cannot be determined without knowing his residential status.• The residential status shall be determined for every person for each previous yearindependently.• The onus of responsibility to prove the residential status is on the assessee.The criteria related to determination of residential status of an individual is described in details inthe later part of this guide (more details refer Chapter 6 – NRI Taxation)16 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Diaspora is a word of Greek origin that means scattering or sowing of seeds It is used to seeds. refer to people who leave their native lands to live in other parts of the world for employment, business or any other purpose. Indian Diaspora is a generic term used for addressing people who have migrated from the territories that are currently within the borders of the Republic of India It constitutes NRIs (Non-resident Indians) and PIOs India. resident Indians (Persons of Indian origins The Indian Diaspora is estimated to be over 30 million. The ns). Government of India recognises the importance of Indian Diaspora as it has brought economic, financial, and global benefits to India The Indian Diaspora today constitutes India. an important, and in some respects unique force in world culture. n unique,17 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 2 Various Types of Bank Accounts - NRIs are permitted to open18 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 1. Types of accounts which can be maintained by an NRI / PIO in India If a person is NRI or PIO, she/he can, without the permission from theReserve Bank, open, hold and maintain the different types of accounts given below with anAuthorized Dealer in India, i.e., a bank authorized to deal in foreign exchange. NRO Savings exchangeaccounts can also be maintained with the Post Offices in India. However, individuals/ entities of .Bangladesh and Pakistan require the prior approval of the Reserve Bank. 2. Non-Resident (Ordinary) Rupee Account (NRO Account) Resident NRO accounts may be opened / maintained in the form of current,savings, recurring or fixed deposit accounts. ings, • Savings Account - Normally maintained for crediting legitimate dues /earnings / income such as dividends, interest etc.The interest rates on NRO Savings deposits shall be at the rate applicable to domestic savings deposits. Currently the interest rate is 4 - 7 per savings cent.(varies banks to banks) (varies • NRO Term Deposits - Banks are free to determine the interest rates. (now banks are offering 8-9.5% interest depending the duration of the deposit) 9.5% • Account should be denomin denominated in Indian Rupees. • Permissible credits to NRO account are transfers from rupee accounts of non non-resident banks, remittances received in permitted currency from outside India through normal banking channels, permitted currency tendered by account holder during his temporary visit to India, legitimate dues in India of the account holder like current income like rent, dividend, pension, interest, etc., sale proceeds of assets including immovable property acquired out of rupee/foreign currency funds or by way of legacy/ inheritance. way • Eligible debits such as all local payments in rupees including payments for investments as specified by the Reserve Bank and remittance outside India of current income like rent, dividend, pension, interest, etc., net of applicable taxes, of the account holder. applicable • NRI/PIO may remit from the balances held in NRO account an amount not exceeding USD one million per financial year, subject to payment of applicable taxes19 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • • The limit of USD 1 million per financial year includes sale proceeds of immovable properties held by NRIs/PIO. • The accounts may be held jointly with residents and / or with non-resident Indian. • The NRO account holder may opt for nomination facility. • NRO (current/savings) account can also be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by sale of foreign exchange brought by him to India. • Loans to non-resident account holders and to third parties may be granted in Rupees by Authorized Dealer / bank against the security of fixed deposits subject to certain terms and conditions. 3. Non-Resident (External) Rupee Account (NRE Account) • NRE account may be in the form of savings, current, recurring or fixed deposit accounts. Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney. • Account will be maintained in Indian Rupees. • Account can be opened with resident join holder – subject to terms and conditions • Balances held in the NRE account are freely repatriable. • Accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively. • Authorised dealers/authorised banks may at their discretion/commercial judgement allow for a period of not more than two weeks, overdrawing in NRE savings bank accounts, up to a limit of Rs.50,000 subject to the condition that such overdrawings together with the interest payable thereon are cleared/repaid within a period of two weeks, out of inward remittances through normal banking channels or by transfer of funds from other NRE/FCNR accounts. • Savings - The interest rates on NRE Savings deposits shall be at the rate applicable to domestic savings deposits. Currently the interest rate above >= 4 % (varies from banks to bank) • Term deposits – Banks are free to fix the term deposit interest rates. On 16th Decemer,2011 with a view to providing greater flexibility to banks in mobilizing non- resident deposits and also in view of the prevailing market conditions, RBI has decided to deregulate interest rates on Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts (the interest rates on term deposits under Ordinary Non-Resident (NRO) Accounts are already deregulated). Accordingly, banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit accounts and savings deposits under Ordinary Non-Resident (NRO) Accounts with immediate effect. However, interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits. Now banks are competing each other to attract NRE deposits and offering annual interest in the range of 6.50 to 9.50%., earlier is was 3.25%. RBI direction is applicable20 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • for all Commercial and Scheduled Banks, Foreign Banks and Regional Rural Banks functioning in India with the license of RBI • Permissible credits to NRE account are inward remittance to India in permitted currency, proceeds of account payee cheques, demand drafts / bankers cheques, issued against encashment of foreign currency, where the instruments issued to the NRE account holder are supported by encashment certificate issued by AD Category-I / Category-II, transfers from other NRE / FCNR accounts, interest accruing on the funds held in such accounts, interest on Government securities/dividends on units of mutual funds purchased by debit to the NRE/FCNR(B) account of the holder, certain types of refunds, etc. • Eligible debits are local disbursements, transfer to other NRE / FCNR accounts of person eligible to open such accounts, remittance outside India, investments in shares / securities/commercial paper of an Indian company, etc. • Loans up to Rs.100 lakh can be extended against security of funds held in NRE Account either to the depositors or third parties. • Such accounts can be operated through power of attorney in favour of residents for limited purpose of withdrawal of local payments or remittances through normal banking channels to the account holder himself.4. Foreign Currency Non Resident (Bank) Account – FCNR (B) Account • FCNR (B) accounts are only in the form of term deposits of 1 to 5 years • All debits / credits permissible in respect of NRE accounts are permissible in FCNR (B) accounts also. • Account can be in Pound Sterling, US Dollar, Japanese Yen, Euro, Canadian Dollar and Australian Dollar • In case the depositor with any convertible currency other than designated currency desires to place a deposit in these accounts, authorised dealers may undertake with the depositor a fully covered swap in that currency against the desired designated currency. Such a swap may also be done between two designated currencies. • Loans up to Rs.100 lakh can be extended against security of funds held in FCNR(B) deposit either to the depositors or third parties. • The interest rates are stipulated by the Department of Banking Operations and Development, Reserve Bank of India. • When an account holder becomes a person resident in India, deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by him.21 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • • Terms and conditions as applicable to NRE accounts in respect of joint accounts, repatriation of funds, opening account during temporary visit, operation by power of attorney, loans/overdrafts against security of funds held in accounts, shall apply mutatis mutandis to FCNR (B).NRIs can now hold bank accounts in any currency The Reserve Bank permitted Indians who have non-resident accountsin the country can now hold them in any currency which is fully convertible. The move is likely tohelp NRIs/Persons of India Origin as it will give them more options in the holding of accounts,and lessen the risk from fluctuations in major currencies.Earlier, FCNR(B) account holders were allowed to hold accounts in only certain currencies suchas the Pound Sterling, US dollar, Japanese yen, euro, Canadian dollar and Australian dollar. Ithas been decided that Authorised Dealer banks in India may be permitted to accept ForeignCurrency (Non- Resident) Account (Banks) deposits in any permitted currency. It may be notedthat ‘Permitted currency for this purpose would mean a foreign currency which is freelyconvertible," RBI said in a notification."The Committee to Review the Facilities for Individuals under Foreign Exchange ManagementAct, 1999 in its Report has recommended that FCNR(B) accounts may be permitted to beopened in any freely convertible currency" RBI said.RBI also said that any citizen who was earlier residing in a foreign country can own or transferproperty or other assets in that nation if it was acquired during the time of his residence there.a person resident in India is free to hold, own, transfer or invest in foreign currency, foreignsecurity or any immovable property situated outside India if such currency, security or propertywas acquired, held or owned by such person when he was resident outside India or inheritedfrom a person who was resident outside India, RBI said.In a clarification issued by it regarding repatriation of income and sale proceeds of assets heldabroad by NRIs who have returned to India permanently, RBI said an investor can retain andreinvest the income earned on investments made under the Liberalised Remittance Scheme.The apex bank said that clarifications are as per relevant sections of the Foreign ExchangeManagement Act of 1999.FCNR deposits can be maintained in any of the nine currencies- American Dollar (USD), BritishPounds (GBP), Euro (EUR) , Japanese Yen (YEN), Australian Dollar (AUD), SingaporeDollar(SGD), Hong Kong Dollar (HKD), Swiss Franc(CHF) and Canadian Dollar (CAD). FCNRaccounts can be opened only as term deposits (fixed deposits/cash certificates).22 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 5.NRE Current Accounts Transfer and repatriate funds easily with your NRE Rupee CurrentAccount. Convenient banking options make your account accessible to you from anywhere inthe world. • o Ideal for foreign nationals who have ESOPs Employee Stock Option Plan (ESOP) are the shares offered to the employees of a company, wherein promoters decide to dilute their stake. Employees are often given a share of the business after a certain length of employment or they can buy shares at any time. issued by Indian companies o Repatriate your principal and interest amount fully o Remit funds easily through Quickremit, IndiaLink, Cheque LockBox, Telegraphic Transfers and Cheque / Draft for free o Utilise account balance for repatriable investments as well as local payments in India o Deposit your overseas earnings in the non-interest bearing Rupee account o Avail of free ATM Card for the mandate holder in India o Get an International Debit Card o Get a personalized cheque book o Operate your account, anywhere, anytime with convenient banking channels like NetBanking o • To deposit money in your NRE Current Account, you can: o Transfer funds from abroad in a freely convertible foreign currency These are foreign currencies that can be exchanged easily with other currencies and are recognized by the international market. o Present foreign currency notes/travellers cheques brought in by you or another NRI during a visit to India o Directly remit the amount to us o Transfer funds from an existing NRE/FCNR Account held in other BanksFees and Charges • Normally you need to maintain an Average Quarterly Balance (AQB) of Rs.5,000 - 25,000/- (this conditions varies from banks to bank) In case your Average Quarterly Balance (AQB) dips below the required amount, a fee of Rs 500 - 1000 per quarter (varies from banks to bank) will be charged.23 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Documents Required o Photocopy of the pages of the passport containing passport details and personal details of all applicants o Copy of valid visa / work permit o One passport photograph of each applicant o One document confirming either the overseas or Indian address. The address on the document has to match the address mentioned in the application form. In case, you cannot go to bank branch for account opening and you reside in a non FATF country, all photocopies of the above documents to be attested by Indian Embassy or by a Notary. In case, you cannot go to any branch for account opening and you reside in a FATF country, then either all photocopies of the above documents to be attested by an Indian Embassy or Notary or by a Banker overseas If the documents are not certified then all documents need to be self signed and submitted along with one additional documents required by the respective banksEligibility • You are eligible if you are a non-resident individual of Indian nationality or of Indian origin. a) In what currency is my NRE Current Account be maintained? • Your NRE Current Account is maintained in Indian Rupees. b) What is the minimum amount with which I can open an NRE Current Account? • The minimum amount required to open an NRE Current Account is INR 5,000- 25,000 or its equivalent in foreign currency( this minimum amount varies from banks to bank). You would be required to maintain an Average Quarterly Balance of INR 5,000 to 25,000/- only. c) What is the frequency of interest payment on my NRE Current Account? • No interest is payable. d) What do I get against my NRE Current Account? • You will get a cheque book and an International Debit Card against your NRE Current Account. f) Can I repatriate funds in my NRE Current Account?24 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • • Yes. The principal and interest earned on NRE Current Account are fully repatriable. g) What taxes am I liable to pay if I have an NRE Current Account? • As per current guidelines, funds in NRE Current Account are exempted from income tax in India. h) Can I transfer funds between NRE Current Accounts? • Yes. Transfer of funds from NRE Current Accounts is allowed for bonafide personal purposes such as personal expenses, education of children, and gifts. i) If I am visiting India, can I use Travellers Cheques or foreign currency to open an account or credit my existing NRE Current Account? • Travellers Cheques can be used to credit/open the account. If the foreign currency notes brought by you exceed USD 5,000/- or the combined value of Travellers Cheques and notes exceed USD 10,000/-, then you have to submit a Currency Declaration Form (CDF) to the customs authorities on arrival in India. You must produce the CDF for endorsement by the Bank when you submit the money for opening/credit to an Account. j) Can I appoint a mandate holder for my NRE Current Account? • Yes. You can appoint a mandate holder for NRE Current Account. You can also choose to provide the mandate holder with an ATM Card. k) What are the payment services available for my NRE Current Account? • With Banks advanced Payment Services, you can bid goodbye to queues and paper work. Our range of payment options makes it easy for you to pay for a variety of utilities and services. l) How do I access my NRE Current Account while I am abroad? • You can access your NRE Current/Savings Account through NetBanking and PhoneBanking.25 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 6. NRO Current Account Remit funds easily through Quickremit, IndiaLink, Cheque LockBox, Telegraphic o Transfers and Cheque / Draft o Deposit your Rupee earnings in the non-interest bearing Rupee account o Open an account jointly with an Indian resident o Utilise account balance for repatriable investments as well as local payments in India o Operate your account, anywhere, anytime with convenient banking channels • Transferring money to and from your account To deposit money in your NRO Current Account, you can: Transfer funds from abroad in a freely convertible foreign currency These are o foreign currencies that can be exchanged easily with other currencies and are recognised by the international market. o Present foreign currency notes / travellers cheques brought in by you or another NRI during a visit to India o Directly remit the amount to us o Transfer funds from an existing NRE/FCNR Account held in other banks o Make local payments in India • Documents required o Photocopy of the pages of the passport containing passport details and personal details of all applicants o Copy of valid visa / work permit o One passport photograph of each applicant o One document confirming either the overseas or Indian address. The address on the document has to match the address mentioned in the application form. Incase, you cannot go to bank branch for account opening and you reside in a non FATF country, all photocopies of the above documents to be attested by Indian Embassy or by a Notary. In case, you cannot go to any bank branch for account opening and you reside in a FATF country, then either all photocopies of the above documents to be attested by an Indian Embassy or Notary or by a Banker overseas. If the documents are not certified then all documents need to be self signed and submitted along with one additional26 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • document required by the bank. • Eligibility o You are eligible if you are a non-resident individual of Indian nationality or of Indian origin. Upon change of your status from NRI to RI, you need to inform the bank immediately. o NRO account can be held in Rupees only o NRO accounts can be held jointly with Residents o In case of change of status from Resident to Non-Resident, the existing Resident Account has to be designated as an NRO Account • FAQs a) In what currency is my NRO Current Account maintained? Your NRO Current Account is maintained in Indian Rupees. b) What is the minimum amount with which I can open an NRO Current Account? The minimum amount required to open an NRO Current Account is INR 5,000- 25,000 or its equivalent in foreign currency. You would be required to maintain an Average Quarterly Balance of INR 5,000- 25,000/- only. (minimum balance requirements varies from banks to bank) c) What is the frequency of interest payment on my NRO Current Account? No interest is payable. d) What do I get against my NRO Current Account? You will get a cheque book and an ATM Card against your NRO Current Account e) What are the permissible debits/credits to the NRO Current Account? There are no restrictions on the debits from NRO Current Account. Credit of funds representing legitimate dues of the account holder from local sources for e.g. current income in India like rent, etc. and proceeds of remittances received from abroad through normal banking channels can be freely credited. f) Can I repatriate funds in my NRO Current Account? You can repatriate up to USD 1 million, for bonafide purposes, per calendar year from balances in NRO Accounts subject to payment of applicable taxes. The limit of USD 1 million per year includes sale proceeds of immovable properties held by NRIs/PIO (Person of Indian Origin) remittance can be made if the sale proceeds have been held by the NRI/PIO for the balance period in eligible investments. (more details about the27 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • repatriation of money abroad is provided in the later part of this guide) g) Can I have joint applicant for my NRO Current Account? Yes. You can hold the account jointly with Resident or Non-Resident Indian(s). Alternately, you can authorise an Indian Resident to operate your account by submitting a mandate letter. h) If I am visiting India, can I use Travellers Cheques or foreign currency to open an account or credit my existing NRO Current Account? Travellers Cheques can be used to credit/open the Account. If the foreign currency notes brought by you exceed USD 5,000/- or the combined value of Travellers Cheques and notes exceed USD 10,000/-, then you have to submit a Currency Declaration Form (CDF) to the customs authorities on arrival in India. You must produce the CDF for endorsement by the bank when you submit the money for opening/credit to an account. i) How do I access my NRO Current Account while I am abroad? You can access your NRO Savings Account through NetBanking and PhoneBanking28 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 7. Resident Foreign Currency Accounts (RFS Accounts) A scheme known as Resident Foreign Currency Accounts (RFC accounts) Scheme has been drawn up by Reserve Bank in pursuance of Government of India Notification No. F.10/22/90/NRI Cell dated 17th July 1992 and Reserve Bank Notifications Nos. FERA.116, 117 and 118 /92-RB dated 7th September 1992 to enable eligible returning Indians to open and maintain foreign currency accounts with authorised dealers in India. Reserve Bank has also granted exemption from the prohibition imposed under Section 24 of FERA 1973 in respect of gift of foreign exchange held in India/abroad or of any property held abroad in certain cases referred to in its Notification No. FERA 165/95-RB dated 28th April 1995. Opening of RFC Accounts (ii) RFC accounts may be maintained in the form of current, savings (without cheque facility) or term deposit accounts and held singly or jointly only in the names of eligible persons Note A -Persons who returned to India prior to 18th April 1992 after having been resident outside India for a continuous period of not less than one year are also eligible to open RFC accounts if (a) they are holding valid specific permission/licence from Reserve Bank as on 17th July 1992 to maintain foreign accounts or to hold other foreign currency assets abroad or (b) they are in receipt of pension or other monetary benefits from their overseas employers subsequent to their return to India even if they did not maintain foreign currency accounts or hold other foreign currency assets abroad Note B - Persons holding RIFEE permits or Reconversion facility have been given29 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • option to continue those facilities or avail of RFC account facility (cf. paragraph 12.13). These options can be exercised at one stroke or in part amounts during the validity period of RIFEE permit or Reconversion facility. Accordingly, holders of RIFEE permit or Reconversion facility are also eligible to open RFC accounts Under the scheme, persons of Indian nationality or origin, who, having been resident outside Inida for a continuous period of not less than one year, have become persons resident in India on or after 18th April 1992 are eligible to open and maintain the accounts with authorised dealers in India in any freely convertible foreign currency. Authorised dealers may, on receipt of an application in form RFC, open RFC accounts in the names of eligible persons. Persons who returned to India after a short assignment of less than one year abroad desiring to have RFC accounts should apply through authorised dealers to Reserve Bank in form RFC. RFC accounts opened with the specific approval of Reserve Bank will be governed by the conditions stipulated by Reserve Bank while granting such approval. Note: For arriving at the period of continuous stay abroad of not less than one year, short visits to India on personal grounds like meeting family members/relatives or on health grounds which do not indicate the persons intention to stay in India for an indefinite period may be ignored.30 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Explanation: For the purpose of this Scheme - A person (not being a citizen of Pakistan or Bangladesh) shall be deemed to be of Indian origin, if, i) he at any time held an Indian passport, or ii) he or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955), or iii) that person is the spouse of an Indian citizen or of a person of Indian origin (not being a citizen of Pakistan or Bangladesh). Eligible Assets Assets acquired or held otherwise than in contravention of the Act by an eligible person ,while he was resident outside India(non-resident), in the form of deposits in banks outside India, investments in foreign currency shares or securities or immovable properties situated outside India or investments in business etc. outside India and include foreign exchange earnings through employment, business or vocation outside India taken up or commenced by such person while he was resident outside India. Credits Undernoted credit transactions may be allowed in RFC Accounts by authorised dealers. (a) Remittance in convertible foreign currency from outside India through normal banking channels representing i) Funds in bank accounts outside India forming part of eligible assets held by the eligible person. ii) Income such as dividend, interest, profit, rent, etc. earned on eligible assets held by the eligible person.31 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • iii) Sale proceeds of eligible assets. (b) Pension or other monetary benefits received from outside India in convertible foreign currency, through normal banking channels, arising out of employment taken up outside India by the eligible person prior to his returning to India. (c) Interest earned on RFC account. (d) Foreign currency notes/travellers cheques brought into India by the eligible person, provided that where the amount tendered exceeds US$ 10,000 or its equivalent where the value of foreign currency/bank notes exceeds US$ 2500 or its equivalent they have been declared on the Currency Declaration Form (CDF) (cf. papragraph 7D.5). (e) Transfers from other RFC accounts of the account holder. (f) Balances in any NRE/FCNR Account (other than in NRE rupee accounts of persons resident in the erstwhile Bilateral Group countries which have been funded in non convertible rupees) in the name of the eligible person standing to his credit at the time of his arrival in India. No penalty would be payable for premature withdrawal of NRE/FCNR deposits in such cases. (g) Unutilised entitlement under any valid RIFEE permit or Reconversion facility granted by Reserve Bank (h) Unspent foreign exchange surrendered by the RFC accountholders provided authorised dealer is satisfied that the concerned foreign exchange/currency had in fact been released for travel etc. abroad by debit to the same RFC accounts and the amount of foreign exchange/currency is surrendered within the stipulated period as required under the Exchange Control regulations.32 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Debits (i) The funds in the RFC account may be allowed to be freely utilised by the account holder for any bona fide remittance outside India through normal banking channels including for investments abroad provided the cost of such investments and/or any subsequent payments required therefor are met out of RFC account. (ii) Withdrawals/payments from such accounts, other than for remittances outside India, or for payments in foreign currency authorised to be made in India by Reserve Bank, shall be permitted by the authorised dealer only in equivalent Indian rupees. Rate of Interest Rate of interest payable on the funds held in RFC accounts may be decided by authorised dealers on the basis of market rates. No interest shall be payable on balances held in the form of current accounts. Nomination Facility (i) RFC accounts shall have the nomination facility as in the case of resident rupee accounts. (ii) On the death of a RFC account holder, the balance in the account may be repatriated to nominees to the extent of his/their entitlement, if on the date of death of the account holder such nominees are resident outside India. To the extent any nominee is a person resident in India on the date of the death of account holder, the amount may be paid to him in equivalent Indian rupees. Reserve Requirements Funds held in RFC accounts are exempt from CRR/SLR requirements. Loans/Overdrafts against the Deposits No loan/overdraft shall be granted by authorised dealers against balances in RFC accounts. Transfer of Balances on becoming Non-resident - Funds held in RFC account may be freely remitted abroad or credited to fresh NRE/FCNR33 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • • The funds in RFC accounts are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment in any form outside India. • RFC accounts can be maintained in the form of current or savings or term deposit accounts, where the account holder is an individual and in the form of current or term deposits in all other cases.If the individual subsequently goes abroad to become an NRI, the balance in the RFC accountcan be converted to NRE/FCNR account. Interest income from RFC is exempt from income-taxtill such time the Returning Indian maintain the status of Resident but Not Ordinarily Resident(NOR). Hence, if the Returning NRI had been non-resident for a continuous period of 2 years,he gets exemption from income-tax for subsequent 9 years.Interest income on RFC deposits is taxable when the NRI loses RNOR (resident not ordinarilyresident) status and becomes an ordinary resident. The balances in NRE or FCNR account canbe credited to RFC Account on the change of the status of the NRE or FCNR Account holderfrom a Non-Resident to a Resident. Under the current FEMA regulations the Non-ResidentIndian is not required to satisfy a minimum period of stay of one year. A person can maintain anRFC Account, once he becomes a resident for any length of time as long as he remains to be aresident. If his status changes once again from Resident to Non-Resident, the funds held inRFC account are allowed to be freely remitted abroad or credited to fresh NRE or FCNRaccount. However the current regulation under FEMA is silent about the above provision.The treatment of deducting tax at source on interest on RFC Account is similar to DomesticTerm Deposits. However it is possible for a person, whose status under the Income TaxProvision is Resident but not Ordinarily Resident to claim that the interest on Term deposits isnot liable to tax under the provisions of Section 10 of the Income Tax Act, 1961. The individualshould furnish Form 15AA if he does not require the bank to deduct tax at source.34 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 8. Foreign Currency Account • A person resident in India who has gone abroad for studies or who is on a visit to a foreign country may open, hold and maintain a Foreign Currency Account with a bank outside India during his stay outside India, provided that on his return to India, the balance in the account is repatriated to India. However, short visits to India by the student who has gone abroad for studies, before completion of his studies, shall not be treated as his return to India. • A person resident in India who has gone out of India to participate in an exhibition/trade fair outside India may open, hold and maintain a Foreign Currency Account with a bank outside India for crediting the sale proceeds of goods on display in the exhibition/trade fair. However, the balance in the account is repatriated to India through normal banking channels within a period of one month from the date of closure of the exhibition/trade fair.35 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 3 Facilities available to NRIs/PIOWhat are the facilities available to NRIs/PIO?1. Investment facilities for NRIsAs a resident, you made some investments and redeemed them after becoming an NRI, thesewill be treated differently. For instance, NRIs cannot extend the tenure of their PPF account.Capital gains long-term or short-term-will be applicable when you redeem/sell your pastinvestments. If you sell shares that are listed on a recognized stock exchange in India afterholding them for more than a year, you will not have to pay tax on the capital gain provided thesecurities transaction tax has been paid. If NRI wish to buy/sell shares on Indian Stock Market,they need to open a special account called PIS.. NRIs can open PIS account both repatriation(NRE) and non-repatriation basis. But capital gain tax will be deducted at source for all selltransactions (this TDS is not applicable for resident share trading account) They are not allowedto trade in ordinary resident share trading/depository account. NRIs are also not allowed toopen Commodity Trading account. But they can buy commodities through ETFs (ExchangeTraded Funds). NRIs are also allowed to invest in Tax Free Bonds.2. NRIs are allowed, without limit, purchase on repatriation basis: • Government dated securities / Treasury bills • Units of domestic mutual funds; • Bonds issued by a public sector undertaking (PSU) in India. • Non-convertible debentures of a company incorporated in India. • Perpetual debt instruments and debt capital instruments issued by banks in India. • Shares in Public Sector Enterprises being dis-invested by the Government of India, provided the purchase is in accordance with the terms and conditions stipulated in the notice inviting bids. • Shares and convertible debentures of Indian companies under the FDI scheme (including automatic route & FIPB), subject to the terms and conditions specified in Schedule 1 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time. • Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 3 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time.36 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 3. NRIs are allowed , without limit, purchase on non-repatriation basis : • Government dated securities / Treasury bills • Units of domestic mutual funds • Units of Money Market Mutual Funds • National Plan/Savings Certificates • Non-convertible debentures of a company incorporated in India • Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme, subject to the terms and conditions specified in Schedules 3 and 4 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time. • Exchange traded derivative contracts approved by the SEBI, from time to time, out of INR funds held in India on non-repatriable basis, subject to the limits prescribed by the SEBI. 4. An individual resident can borrow money from his close relatives outside India An individual resident can borrow sum not exceeding USD 250,000or its equivalent from his close relatives staying outside India, subject to the conditions that: i) the minimum maturity period of the loan is one year; ii) the loan is free of interest; and iii) the amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the NRI.37 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 5. Repayment of Housing Loan of NRI / PIOs by close relatives of the borrower in IndiaHousing Loan in rupees availed of by NRIs/ PIOs from ADs / Housing Financial Institutions inIndia, can be repaid by the close relatives in India of the borrower.RBI/2011-12/465A. P. (DIR Series) Circular No.95March 21, 2012ToAll Category-I Authorised Dealer Banks and Authorised banksMadam / Sir,Foreign Exchange Management (Deposit) Regulations, 2000 - Credit to Non Resident (External)Rupee AccountsAttention of Authorised Dealer Category – I (AD Category-I) banks is invited to Regulation 5(6)of ForeignExchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000notified vide Notification No. FEMA 3/2000-RB dated May 3, 2000, as amended from time to time, interms of which, an individual resident in India may borrow a sum not exceeding USD 250,000/- or itsequivalent from her / his close relatives outside India, subject to the conditions mentioned therein.2. The Reserve Bank has received representations that the repayment of such loans may be allowed tobe credited to the Non Resident (External) Rupee (NRE) Accounts. On review, it has been decided thatAD Category-I banks may allow repayment of such loans to NRE / Foreign Currency Non-Resident(Bank) [FCNR(B)] account of the lender concerned subject to the condition that the loan to the residentindividual was extended by way of inward remittance in foreign exchange through normal bankingchannels or by debit to the NRE / FCNR(B) account of the lender and the lender is eligible to open NRE /FCNR(B) account within meaning of the Foreign Exchange Management (Deposit) Regulations, 2000notified vide Notification No. FEMA 5/2000-RB dated May 3, 2000, as amended from time to time. Suchcredit shall be treated as an eligible credit to the NRE / FCNR(B) account in terms of Para 3(j) ofSchedule-1 read with Para 5 of Scheule-2 of Notification No. FEMA 5/2000-RB, ibid.3. Authorized Dealer banks may please bring the contents of this circular to the notice of theirconstituents concerned.38 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 4. The directions contained in this circular have been issued under Section 10(4) and 11(1) of the ForeignExchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, ifany, required under any other law.Yours faithfully,(Meena Hemchandra)Chief General Manager-in-Charge 6. Facilities to returning NRIs/PIO • Returning NRIs/PIO may continue to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India, if such currency, security or property was acquired, held or owned when resident outside India39 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 4 Investment Options not permitted for NRIsNRIs are not permitted to invest in small savings or Public Provident Fund (PPF).The following investments options are not available to NRIsa) PPF (Public Provident Fund)b) NSC (National Savings Certificate) – 5 years and 10 yearsc) Senior citizens savings accountd) Tax saving infrastructure bonds under section 80CCFe) Post office time deposits are not available for NRIs.NRIs are not allowed to invest in Public Provident Fund (PPF) and the Senior Citizens SavingsScheme and Post Office Small Savings Schemes. If and when the accounts office comes toknow of the anomaly, the deposit will be returned to the investor, without any interest.As per rules NRIs are not allowed to open Savings, Recurring Deposit, Term Deposit andMonthly Income Scheme accounts or purchase of National Saving Certificates issued by PostOffices. The accounts opened prior to this date are allowed to continue up to their maturity. Asand when the irregularity comes to the notice of the authorities, the money will be returned toyou without any interest. Those NRIs who have opened such accounts will do well bywithdrawing the investment themselves or face the consequence of the violation of the rules.Those small savings accounts like MIS,NSC etc already opened can be continued till maturity.When an Indian Resident goes abroad, there is no other choice other than leaves most ofhis/her investments either financial or non-financial assets like property in India itself. Theseinvestments may include the above mentioned prohibited investments in like PPF, NSC, PostOffice MIS and other small savings deposits etc. A resident Indian who subsequently becomesNRI during the currency of term of these investments may continue the same till maturity. Thismeans, they are not allowed to open a new account or extend the scheme beyond its maturity.However, an already existing investment may be continued. For those instruments that requireperiodic investments like PPF, the NRI may use either the NRE or the NRO as per his40 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • convenience for further investments, it is better to use the NRO account. The ex-minor can takeover the operations of the PPF account by registering his signature at the accounts office. Theguardian will have to attest the signature of the ex-minor. The PPF maturity proceeds belong tothe minor (or the minor holder who has turned major). The guardian has no right to the same. . Foreign Exchange Management Act Restriction for NRIs for opening an account in PPF scheme, post office saving bank and purchase National Saving Certificates. July 25, 2003 PUBLIC PROVIDENT FUND (AMENDMENT) SCHEME, 2003Notification No. G.S.R. 585(E), dated 25-7-2003In exercise of the powers conferred by sub-section (4) Section 3 of the Public Provident FundAct, 1968 (23 of 1968), the Central Government hereby makes the following further amendmentto the Public Provident Fund Scheme, 1968, namely :—1. (1) This Scheme may be called the Public Provident Fund (Amendment) Scheme, 2003. (2) It shall come into force on the date of its publication in the Official Gazette.2. In the Public Provident Fund Scheme, 1968, in paragraph 3, after sub-paragraph (2), thefollowing sub-paragraph shall be inserted, namely:— “(3) Non-Resident Indians (NRIs) are not eligible to open an account under the PublicProvident Fund Scheme:Provided that if a resident who subsequently becomes NRI during the currency of maturityperiod prescribed under Public Provident Fund Scheme, may continue to subscribe to the Fundtill its maturity on a non-repatriation basis.”Post Office Savings Bank General (Amendment) Rules, 2003Notification No. G.S.R. 586(E), dated 25-7-2003In exercise of the powers conferred by section 15 of the Government Savings Banks Act, 1873(5 of 1873), the Central Government hereby makes the following rules further to amend the PostOffice Savings Bank General Rules, 1981, namely :—1. (1) These rules may be called the Post Office Savings Bank General (Amendment) Rules,2003. (2) They shall come into force on the date of their publication in Official Gazette.2. In the Post Office Savings Bank General Rules, 1981, —(i) rule 3 shall be re-numbered as sub-rule (1);(ii) after sub-rule (1) as so re-numbered, the following sub-rule shall be inserted, namely:—41 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • “(2) Non-Resident Indians (NRIs) are not eligible to open an account in a Post Office SavingsBank:Provided that if a resident who opened an account in any Post Office Savings Bank,subsequently becomes Non-Resident Indian during the currency of maturity period, maycontinue such account till its maturity on a Non-Repatriation Basis”.National Savings Certificates (VIII Issue) (Third Amendment) Rules, 2003Notification No. G.S.R. 591(E), dated 25-7-2003In exercise of the powers conferred by section 12 of the Government Savings Certificates Act,1959 (46 of 1959), the Central Government hereby makes the following rules further to amendthe National Savings Certificates (VIII Issue) Rules, 1989, namely :—1. (1) These rules may be called the National Savings Certificates (VIII Issue) (ThirdAmendment) Rules, 2003.(2) They shall come into force on the date of their publication in Official Gazette.2. In the National Savings Certificates (VIII Issue) Rules, 1989, in rule 4, after sub-rule (2), thefollowing sub-rule shall be inserted, namely :—“(3) Non-Resident Indians (NRIs) are not eligible to purchase the National Savings Certificates :Provided that if a resident who subsequently becomes NRI during the currency of maturityperiod, shall be allowed to avail the benefits of the certificates on maturity on a non-repatriationbasis.”Kisan Vikas Patra (Second Amendment) Rules, 2003Notification No. G.S.R. 592(E), dated 25-7-2003In exercise of the powers conferred by section 12 of the Government Savings Certificates Act,1959 (46 of 1959), the Central Government hereby makes the following rules further to amendthe Kisan Vikas Patra Rules, 1988, namely :—1. (1) These rules may be called the Kisan Vikas Patra (Second Amendment) Rules, 2003. (2) They shall come into force on the date of their publication in Official Gazette.2. In the Kisan Vikas Patra Rules, 1988, in rule 6, after sub-rule (2), the following sub-rule shallbe inserted, namely :— “(3) Non-Resident Indians (NRIs) are not eligible to purchase the Kisan Vikas Patras :Provided that if a resident who subsequently becomes NRI during the42 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 5 NRI’s Investment in immovable PropertiesInvestment in immovable Property • NRI / PIO / Foreign National who is a person resident in India (citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of the Reserve Bank) may acquire immovable property in India other than agricultural land/ plantation property or a farm house out of repatriable and / or non- repatriable funds. • The payment of purchase price, if any, should be made out of (i) funds received in India through normal banking channels by way of inward remittance from any place outside India or (ii) funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank.Note : No payment of purchase price for acquisition of immovable property shall be made eitherby traveller’s cheque or by foreign currency notes or by other mode other than those specificallypermitted as above. • NRI may acquire any immovable property in India other than agricultural land / farm house plantation property, by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India • NRI may acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property 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 or from a person resident in India • An NRI may transfer any immovable property in India to a person resident in India. • NRI may transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India.In respect of such investments, NRIs are eligible to repatriate:43 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 7. The sale proceeds of immovable property in India if the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR (B) account. 8. The amount to be repatriated should not exceed the amount paid for the property in foreign exchange received through normal banking channel or by debit to NRE account (foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account. 9. In the event of sale of immovable property, other than agricultural land / farm house / plantation property in India, by NRI / PIO, the repatriation of sale proceeds is restricted to not more than two residential properties subject to certain conditions. 10. If the property was acquired out of Rupee sources, NRI or PIO may remit an amount up to USD one million per financial year out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance. 11. Refund of (a) application / earnest money / purchase consideration made by house- building agencies/seller on account of non-allotment of flats / plots and (b) cancellation of booking/deals for purchase of residential/commercial properties, together with interest, net of taxes, provided original payment is made out of NRE/FCNR (B) account/inward remittances.44 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 6 NRI Taxation45 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 1. Expatriates Working Abroad – Tax Provisions The tax liability related to expatriates working outside theIndia would be determined based on their residential status. The following are themain categories of Non-Resident Indians as per Income Tax Act, 19611) Non-Resident Indian (NRI) a) He/She is not in India for 182 days or more during the relevant previous year b) He/She india for 60 days or more during the previous year and he/she is not in India for 365 days or more during the 4 years prior to the previous year c) In the case of an individual on visit to India or a member of the crew of an Indian ship or a person leaving India for employment outside India, the requirement of stay in India of 60 days in condition 2 above is extended to 182 days.2) Resident but not Ordinarily Resident (RNOR)A NRI who has returned to India for good is covered under the provisions of section6(6) of the Income-tax Act. He is given a special status of RESIDENT BUT NOTORDINARILY RESIDENT (RNOR) if he satisfies one of the following conditions: a) He is not a resident, as per the above provisions, for at least 9 out of 10 previous years prior to the previous year under consideration. b) His stay in India during the 7 previous year prior to the previous year under consideration should not be 730 days or more Tax Liabilities Thus according to condition in clause (a) a new comer to India would remain ‘not ordinarily resident’ in India for the first 9 years of his stay in India. Similarly, in case where a person who is resident in India goes abroad and ceases to be a resident in India for atleast 2 years, he shall, on his return, be treated as not ordinarily resident for the next 9 years. ies of each category of IndividualsBased on the residential status of payer, his/her tax liability will be as follows:- a) Resident - All income of the previous year wherever accruing or arising or received by him including incomes deemed to have accrued or arisen. b) Non-Resident Indian - All income accruing, arising to or deemed to have accrued or arisen or received in India. c) Resident but not Ordinary Resident - All Income accruing or arising or deemed to have accrued or arisen or received in India. Moreover, all income earned outside India will also be included if the same is derived from a business or profession controlled or set up in India.46 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • The residential status of a person as refered in Sec. 2(31) of the Act. for each assessment year under consideration to determine the scope of total income. Importance • Total income of an assessee cannot be determined without knowing his residential status. • The residential status shall be determined for every person for each previous year independently. • The onus of responsibility to prove the residential status is on the assessee. 2. Income Tax Rates proposed in Union Budget 2012 for the financial year 2012-2013The basic income tax exemption limit has been increased to Rs. 200,000 from Rs. 180,000.00.As per the present exemption limit the tax applicable from FY 2012-13 is given belowThe rates of Basic Tax, Education Cess and Higher Secondary Education Cess have beenkept unalteredfor all assesses total 3%Up to Rs 200,000 : NIL (for FY 2011-12 Rs 180,000)Rs 200,000-500,000: 10%Rs 500,000-1,000,000 20% (for FY 2011-2012 Rs 500,000-800,000)Above Rs 1,000,000.00: 30% (FY 2011-12 above Rs. 800,000)As a result of increasing the basic exemption limit, for NRIs as well as for all resident Indians,the tax liability will come down and tax reduction of up to Rs 22,000 is likely on income of Rs1,000,000.0047 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Proposed basic exemption and Existing basic exemption and Assessee Income Slabs (FY 2011-12) Income Slabs (YF 2012-2013) Total Income Tax Rate Total Income Tax Rate uptoRs.1,80,000/- Nil uptoRs.2,00,000/- Nil 10% of income 10% of income Rs.1,80,001/- above Rs.2,00,001/- above toRs.5,00,000/- Rs.1,80,000/- toRs.5,00,000/- Rs.2,00,000/- Rs.32,000/- Rs.30,000/- plus plus 20% of 20% of income Rs.5,00,001/- income above Rs.5,00,001/- above toRs.8,00,000/- Rs.5,00,000/- toRs.10,00,000/- Rs.5,00,000/- All Individuals, Rs.1,30,000/- plus HUF, AOP Rs.92,000/- 30% of income and BOI plus 30% of above (except those income above Rs.10,00,000/- stated below) AboveRs.8,00,000/- Rs.8,00,000/- AboveRs.10,00,000/- uptoRs.1,90,000/- Nil uptoRs.2,00,000/- Nil 10% of income 10% of income Rs.1,90,001/- above Rs.2,00,001/- above toRs.5,00,000/- Rs.1,90,000/- toRs.5,00,000/- Rs.2,00,000/- Rs.31,000/- Rs.30,000/- plus plus 20% of 20% of income Individuals, Rs.5,00,001/- income above Rs.5,00,001/- above being toRs.8,00,000/- Rs.5,00,000/- toRs.10,00,000/- Rs.5,00,000/- resident Rs.91,000/- Rs.1,30,000/- plus woman, upto plus 30% of 30% of income the age of 60 income above above years AboveRs.8,00,000/- Rs.8,00,000/- AboveRs.10,00,000/- Rs.10,00,000/-48 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • uptoRs.2,50,000/- Nil uptoRs.2,50,000/- Nil 10% of income 10% of income Rs.2,50,001/- above Rs.2,50,001/- above Individuals, toRs.5,00,000/- Rs.2,50,000/- toRs.5,00,000/- Rs.2,50,000/- being Rs.25,000/- Rs.25,000/- plus resident, and plus 20% of 20% of income ‘Senior Rs.5,00,001/- income above Rs.5,00,001/- above Citizen’ (i.e. toRs.8,00,000/- Rs.5,00,000/- toRs.10,00,000/- Rs.5,00,000/- above 60 Rs.85,000/- Rs.1,25,000/- plus years) upto plus 30% of 30% of income the age of 80 income above above years AboveRs.8,00,000/- Rs.8,00,000/- AboveRs.10,00,000/- Rs.10,00,000/- uptoRs.5,00,000/- Nil uptoRs.5,00,000/- Nil Individuals, 20% of income 20% of income being Rs.5,00,001/- above Rs.5,00,001/- above resident, and toRs.8,00,000/- Rs.5,00,000/- toRs.10,00,000/- Rs.5,00,000/- ‘ Very Senior Rs.60,000/- Rs.1,00,000/- plus Citizen’ i.e. of plus 30% of 30% of income age 80 years income above above and above AboveRs.8,00,000/- Rs.8,00,000/- AboveRs.10,00,000/- Rs.10,00,000/-For assessment year 2012-13, additional surcharge called the “Education Cess on income-tax” and“Secondary and Higher Education Cess on income-tax” shall continue to be levied at the rate of two percent. and one per cent., respectively, on the amount of tax computed, inclusive of surcharge, in all cases.No marginal relief shall be available in respect of such Cess.49 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 3. Particulars of Income Tax Incidence for various tax status Resident but not ordinarily Non- Particulars of Income Tax incidence in case of Resident resident Resident a. Income received in India whether accrued in India or outside India YES YES YES b. Income deemed to be received in India whether accrued in India or outside India YES YES YES c. Income accruing or arising in India whether received in India or outside India. YES YES YES d. Income deemed to accrue or arise in India, whether received in India or outside India. YES YES YES e. Income received and accrued outside India from a business controlled in profession set up in India YES YES NO f. Income received and accrued outside India from a business controlled from outside India or profession set up outside India. YES NO NO g. Income earned and received outside India but later on remitted to India. NO NO NO50 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 4 Tax Exemptions from Income Tax available for NRIsIncome from the following investments made by NRIs/PIOs out of convertible foreign exchangeis totally exempt from tax:(a) Deposits in under mentioned bank accounts(i) Non Resident External Rupee Account (NRE)(ii) Foreign Currency Non Resident Account (FCNR) (b) Units of specified mutual funds, other specific securities, bonds and savingscertificates (subject to conditions prescribed under the Income-tax laws and regulations).(c) Dividend declared by Indian company.(d) Long term capital gains arising from transfer of equity shares in a company and/or equityoriented schemes of Mutual Funds, which are subject to Securities Transaction Tax.It should be noted that the tax exemptions relating to NRE bank deposits will cease immediatelyupon the NRI/PIO becoming a resident in India whereas the interest on FCNR bank deposits willcontinue to be tax free as long as the NRI maintains the status of Resident but Not OrdinarilyResident or until maturity,5.Other Tax Aspects related to NRIsA person who is non-resident is liable to tax on that income only which is earned by him in India.Income is earned in India if 1. It is directly or indirectly received in India; or 2. It accrues in India or the law construes it as having accrued in India.. The following are some of the instances when the law construes and income to have accrued inIndia: 1) income from property if such property is situated in India; 2) income from any asset or source if such asset or source is in India; 3) income from salaries if the services are rendered in India. In such cases salary for rest period or leave period will be regarded as earned in India if it forms part of service contract,. 4) income from salaries payable by the Government to a citizen of India even though the services are rendered outside India; 5) income from dividend paid by an Indian company even if the same is paid outside India; 6) income by way of interest payable by Government or by any other person in certain circumstances ; 7) income by way of Royalty if payable by the Government or by any other person in certain circumstances;51 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 8) income by way of fees for technical services if such fees is payable by the Government or by any other person in certain circumstances. 9) Income from business arising through any business connection in India (refer Chapter X of Income Tax Act);Non-resident, having annual taxable income in India more than Rs. 180,000/- should pay taxfor financial year 2011-12, has to file a return of income in India(from FY 2012-13 Rs. 200,000).The return can be filed in the ITR applicable for this purpose. NRIs must also obtain Incometax PAN Number not only for filing Income Tax Returns, but PAN requires for so many otherpurposes also.Income which is earned outside India by an NRI is not taxed in Inida. An NRI doesnt have topay tax on the interest income in a non-resident external (NRE) account or foreign currencynonresident (FCNR) account, dividend received from Mutual Funds and share investments.Long term capital gain arising from sale of equity mutual fund schemes and share investmentsare also exempted from tax (minimum holding period for these assets 12 months). Short termcapital gain will be added to their total income and tax needs to be paid at the applicable taxslab which the NRI belongs. Long Term capital gain on sale of bonds, mutual funds schemesother than equity will be taxed @ 20% with indexation and benefits and @ 10% withoutindexation benefits 6. Special Provisions Relating to Non-ResidentsChapter XIIA of the Income Tax Act deals with special provisions relating to certain incomes ofnon-residents. Sec. 11 5D deals with special provisions regarding computation of investmentincome of NRIs. Section 11 5E relates to investments income and long term capital gains ofNRIs, such income being taxed at concessional flat rates. As per section 11 5F, capital gain isnot chargeable on transfer of foreign exchange assets under certain circumstances. The NRIsneed not file their return of income if their total income consist only of investment income or longterm capital gains or both and proper tax has been deducted from this income(Sec. 11 5G).Benefits under this chapter are available even after the assessee becomes a resident (Sec. 115H). The provisions of this chapter would not apply if the assessee so chooses (Sec. 115I).52 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 7. Income Tax Clearance Certificate A resident Indian proceeding overseas for employment has toapply for an Income Tax Clearance Certificate on Form 31, as per Section 230 (I) of the IncomeTax Act 1961. The Assessing Officer assessing the applicant’s form would provide Form 32which authorises the application.. An expatriate before leaving the territory of India is required toobtain a tax clearance certificate from a competent authority stating that he does not have anyoutstanding tax liability. Such a certificate is necessary in case the continuous presence in Indiaexceeds 120 days. An application is to be made in a prescribed form to the Income TaxAuthority having jurisdiction for assessment of the expatriate to grant a tax clearance certificate.This is to be exchanged for final tax clearance certificate from the foreign section of the IncomeTax Department. Tax Clearance certificate is valid for a period of 1 month from the date of issueand is necessary to get a confirmed booking from an airline or travel agency and may berequired to be produced before the customs authorities at the airportThe following categories of persons are required to produce a tax clearance certificate from theconcerned assessing officer prior to their departure:- • persons who are not domiciled in India, and in whose case the stay in India has exceeded 120 days; • persons of Indian or non-Indian domicile whose names have been communicated to the airlines/shipping Companies by the Income Tax authorities; • persons who are domiciled in India at the time of their departure; but i. intend to leave India as emigrants; or ii. intend to proceed to another country on a work permit with the object of taking any employment or other occupation in that country; or iii. in respect of whom circumstances exist, which in the opinion of the income tax authorities render it necessary for him to obtain the Tax Clearance Certificate. • Foreigners working in India can get one-time tax clearance: There are many foreign employees not domiciled in India. To save them the hassles of obtaining a tax clearance each and every time such employees travel abroad, there is a provision where they can get a onetime clearance certificate that covers a period of up-to five years. This type of one-time clearance is given in those cases where their employers give a guarantee in the prescribed form that if any tax is found due against the employee during the entire period of the contract of service plus two years the same shall be paid by the employer. Such a guarantee may also cover the tax liabilities of the spouse and dependents of the foreign employee.53 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 8. Tax Exemption Certificate - Lower or Nil Rate of TDS: The rate prescribed for TDS from NRIs income is the maximum rate of tax at which relevant Income is taxable in India. However, in majority of the cases of NRI, the actual tax liability is lower than this. However, the higher deduction of tax so made is generally not claimed as refund by filing Income Tax Returns In order to assist such a situation, the Income-tax Act has provided procedure under section 197 whereby a NRI can apply to the Assessing officer (in prescribed form) to issue specific certificate authorising the payer of income (who normally deducts tax at highest prescribed rate) to deduct tax at a lower rate or nil rate as the case may be. The NRI should estimate his income, tax liability and likely TDS and then apply for partial or complete Tax Exemption Certificate. The payer shall deduct tax in accordance with the certificate of the Assessing officer. Such a certificate would be binding on the payer. Any NRI who has obtained Exemption Certificate needs to submit it to the Payer of the income who will follow the certificate and not deduct tax or may deduct at a lower rate as given.54 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 9. Renting out of Property by an NRI in India As an NRI who has rented out his/her house in India,you will need to adhere to a number of FEMA and RBI guidelines, the following are the variousprovision related to renting out a house or residential flat in India by an NRIe. Read on to findout more about renting out a house/residential flat in India.An NRI can rent out property that he owns in India without any special permission from RBI. Themonthly rent amount can be credited to the NRE or NRO account. Rental income received inthese accounts can be freely repatriated. If the NRI do not have an NRE or NRO account, theproceeds can also be directly remitted abroad but you would need an appropriate certificatefrom a chartered accountant certifying that all taxes have been duly paid.9(a) Remittance of RentNRIs/PIOs can freely rent out their immovable property in India without the prior permission ofthe RBI. If the house rented by the NRI/PIO is financed by the way of a housing loan, the entirerental income (even if it is more than the prescribed installment) has to be adjusted towards therepayment of the loan. If the rental income is less than the prescribed installment, the borrowershould remit the outstanding loan amount from abroad or from his NRE, FCNR or NRO accountin India.9(b)Tax treatment of rental incomeThe rental income is earned in India; hence it is subject to income tax. As per the Income Taxrules the tenant is liable to, deduct tax at source before paying the monthly rent to the NRI..The payer of the rent, in this case, must obtain a TAN number and deduct TDS of 30 per cent +applicable cess from the rent amount. He must also provide appropriate TDS certificate to theNRI. The responsibility of deducting tax is on the payer. So in case the payer does not deducttax and the NRI too fails to declare the income and pay the tax, the income tax authorities ifrequired can hold the payer responsible. Even if the tenant deduct the tax or not, finally it isresponsibility of the owner to pay tax on the rental income he earned during a financial year.9(c) Deemed rental incomeAccording to the Indian Income Tax Act 1961, if a person (applicable for both resident and NRI)owns more than one house property (either in India or aboard), only one of them will be deemedas self-occupied. There will be no income tax on a self-occupied property. The other one,whether you rent it out or not, will be deemed to be given on rent. If you have not given thesecond property on rent, you will have to calculate deemed rental income on the secondproperty based on certain valuations prescribed by the income tax rules and pay the tax thereof.In other words NRIs who own more than one property in India only one property can be55 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • declared as a self-occupied property. A tax on a calculated rent amount will need to be paid onall other property that is owned by such an individual. In case NRI won a residential house inIndia and one in abroad, and NRI stays in his/her house abroad, if the house in India is vacant,for the tax calculation purposes, the house in India is considered as rented out and he/sheneeds to pay tax on the deemed rental income. Likewise, the property in India is inherited byhim/her, the inherited property is also considered as his second house and will be liable to paytax, even if it is kept vacant (in case he/she owns another house at the time of inheritance). Incase the rental income is taxable abroad where the NRI is presently staying for such cases, weneed to refer to the Double Taxation Avoidance Agreements that India has entered into withrespective countries. It is better to check the tax laws of the country that you are resident of orcontact a expert tax consultant for proper guidance.9(d) Service Tax applicable to renting out of residential properties for commercial use As per the Union Budget 2012 it is proposed to impose service taxes on all services except 17 services included in the negative list. In the existing system, only the services specified in clause (105) of section 65 of the Finance Act, 1994 are taxed under the charging section 66. In the new system, all services, other than services specified in the negative list, provided or agreed to be provided in the taxable territory by a person to another would be taxed under section 66B. This includes Services by way of renting out of residential dwelling for use as residence. In case you rent your residential property for any commercial use or partially commercial and residential use, it is proposed to deduct 12% service tax from the rental income (this is budget 2012 proposal only the effective date of implementation of this new rule is not known at the time preparing this guide)56 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 10. NRI and Senior Citizen status for Income Tax calculation purposes As per Indian tax laws, the initial basic exemption income limit belowwhich tax is not payable is Rs180,000 for FY 2011-12 (for FY 2012-13 Rs, 200,000). Forsenior citizens, this limit is enhanced to Rs 250,000 as per Union Budget 2011. However, thisenhanced limit is not applicable to NRIs, notwithstanding the fact that they may be seniorcitizens (above 60 years of age). In other words, regardless of the age, the general limit ofRs180, 000 ( Rs. 200,00 for FY 2012-13) would be applicable to NRIs. 11. Tax Liabilities related to NRIs investments made in Joint basisNon-resident Indians are now allowed to open bank accounts jointly with a residentrelative (resident family member).Non-resident Indians (NRIs) and their investments or incomes earned in India aregoverned by a separate set of rules, compared to resident Indians. Matters could besimple if these investments were to be held singly. However, if held jointly with aresident-Indian family member, things may get complicated for the latter. Broadly, yourresidential status for the next financial year depends on the number of days spent inIndia during the current year. If one has stayed in India for less than or up to 182 days(period of stay may not be continuous) during the current financial year, his/herresidential status would change to that of an NRI the next year. So, if you are on yourway to becoming an NRI, here are some taxation-related complications you may haveto face for jointly-held investments. 12. Bank Term Deposits – Tax AspectsNRIs cannot hold a resident fixed deposit (FD) in India. But, if you are already holdingone jointly with an NRI family member, the bank may allow you to hold the deposit tillmaturity and not renew it further. If you still wish to hold a deposit jointly, then the NRIcan open a nonresident ordinary or NRO deposit, with the resident family member as asecond holder. There will, however, be a difference in the TDS rates applicable. Forregular FDs, the TDS is calculated at 10 per cent. The entire interest amount is addedto the overall income and taxed according to the slab. One can then claim a TDS creditfor it while filing returns. For NRO deposits, though, the TDS rate is a flat 30 per cent. If57 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • you fall in the highest tax bracket, this may not change matters. But, if you fall in a lowerbracket, instead of claiming a credit, you must now ask for a refund. 13. Property Rental income – Tax AspectsRental income earned by a resident Indian is not subject to tax deducted at source(TDS). One simply adds it to the overall income and pays the tax according to the slab.However, all income earned by an NRI is subject to TDS, typically at a flat 30 per centrate, which is the tenants legal obligation. That is, he must deduct the amount and issueyou a TDS certificate. In case of a joint property, though, the applicability of TDS willdepend on who the first owner is — the NRI or the resident Indian family member. "Forall investments, taxes are the first holders obligation. So, if the first holder is a residentIndian, there need not be any TDS," Both would then have to bear the tax liabilityindependently. 14. Mutual Fund/Equity Investments – Tax Aspects Similar to bank accounts and deposits, NRIs can hold mutual fund investments jointlywith their family members. However, the shares cannot be held jointly, as NRIs whowant to trade in the Indian stock markets have to register with a bank offering portfolioinvestment schemes, specially designed for NRIs With regard to mutual funds, again there will be a first and second holder concept.Taxation remains the same for both NRIs and residents. Except, in case of short-termcapital gains (STCG) for NRIs, flat 15 per cent is deducted for any gains from equitymutual funds and 30 per cent for debt funds. "Adjustments against short term capitallosses, if any, can be made at the time of filing returns. The STCG tax for equity funds isat par with that levied for residents. For debt funds, though, the gains are added toincome and taxed according to slab. The 30 per cent TDS rate could be higher thanyour income 15. NRI income and Applicability of TDS on the sameThe income tax is applicable for most of the income earned by NRIs in India and more over, taxwould be deducted at source. And the rates for tax deducted at source (TDS) are widelydifferent from the rates applicable to resident Indians. It is pertinent to note that, that tax will bededucted at source only on incomes that are liable to tax in India. If the income is tax free inIndia like long term capital gains from equity shares or income earned on NRE deposits therewould be no TDS. Another important thing to remember is that you should be an NRI at the timeof receiving the income. For instance, you may have purchased affixed income security whenyou were a resident Indian. But any interest that you receive during the period after becoming58 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • an NRI will be subject to TDS. So necessarily you need to inform the company regarding yourresidential status after you become the NRI 16. Tax Treatment of overseas Financial Assets.Foreign exchange and overseas assets (such as bank accounts, stocks/securities, lifeinsurance policies, loans, company deposits, debentures, bonds etc.) acquired/held/owned byNRI while he was abroad can be continued to be so held and owned even after the NRI returnsto India for permanent settlement. Such foreign exchange and overseas assets can accumulateor accrue income outside India and the balances can be utilized for reinvestment or repatriatedto India at any time (without attracting Wealth tax in India) within 1 year immediately precedingthe date of his return or later. This exemption period is limited to 7 successive years whichimmediately follow the year in which the NRI permanently returns to India. 17. Other Tax Aspects related to NRIs including Immovable PropertiesNRIs can continue to hold immovable properties outside India. Such properties can be rentedout and rentals can be credited to overseas bank accounts. The properties can be sold and thesale proceeds credited to overseas bank accounts. Expenses relating to such properties, suchas maintenance, insurance premium etc. can be paid out of the overseas balances. a) as per the FEMA, any person resident in India may hold, own, transfer or invest in foreign currency, foreign security and immovable property situated outside India; if the person had acquired, held, owned or inherited the same while he was resident outside India. Further, the FEMA also requires that where any amount of foreign exchange is due or has accrued to a person resident in India, such person shall take reasonable steps to realise and repatriate the same within such period and manner as specified by RBI. b) Even after returning to India, the NRI can continued remitting funds out of India and investing in overseas markets, these remittances under the Liberalised Remittance Scheme (LRS) of the RBI. LRS has liberalised and globalised many Indian investors in the true sense. It has allowed Indian resident individuals to remit funds upto USD 200,000 per financial year outside India freely, without the prior approval from RBI for permissible transactions, including acquisition of immovable property, shares, debt instruments and any other assets subject to certain conditions c) As per the Indian income-tax laws, NRs are taxable in India only on income which accrues in India or is received in India. In the case of an NR, once an income is earned and received outside India and it is brought to India at a later date, it would not be taxable in India. d) It is beneficial to persons could sell his residential property in aboard, while he is an NR or a Not Ordinarily Resident (NOR) in India, and he would not be taxable in India59 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • on the gain that he makes from the sale. Similarly, he would not be taxable in India on the income earned and received by him in abroad from his investments till he qualifies as a NR or NOR in India. Once he/she loses the status of a NR or NOR and qualifies as an Ordinary Resident in India, he/she would be taxable in India on his global income. e) The provisions for determining residency under the wealth tax laws are the same as that of the Income Tax laws. In the case of NRs and NORs, the current wealth tax provisions provide that any assets located outside India would be excluded from the ambit of wealth tax in India. Hence, the returned NRIs will not be required to pay wealth tax in India on the assets that are located outside India, as long as he qualifies as a NR or NOR in India f) If the returned NRI intends to reside in India permanently, she/he would not be required to pay wealth tax on money and the other assets brought by him into India from abroad, within one year immediately preceding the date of his return or later. This exemption is limited to seven successive years which immediately follow the year in which she/he returns to India. Under wealth tax law, wealth tax is payable at the rate of 1% for the net wealth in excess of Rs 30 lakhs. However, assets located outside India owned by NRI shall not come under wealth tax bracket. Further, a NRI returning to India for good can claim wealth tax exemption for the assets brought by him /her to India or assets acquired by such money up to seven years commencing from the year in which such person returned to India subject to fulfillment of other conditions g) As per Baggage Rules, 1998, since, the used car in the abroad for personal purposes for more than a year and he/she is transferring residence to India now, he/she could bring his/her car with him but would be required to pay customs duty on the same. However, considering the quantum of custom duty liability likely to arise due to the import, it may be a better idea to buy a new car in India subsequent to shift of his residence. In addition to the car, he/she would be able to get certain specified used personal effects upto a specified threshold without payment of customs duty. h) With regards to exchange control implications, the returned NRI would be able to open a Resident Foreign Currency Bank Account (RFC Account). He/she could then transfer, through appropriate banking channels, the amount that he has in his/her foreign Bank account into such RFC account without any limit. He/she can continue to hold his other investments in abroad, since he/she had acquired these when he/she was a resident outside India. The dividend from the foreign companies and mutual funds and interest income from his/her foreign bank account which he/she receives from his investment that he continues to hold in the foreign country can also be credited to the RFC account. i) There are some special provisions under Indian tax laws wherein NRIs can opt for special tax rates (instead of progressive slab rates applicable in India) for specific investment incomes or capital gains from foreign exchange assets (eg: Shares in Indian company purchased in convertible foreign exchange). Further, the interest earned by NRI on his NRE, FCNR or RFC account is tax free subject to certain conditions.60 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • j) Further, an Indian Citizen or Person of Indian origin who is outside India visits India in any year, would be regarded as Resident, even if he stays in India for less than 182 days, but 60 days or more in the relevant tax year and 365 days or more in preceding four tax years, (the extended stay benefit of 181 days shall be removed under DTC which is expected to be implemented from FY 2013-14).18) Tax Treatment of selling property abroad"As a returning Indian, try to sell your overseas property while you are still a not ordinarilyresident (NOR) or non-resident (NR). As a NOR or NR, if you sell any overseas assets andreceive the sale proceeds outside India, you do not have to pay any taxes in India. If you needto buy a house in India out of the sale proceeds, you can first receive the sale proceeds in aforeign bank account and thereafter remit part or whole of the proceeds back to India withoutcreating any Indian tax liability. Keep in mind that the sale of property at a profit will probablycreate tax liability in the country where the property is situated. In some countries, it createssales tax and other liabilities as well."If you have become an Indian resident, selling the house liable for taxes both in the countrywhere the property is situated as well as in India. The country where the property is situated willgenerally have the primary taxing rights ie, the right to collect the tax while India will have theobligation to provide a credit for taxes paid in the foreign country and collect only the balancetax, if any. The precise tax treatment will be guided by the domestic tax laws of India and theforeign country as well as the tax treaty between the two countriesFor an Indian tax resident, long-terms capital gains from a property outside India will ordinarilybe subject to tax that can be mitigated to some extent by claiming the credit for taxes, if any,paid overseas or by making investments in specified bonds or acquiring a residential property inIndia and holding such bonds or property for a specified period of time.19) Tax Treatment of Rental Income Earned AbroadWhile such rental income is taxable in India, returning Indians should note that the notionalrental income from more than one self-occupied property is also treated as taxable. This isbecause an exemption is allowed for only one self-occupied house property irrespective ofwhere it is situated."A notional valuation would need to be made of the rent that the self-occupied property wouldhave fetched and offered to tax in India. The saving grace is that the individual has the choice ofselecting one among his several self-occupied properties for claiming the exemption, and hemay, therefore, select the property that has the higher rental value as self-occupied Further, adeduction of 30% of the net rent (after deduction of tax levies by a local authority) is allowed.61 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Also, the interest due on loans taken to finance the purchase or construction of the house isalso allowed as deduction from the rental income."20) Tax Treatment of Dividend on overseas Investments"Dividends of interest from overseas investments will be taxable in India as ordinary income.Dividends from shares held in an Indian company are not taxable in the hands of the recipient.Generally, losses incurred from the sale of one investment can be set off against gains fromsale of another investment subject to the setoff and carry-forward rules provided in the IncomeTax Act21) One Time Financial SettlementIf the financial settlement relates to the employment exercised overseas, it should not be taxedin India generally. But, if the individual is an Indian resident at the time of settlement, there is apossibility of the settlement being taxed in both countries. The double tax treaty will helpmitigate double taxation depending on the effective rates of taxes in the two countries.22) Capital Gains – earned abroadAssets would either qualify as long-term capital assets (if held for 36 months or more) or asshort-term capital assets (if held for less than 36 months). As an exception, shares held in acompany qualify as long-term capital asset if held for 12 months. With long-term capital assets,the cost of purchasing or improving them are allowed to be indexed and the indexed cost ispermitted to be reduced from the sale value. In the case of short-term capital assets, the costscannot be indexed. The indexation benefit is meant to take into account the inflationary trendsbetween the year of purchase and the year of sale. The costs incurred on the sale (such asbrokerage charges) are allowed as deduction while calculating gains from the sale of both short-term and long-term assets.India tax laws allow tax exemptions if the sale proceeds or the gains from the sale are re-invested in specific assets. "For example, an exemption can be claimed in respect of gains fromthe sale of a house property where the gain is re-invested in the purchase or construction ofanother house property, subject to certain conditions and timelines, Income received in foreigncurrency should be converted into Indian rupees at the rates provided by the SBI as on thespecified date. The specified date differs depending on the type of income earned.Juggling finances in one country is bad enough; having to do it in two can be baffling. When itcomes to filing taxes, NRIs find themselves in this unenviable position. The income tax rulesthat apply to NRIs are different from those that are valid for residents. "Certain incomes resultingfrom remittances and investments in the home country are either exempt or taxed atconcessional rates62 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER - 7 Budget 2012 Tax Proposals The Honorable Finance Minister of India the Union Budget 2012-2013 on the 16thMarch 2012, and thereafter presented the Finance Bill, 2012 before the Parliament. For the easy reference and information important budget proposals mostly affecting NRIs and common men are also included in this guide at the relevant places. As of date, these are proposals only and if adopted by the Parliament and passed as Finance Act; will come into force for and from Assessment Year 2013-2014 relevant to Financial Year 2012-13, unless specifically provided otherwise. 1) In the budget 2012 it is proposed to introduce mandatory foreign asset reporting; income tax dept to have powers to open previous returns of up to 16 years to check for tax evasion cases. While the intention of this proposal is to bring to book all those who have been evading taxes by hiding their assets abroad, one fears that it will create unnecessary reporting requirements and needless harassment for NRIs who have returned to India after a long stay in abroad 2) Section 139 providing for filing of returns is proposed to be amended so as to require compulsory filing of return of income by a resident person, who, though not required to file a return under other provisions, has any asset (including financial interest in any entity) located outside India or any signing authority in any account located outside India.3) The government of India will now allow qualified foreign investors access to the Indian corporate debt market. Qualified foreign investors, or QFIs, can be individuals, groups or associations based abroad. This proposal, when implemented will deepen the countrys shallow bond market and also open up a lucrative avenue for foreign individual investors who are keen to participate in Indias growth story. But, NRIs will hope for something more. On paper, NRIs were always permitted to invest in Indian corporate bonds. However, it required the issuing companies to enable the option for NRI investors with specific permission with the Reserve Bank of India. Often, companies chose not to do so, restricting access to NRIs. It is hoped that this move will also improve access for NRIs in the corporate bond market. 63 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 4) Section 115A -Insertion of new sub clause and amendment of existing clauses -01.07.2012 The interest payable to a non resident by an Indian company engaged in certain specified business relating to generation or distribution of power, operation of aircraft, manufacture or production of fertilizer, construction of road, toll road, bridge, port, inland port, shipyard, ship or dam shall be taxed under section 115A under newly inserted clause (iiaa) of sub section(1). Consequential amendment to provide the tax rate at the rate 5% has been carried out u/s 115A (1)(BA). 5) Lower rate of tax on dividends received from foreign companies6) Section 115BBD -Extension of concessional taxed on Dividend Income of Indian Companies received from Foreign Companies -Extended till 31.03.2013 -The concessional tax on Dividend Income received from Foreign Companies by Indian Companies continues till 31.03.2013 Section 115BBD of Income Tax Act (the Act) provides for taxation of gross dividends received by an Indian company from a specified foreign company (in which it has shareholding of 26% or more) at the rate of 15% if suchdividend is included in the total income for the Financial Year 2011-12 i.e. Assessment Year 2012-13. The above provision was introduced as an incentive for attracting repatriation of income earned by residents frominvestments made abroad with certain conditions to check the misuse of the incentive. In order to continue these provisions for one more year, it is proposed to amend section 115BBD to extend the applicability of this section in respect of income by way of certain foreign dividends received in Financial Year 2012-13 also, subject to the same conditions. This amendment will take effect from 1st April, 2013 and shall apply to the Assessment year 2013-14. 7) Section 194LAA -Insertion of New Section -01.10.2012 -TDS @1% on transfer of immovable properties exceeding 50 lacs in specified urban area and 20 lacs in other areas by the transferee on the consideration or value assessable under state stamp duty whichever is higher. No need to obtain TAN by transferee. New single page challans having details including PAN of transferor and transferee. No registration without submission of payment proof of TDS before the registering authority Under the existing provisions of the Income-tax Act, tax is required to be deducted at source on certain specified payments made to residents by way of salary, interest, commission, brokerage, professional services, etc. On transfer of immovable property by a non-resident, tax is required to be deducted at source by the transferee. However, there is no such requirement on transfer 64 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • of immovable property by a resident except in the case of compulsory acquisition of certain immovable properties. In order to collect tax at the earliest point of time and also to have a reporting mechanism of transactions in the real estate sector, it is proposed to insert a new provision to provide that every transferee, at the time of making payment or crediting any sum by way of consideration for transfer of immovable property (other than agricultural land), shall deduct tax, at the rate of 1% of such sum, if the consideration paid or payable for the transfer of such property exceeds – 1. Fifty lakh rupees in case such property is situated in a specified urban agglomeration; or 2. Twenty lakh rupees in case such property is situated in any other area. It is further proposed to provide that where the consideration paid or payable for the transfer of such property is less than the value adopted or assessed or assessable by any authority of a State Government for the purposes of payment of stamp duty,the value so adopted or assessed or assessable shall be deemed as consideration paid or payable for the transfer of such immovable property. For better compliance, it is also proposed to provide that a registering officer appointed under the Indian Registration Act,1908 (Registrar) shall not register the transfer of any immovable property where taxes are required to be deducted under this provision unless the transferee furnishes proof of deduction and payment of TDS. For reducing the compliance burden on the transferee, it is also proposed that a simple one page challan for payment of TDS would be prescribed containing details (including PAN) of transferor and transferee and also certain details of the property. The transferee would not be required to obtain any Tax Deduction and Collection Account Number (TAN) or to furnish any TDS statement as this would be mostly a one time transaction. The transferor would get credit of TDS like any other pre-paid taxes on the basis of information furnished by the transferee in the challan of payment of TDS.8) As per the first amendment non residents are being specifically brought in the ambit of section 195 whether or not such non- resident has a residence or place of business or business connection in India or any other presence in India. 65 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 9) Tax Collection at Source (TCS) on cash sale of bullion and jewellery Under the existing provisions of the Income-tax Act, tax is required to be collected at source by the seller at the specified rate on certain goods like alcoholic liquor, tendu leaves, scrap etc. at the time of sale. In order to reduce the quantum of cash transaction in bullion and jewellery sector and for curbing the flow of unaccounted money in the trading system of bullion and jewellery, it is proposed to provide that the seller of bullion and jewelleryshall collect tax at the rate of 1% of sale consideration from every buyer of bullion and jewellery if sale consideration exceeds two lakh rupees and the sale is in cash. This would be irrespective of the fact whether buyer is a manufacturer, trader or purchase is for personal use.10) Gold purchases in India to become expensive due to hike in customs duty. It is propose to increase basic customs duty on standard gold bars; gold coins of purity exceeding 99.5 per cent and platinum from 2 per cent to 4 per cent and on non-standard gold from 5 per cent to 10 per cent. In sync with these, basic duty on gold ore, concentrate and dore bars for refining is being enhanced from 1 per cent to 2 per cent. On the excise side, duty on refined gold is being increased in the same proportion from 1.5 per cent to 3 per cent. If keeping your money in India in the form of gold has been a favorite avenue that might just change. Gold will become more expensive as the FM doubled customs duty. This amendment will take effect from 1st July, 2012.11) Section 115A providing concessional tax rates in certain incomes of non-residents, is proposed to be amended so as to provide concessional tax rate of 5% to non-residents on income by way of interest on loans borrowed in foreign currency between 1st July 2012 and 30th June 2015 under approved agreements, by Indian companies engaged in specified business.12) Section 194 LC proposed to be inserted providing for tax deduction at source on such interest payable/paid by the Indian Company. One year’s extension for concessional rate of taxation to Indian companies on dividend from foreign companies with holding of atleast 26% 66 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 13) Section 115BBD provides for concessional rate of tax at 15% on dividend income of by Indian companies from foreign companies in which they hold atleast 26% equity stake, for Assessment Year 2012-13. It is proposed to extend this benefit for Assessment 2013-14 also. 14) Section 115BBE proposed to be inserted to tax additions on account of unexplained cash credit/money/expenditure/ investments/ amount borrowed/repaid on hundi, at flat rate of 30% (i.e. without applying the slab rates, where applicable), and no deduction whatsoever shall be allowed against the same.15) Section 115JB is proposed to be amended so as to include in ‘book profits’ the amount standing to the revaluation reserve in respect of assets disposed off, even if the same is not credited to the Profit & Loss Account.16) Reassessment of income in relation to any asset located outside India Under the provisions of section 149 of the Income-tax Act, the time limit for issue of notice for reopening an assessmenton account of income escaping assessment is 6 years. The time limit of 6 years is not sufficient in cases where assets are located outside India because gathering information regarding such assets takes much more time on account of additional procedures and laws of foreign jurisdictions. It is proposed to amend the provisions of section 149 so as to increase the time limit for issue of notice for reopening an assessment to 16 years, where the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment. Amendments are also proposed to be made in section 147 of the Income-tax Act to provide that income shall be deemed to have escaped assessment where a person is found to have any asset (including financial interest in any entity) located outside India. The provisions of sections 147 and 149 are procedural in nature and will take effect from 1st July, 2012 for enabling reopening of proceedings for and assessment year commencing prior to this date. This is proposed to be clarified through an Explanation stating that the provisions of these sections, as amended, by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. 67 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Corresponding amendments are also proposed to be made to the provisions of section 17 of the Wealth-tax Act. These amendments will take effect from the 1st day of July, 2012. 17) Section 147 containing provisions income-escaping assessments (commonly called as ‘reassessments’) are proposed to be amended so as to allow a window of 16 years for cases involving escapement of income in relation to any asset (including financial interest in any entity) located outside India (as against maximum of 6 years for other cases). Further, in cases of income escaping assessments on Indian agents of non-residents, the current time limit of issuing notice within 2 years from the Assessment Year is proposed to be extended to 6 years. It is also proposed to be provided that these amendments would also apply to years before 2012. Similar provisions are proposed under the Wealth-tax Act, 1957.18) Section 193 providing for TDS on interest on Securities is proposed to be amended to allow exemption from TDS from interest on debentures upto Rs.5,000/- payable by way of account payee cheque by companies in which public are substantially interested to individuals and HUFs. 19) Threshold for TDS on payment of interest on debentures Under the existing provisions of section 193 of the Income-tax Act, a person responsible for paying interest to a resident individual on listed debentures of a company, in which the public are substantially interested, is not required to deduct tax on the amount of interest payable if the aggregate amount of interest paid during a financial year does not exceed Rs.2,500/- and the interest is paid by account payee cheque. However, in the case of unlisted debentures of a company, no threshold limit is specified for deduction of tax on payment of interest. In order to reduce the compliance burden on small assessees and companies, it is proposed that no deduction of tax should be made from payment of interest on any debenture, (whether listed or not) issued by a company, in which the public are substantially interested, to a resident individual or Hindu undivided family, if the aggregate amount of interest on such debenture paid 68 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • during the financial year does not exceed Rs.5,000 and the payment is made by account payeecheque. This amendment will take effect from 1st July, 2012. 20) Expansion of definition of ‘related parties’ for domestic transactionsSection 40A (2) (a) provides for disallowance of expenditure/part of expenditure payable/paid to‘related party’ indomestic transactions, considered by the as excess or unreasonable havingregard to the fair market value thereof. Section 40A (2) (b) provides for relations which shall beconsidered as ‘related parties’ for the above purpose. One such relation under aboveprovisions is of a company, firm, AOP or HUF having substantial interest (more than 20%) in thebusiness/profession of the concerned assessee or any director/partner/member of suchcompany, firm, AOP or HUF, or any relative of such director/partner/member. It is now proposedto also include a company in which the above mentioned company (which has substantialinterest in assessee) has substantial interest. While this amendment has not be appropriatelyworded, it does not include cases where a person other than a company viz. firm, AOP or HUFhas substantial interest in another company or any other entity. Also, the provisions of thissection shall not apply to cases where the aggregate amount to ‘related party’ is Rs.5 crores ormore, for which the transfer pricing provisions are proposed to be made applicable. 21) Sale value where consideration not ascertainable/determinableSection 50D is proposed to be inserted to provide that where the consideration received oraccruing on transfer of capital asset is not ascertainable or cannot be determined, then the fairmarket value of the said asset on the date of transfer shall be considered as its saleconsideration, for the purpose of computing capital gains.While this amendment is also proposed to undo certain judiciary decisions holding that capitalgains cannot be taxed in such scenario, the good thing here is that this proposal is prospective. 22) The Basic Rate of Service is proposed to be increased from 10% to 12%New Section 66B of the Act, being the charging section for levy of service tax on the approachof Negative List stipulates that all services other than those covered by the Negative List,provided or agreed to be provided by one person to another would be subjected to tax @ 12%.69 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Further, no change is proposed in the current rate of Cess, and therefore those too would continue at current rates i.e., Education Cess at the rate of 2% on service tax, and Higher Education Cess at the rate of 1%; Accordingly, the effective rate of Service Tax would be 12.36 %. 23) Penalty on undisclosed income found during the course of search Under the existing provisions of section 271AAA of the Income-tax Act, no penalty is levied if the assessee admits the undisclosed income in a statement under sub-section (4) of section 132 recorded in the course of search and specifies the manner in which such income has been derived and paysthe tax together with interest, if any, in respect of suchincome. As a result, undisclosed income (for the current year in which search takes place or the previous year which has ended before the search and for which return is not yet due) found during the course of search attracts a tax at the rate of 30% and no penalty is leviable. In order to strengthen the penal provisions, it is proposed to provide that the provisions of section 271AAA will not be applicable for searches conducted on or after 1st July, 2012. It is also proposed to insert a new provision in the Act (section 271AAB) for levy of penalty in a case where search has been initiated on or after 1st July, 2012. The new section provides that,- (i) If undisclosed income is admitted during the course of search, the taxpayer will be liable for penalty at the rate of 10% of undisclosed income subject to the fulfillment of certain conditions. (ii) If undisclosed income is not admitted during the course of search but disclosed in the return of income filed after the search, the taxpayer will be liable for penalty at the rate of 20% of undisclosed income subject to the fulfillment of certain conditions. (iii) In a case not covered under (i) and (ii) above, the taxpayer will be liable for penalty at the rate ranging from 30% to 90% of undisclosed income. These amendments will take effect from the 1st day of July, 2012 and will, accordingly, apply to any search and seizure action taken after this date.24) Compulsory filing of Income tax return in relation to assts located outside India irrespective of income Under the existing provisions of section 139, every person is required to furnish a return of income if his income during the previous year relevant to the assessment year exceeds the 70 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • maximum amount which is not chargeable to tax. The return of income has to be furnished inthe prescribed form and verified in the prescribed manner and setting forth such otherparticulars as may be prescribed.It is proposed to amend the provisions of section 139 so that furnishing of return of incomeunder section 139 may be made mandatory for every resident having any asset (includingfinancial interest in any entity) located outside India or signing authority in any account locatedoutside India. Furnishing of return by such a resident would be mandatory irrespective of thefact whether the resident taxpayer has taxable income or not.This amendment will take effect retrospectively from the 1st day of April, 2012 and willaccordingly apply to assessment year 2012-13 and subsequent assessment years. 25) Section 194E of the Act – Tax deduction at source from payment to non-residententertainer, sports person etc.Section 115BBA of the Income Tax Act provides a concessionary tax regime in the case ofincome of sports persons who are non-citizen and non-resident. The provision covers incomereceived by way of participation in any game or sport, advertising or contribution of article in anynewspaper etc. The income of such sportsmen is taxed at the rate of 10% of the gross receipts.The same regime is also available to a non-resident sports association or institution forguarantee money payable to such institution in relation to any game or sport played in India.Under the Double Tax Avoidance Agreement (DTAA’s), there is parity between a non-residentsportsman and a non-resident entertainer. A similar tax regime i.e. taxation on basis of grossreceipts rather than net income would simplify the process of taxation in the case of entertainer.The special treatment in respect of entertainer is required because determination of deductibleexpenses for performance is complicated, especially when the production expenses of aninternational tour need to be allocated across performances in various countries.Internationally, similar tax rates exist for both entertainer and sportsperson. Internationalcomparisons also reveal that the tax rate ranges between 10% to 30% in case of entertainerand sportsperson. Therefore, rate of 20% on gross receipts is a reasonable rate of tax in case ofnon-resident, non-citizen entertainer. The tax rate in case of non-resident, noncitizensportspersons and non-resident sports associations also needs to be raised to 20%.71 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • It is proposed to amend section 115BBA (Union Budget 2012) to provide that income arising to a non-citizen, non-resident entertainer (such as theatre, radio or television artists and musicians) from performance in India shall be taxable at the rate of 20% of gross receipts. It is also proposed to increase the taxation rate, in case of non-citizen, non-resident sportsmen and non-resident sports association, from 10% to 20% of the gross receipts. This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. Consequential amendment is proposed in section 194E to provide for withholding of tax at the rate of 20% from income payable to non-resident, non-citizen, entertainer, or sportsmen or sports association or institution.26) Section 194LC- Tax deduction at source from payment of interest to a non-resident by an Indian company- New provision Section 115A of the Income Tax Act provides that any interest income received by any non-resident from the Government or an Indian concern shall be taxable at the rate of 20% on the gross amount of such interest income. The interest income received by a non-resident from a notified Infrastructure Debt Fund (IDF) is taxable at a reduced rate of 5% on gross amount of such interest income. Section 195 of the Act provides that in case of any interest payment made to a non-resident tax shall be deducted (withholding tax) at the rate in force. Currently, the rate of 20% withholding tax is prescribed, in case of any interest paid by the Government or Indian concern to a non- resident. In order to augment long-term low cost funds from abroad for the infrastructure sector, it is proposed (Union Budget 2012) to provide tax incentives for funding certain infrastructure sectors from borrowings made abroad subject to certain conditions. It is proposed to amend Section 115A of the Income Tax Act to provide that any interest paid by a specified company to a non-resident in respect of borrowing made in foreign currency from sources outside India between 1st July, 2012 and 1st July, 2015, under an 72 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • agreement, including rate of the interest payable, approved by the Central Government, shall be taxable at the rate of 5% (plus applicable surcharge and cess). The specified company shall be an Indian company engaged in the business of - (i) construction of dam, (ii) operation of Aircraft, (iii) manufacture or production of fertilizers, (iv) construction of port including inland port, (v) construction of road, toll road or bridge; (vi) generation, distribution of transmission of power (vii) construction of ships in a shipyard; or (viii) developing and building an affordable housing project as is presently referred to in section 35AD(8)(c)(vii). This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the Assessment Year 2013-14 and subsequent assessment years. It is further proposed to insert a new section 194LC to provide that interest income paid by such specified company to a non- resident shall be subjected to tax deduction at source at the rate of 5% (plus applicable surcharge and cess). This amendment will take effect from 1st July, 2012.27) Section 195 – Amendment – Scope of Section 195 of the Act Applicability of Section 195 of the Act on non- resident -Amendment in Section 197A of the Act – Reduction of the eligible age for senior citizens for certain tax reliefs The Finance Act, 2011 amended the effective age of a senior citizen being an Indian resident from sixty-five years of age to sixty years for the purposes of application of various tax slabs and rates of tax under the Income Tax Act, 1961 for income earned during the financial year 2011- 12 (assessment year 2012-13). There are certain other provisions of the Act in which the age for qualifying as a senior citizen is now proposed to be similarly amended. (i) Section 80D of the Income-tax Act provides for a deduction in respect of premia paid towards a health insurance policy for the assessee or his family (spouse and dependant children) and a further deduction is also allowed for buying a health insurance policy for parent(s). Where the 73 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • premium is paid to effect or keep in force an insurance on the health of any person who is asenior citizen, the deductions are allowable up to a higher sum of Rs. 20,000/- instead of Rs.15,000/-.(ii) Section 80DDB of the Income-tax Act provides for a deduction up to Rs. 40,000/- for themedical treatment of a specified disease or ailment in the case, inter alia, of an individual or hisdependant. This deduction is enhanced to Rs. 60,000/ – where the amount actually paid is inrespect of any of the above persons who is a senior citizen.(iii) Section 197A(1C) of the Income-tax Act provides that in respect of tax deduction at sourceunder section 193 (interest on securities) or section 194 (dividends) or section 194A (interestother than interest on securities) or section 194EE (payments in respect of deposits under NSSetc.) or section 194K (income in respect of units), no deduction of tax shall be made in the caseof a senior citizen, if such individual furnishes a declaration in the prescribed form (Form No.15H) to the effect that the tax on his estimated total income of the previous year in which suchincome is to be included in computing his total income will be nil.In all of the above-mentioned provisions, i.e., under sections 80D, 80DDB and 197A theeffective age for a “senior citizen” who can avail of the benefit is mentioned as sixty-five years ormore at any time during the relevant previous year.In order to make the effective age of senior citizens uniform across all the provisions of theIncome Tax Act, it is proposed (Union Budget 2012)to reduce the age for availing of the benefitsby a senior citizen under the aforesaid sections (sections 80D, 80DDB and 197A) from sixty-fiveyears to sixty years.The amendments to section 80D and section 80DDB will take effective from 1st April, 2013 andwill, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessmentyears.74 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 28) Interest on bank deposits Interest earned on Non Resident External (NRE) accountsand Foreign Currency Non Resident (FCNR) accounts are exempted from income and hence notax is deducted at soruce. However, interest earned on the Non Resident Ordinary Account(NRO) is taxable and will be subject to a TDS of 30 per cent plus applicable cess+shec even ifthe interest earned is only Re. 1, tax will be deducted at source, there is no basic exemptionlimit. In case you wanted to avail the benefits of lower TDS rate under the respective DTAA(Double Taxation Avoidance Agreement), you need to submit a declaration form with yourbanker with in the specified time limit of the respective financial year. More details regardingDTAA will be discussed in details in the later part of this NRI Guide.Savings bank interest upto Rs. 10,000.00 is exempted from tax (Section 80 TTA of IT Act)FM propose (Union Budget 2012) to allow individual taxpayers, a deduction of up to Rs. 10,000for interest from savings bank accounts (interest from bank term deposits are not allowed).Under the proposed new section 80TTA of the Income-tax Act, a deduction up to an extent often thousand rupees in aggregate shall be allowed to an assessee, being an individual or aHindu undivided family, in respect of any income by way of interest on deposits (not being timedeposits) in a Scheduled Commercial Banks, Co-operative societies, Post Office. FromAssessment year 2013-2014. I assume this new tax exemption is applicable for NRIs alsorelated to the interest earned on their NRO account (more clarifications required).75 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER - 8 TAX DEDUCTION AT SOURCE 1. Interest on all other investmentsInterest earned on all other investments like corporate deposits and bonds will be subject toTDS at 20 per cent. In all these cases, the company or party making the payment will deductthis tax. 2. Rental Income – Rental Income is also subject to tax deduction 3. DividendsDividends from equity shares, equity mutual funds and debt mutual funds are exempt in thehands of the share or unit holder.4. Capital gains on securities- Equity shares and equity mutual funds (mutual funds with more than 50 per cent in equities)Long term capital gains, that is profits made on sale after 1 year from date of purchase, onequity shares and equity mutual funds are exempt from tax. There will be no TDS applicable.Short term capital gains, that is, profits on sale within one year of date of purchase, will besubject to a TDS of 15 per cent.- Debt mutual funds, corporate debentures76 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Long term capital gains from debt mutual funds and corporate debentures (when sold in thesecondary market) will be subject to TDS at 10 per cent.Short term capital gains will be subject to a TDS of 30 per cent.Capital gains on other assets like house property, goldLong term capital gains will be subject to a TDS of 20 per cent.Short term capital gains will be subject to a TDS of 30 per cent.The treatment of deducting tax at source on interest on RFC Account is similar to DomesticTerm Deposits. However it is possible for a person, whose status under the Income TaxProvision is Resident but not Ordinarily Resident to claim that the interest on Term deposits isnot liable to tax under the provisions of Section 10 of the Income Tax Act, 1961. The individualshould furnish Form 15AA if he does not require the bank to deduct tax at source.5.TDS on salary payments to Non Residents & Expatriates As per Section 192 of the IT Act, any person responsible for paying any amount under thehead salaries is required to deduct tax at source at the time of payment. This section unlikesome other provisions, does not distinguish between payment of salary, to a resident, nonresident or expatriate. Thus all payments which are taxable under the head salaries, are alsocovered by the provisions of TDS, irrespective of the residential status of the recipient.However, the residential status of an individual is pertinent in determining whether the receiptitself is taxable in India or not.6.Deduction of interest paid on more than one loan borrowed for purchase orconstruction of same houseThere is no bar in section 24 of the Income Tax Act regarding the number of loans on whichinterest is allowable simultaneously. In fact ,the simple rule of the deduction of interest u/s 24 ofthe Income Tax Act is that whatever be the interest paid or due on loan borrowed for purchaseor construction of house is allowable as deduction. So, whether you take loan from one bank orfive banks , all loan should be utilised for buying or constructing the house for allowance ofinterest paid to all the banks. However, as far as self occupied house is concerned, theallowance of interest is limited to Rs 1, 50,000 per owner. The respective share in the propertyis determined based on proportion of the ownership mentioned in these documents with the co-owners. If this proportion or share of ownership is not specifically mentioned in the registrationdocument, the ownership would be deemed to be 50 : 50. Each co-owner is assessed forincome from house property separately . Therefore, allowance of interest u/s 24 is also givenseparately. But interest is deductible only if the same is borrowed by co-owners i.e even if one isjoint owner but not a borrower of the loan is not allowed any deduction of interest. Only theperson borrowing the loan is allowed deduction. In case of joint loan , each co-owner gets 1.5lakh of maximum interest deduction u/s 24 of the I T Act.77 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER - 9 Double Taxation Avoidance AgreementDouble Taxation in India – DTAA (Double Taxation Avoidance Agreement) Double taxation occurs when an individual is required to pay two ormore taxes for the same income, asset, or financial transaction in different countries. Doubletaxation occurs mainly due to overlapping tax laws and regulations of the countries where anindividual operates his business. Double taxation Agreement is the systematic imposition of twoor more taxes on the same income. When an Indian businessman makes a profit or some othertype of taxable gain in another country, he may be in a situation where he will be required to paya tax on that income in India, as well as in the country in which the income was made! Toprotect Indian tax payers from this unfair practice, the Indian government has entered into taxtreaties, known as Double Taxation Avoidance Agreement (DTAA) with other countries.The double liability is often mitigated by tax agreements, known as treaties, between countries.These agreements provides for relief from the double taxation in respect of incomes byproviding exemption and also by providing credits for taxes paid in one of the countries. Thesetreaties are based on the general principles laid down in the model draft of the Organization forEconomic Cooperation and Development (OECD) with suitable modifications as agreed to bythe other contracting countries. In case of countries with which India has double taxationavoidance agreements, the tax rates are determined by such agreements and are indicated forvarious countries as under:The Central Government acting under the authority of Law (Sec. 90) has entered into DTAAswith more than 82 countries including U.S.A, Canada, U.K, Japan, Germany, Australia,Singapore, U.A.E, and Switzerland. DTAA ensures that Indias trade and services with othercountries, as well the movement of capital are not adversely affected.. Such treaties serve thepurpose of providing protection to the tax payers from double taxation. As per section 90(2), inrelation to an assessee to whom any DTAA applies, the provisions of the Act shall apply only tothe extent they are more beneficial to the assessee. The provisions of these DTAAs thus prevailover the statutory provisions. For availing the benefits under DTAA the NRIs need to completecertain formalities for example for getting the reduced rate of tax deduction from bank interest(NRO deposits), they need to submit certain declaration with their banks before the starting ofthe financial year.78 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • To avail benefit of lower rates of tax as per double taxation avoidance treaty entered in byIndia, NRIs need to submit certain declarations and forms with his banker. These documentsshould be submitted to the designated bank branch at the time of opening the bank account andsubsequently each financial year. The reduced TDS rate shall be applied only after thesubmission of the required declarations by the NRIs with the designated banker.1) Indian Residents posted abroad for employmentIndian residents who have taken up employment in countries with which India has got DTAA areentitled to the benefit of the DTAA entered into by India with the country of employment.Accordingly, their tax liability is decided.Indian expatriates working abroad have been granted several special tax concessions under theAct. Professors, teachers and research workers working abroad in any university or anyeducational institutions are entitled to deduction of 75% of their foreign remuneration providedthe same is brought into India in convertible foreign exchange within a period of 6 months fromthe end of the previous year or such extended time as may be allowed(Sec. 80-R). Similarly, incase of an Indian Citizen having received remuneration for services rendered outside India,75% of his foreign remuneration is deductible from his taxable income provided suchremuneration is brought to India in convertible foreign exchange within the time specified above(Sec. 80 RRA).From assessment year 2001-2002 onwards, there has been a change in the amount ofdeduction available under sections 80R/ 80RRA. For details, reference may be made to thesections concerned of the Income Tax Act. No deduction u/s 80R/80RRA shall be allowed inrespect of A.Y. 2005-06 onwards.It may also be mentioned here that as per section 9(1)(iii) income chargeable under the head‘Salary’ payable by the Government to a citizen of India for services rendered outside India isdeemed to accrue or arise in India. However, allowances or perquisites paid or allowed outsideIndia by the Govt. to a citizen of India for rendering services abroad is exempt from taxation u/s10(7).Capital gain tax ratesUnder Section 90 and 91 of the Income Tax Act, relief against double taxation is provided intwo ways:Unilateral ReliefUnder Section 91, the Indian government can relieve an individual from double taxationirrespective of whether there is a DTAA between India and the other country concerned.Unilateral relief may be offered to a tax payer if: 1. The person or company has been a resident of India in the previous year.79 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 2. The same income must be accrued to and received by the tax payer outside India in the previous year. 3. The income should have been taxed in India and in another country with which there is no tax treaty. 4. The person or company has paid tax under the laws of the foreign country in question.Bilateral ReliefUnder Section 90, the Indian government offers protection against double taxation by enteringinto a DTAA with another country, based on mutually acceptable terms. Such relief may beoffered under two methods: 1. Exemption method – This ensures complete avoidance of tax overlapping. 2. Tax credit method – This provides relief by giving the tax payer a deduction from the tax payable in India.India has entered into DTAA with more than 80 countries including countries like U.S.A., U.K.,Japan, France, Germany, etc. These agreements provides for relief from the double taxation inrespect of incomes by providing exemption. The Countries with which India has DTAA are givenbelow:80 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Country Year Country Year Australia 1993-94 Mongolia 1995-96 Austria 1963-64 Namibia 2000-01 Bangladesh 1993-94 Nepal 1990-91 Belarus 1999-2000 Netherlands 1990-91 Belgium 1989-90; 1999-2000 New Zealand 1988-89 Brazil 1994-95 Norway 1988-89 Bulgaria 1997-98 Oman 1999-2000 Canada 1987-88; 1999-2000 Philippines 1996-97 China 1996-97 Poland 1991-92 Cyprus 1994-95 Portugal 2000-01 Czechoslovakia 1986-87; 2001-02 Qatar 2001-02 Czech Republic 1998-99 Romania 1989-90 Denmark 1991-92 Russian Federation 2000-01 Egypt 1970-71 Singapore 1995-96 Finland 1985-86; 2000-2001 South Africa 1999-2000 France 1996-97 South Korea 1985-86 Germany 1996-97 Spain 1997-98 Greece 1964-65 Sri Lanka 1981-82 Hungary 1989-90 Sweden 1990-91; 1999-2000 Indonesia 1989-90 Switzerland 1996-97 Israel 1995-96 Syria 1983-84 Italy 1997-98 Tanzania 1983-8481 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Japan 1991-92 Thailand 1988-89 Jordan 2001-02 Trinidad and Tobago 2001-02 Kazakhstan 1999-2000 Turkey 1995-96 Kenya 1985-86 Turkmenistan 1999-2000 Korea 1985-86 United Arab Emirates 1995-96 Kyrgyzstan 2001-02 United Kingdom 1995-96 Libya 1983-84 United States 1992-93 Malaysia 1973-74 Uzbekistan 1994-95 Malta 1997-98 Vietnam 1997-98 Mauritius 1983-84 Zambia 1979-80 Morocco 2000-01Double Taxation Avoidance Agreement (DTAA) is an agreement entered into by India withvarious countries. Under the current DTAA provisions, you can enjoy the benefit of concessionalrates for Tax Deducted at Source (TDS), providing you a higher yield as compared to theregular NRO FD offered today.In case the NRIs who wish to avail the reduced rate of TDS from NRO deposits as per DTAAthey need to submit the required declaration with their banks along with their PAN numberbefore the cut of date specified by the bank for each financial yearPAN updation is mandatory to avail of DTAA. One set of the below documents is requiredper Customer ID. o Declaration that the client was an NRI during the year in which tax is sorted to be deducted & that he does not have any permanent establishment in India. o Original or certified true copies of the tax residency certificate from income tax authorities to be obtained from the client OR ii) In case of non-taxpaying countries, any valid proof issued by the government, certifying that the client is a resident of that country OR iii) If the client is unable to obtain the residency certificate in (i) above, and has been assessed as a resident earlier, then he may obtain a certificate from any82 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CA firm registered in India). However, in such cases, the CA certificate should be supported by certified true copies of documentation from tax authorities, e.g., assessment order, notice from the tax authorities clearly indicating the residential status of the customer as a resident under the local tax laws. o Self attested copy of passport & visa. (not required in case the client is submitting Tax Residency Certificate). o For UAE and KUWAIT ONLY- photocopy of the passport pages which give the details of entry and exit.(to ascertain 183 days stay in a calendar year for UAE and 183 days in a financial year for Kuwait)If your PAN is not updated with the Bank/financial institution, then the DTAA rate or applicable TDS(Income tax will be deducted at source under Section 195 of the Income Tax Act, 1961, at the ratesin force) rate whichever is higher will be applicable. For more details, please contact your bank. 83 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • The following are the Tax rates applicable in India under ADT Agreement) Country Tax % Country Tax % Armenia 10% Namibia 10% Australia 15% Nepal 15% Austria 10% Netherlands 10% Bangladesh 10% New Zealand 10% Belarus 10% Norway 15% Belgium 15% Oman 10% Botswana 10% Philippines 15% Brazil 15% Poland 15% Bulgaria 15% Portuguese Republic 10% Canada 15% Quatar 10% China 10% Romania 15% Cyprus 10% Russian Federation 10% Czeck Republic 10% Saudi Arbaia 10% Denmark 15% Serbia 10% Germany 10% Slovenia 10% Finland 10% Singapore 15% France 10% South Africa 10% Greece 20% Spain 15% Hungary 10% Srilanka 10% Iceland 10% Sudan 10% Indonesia 10% Sweden 10% Ireland 10% Swiss 10% Israel 10% Syria 10% Italy 15% Tanzania 12.50% Japan 15% Thailand 20% Jordan 10% Trinidad and Tobago 10% Kazakstan 10% Turkey 15% Kenya 15% Turkmenistan 10% Korea 15% Uganda 10% Kuwait 10% Ukraine 10% Kyrgyz Republic 10% United Arab Emirates 12.50% Libyan Arab United Arab Republic 20% 20% Jamahiriya (Egypt) Malaysia 10% United Kingdom 15% Malta 10% United States 15% Mangolia 15% Uzbekistan 15% Mauritius 20% Vietnam 10% 84 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Morocco 10% Zambia 10Amendments relating to DTAA provisions (Union Budget 2012)Section 90 (2) provides that in case of a person resident in any country with which India has aDouble Tax Avoidance Agreement (‘DTAA’), the more beneficial provisions between such DTAAand the Act shall apply.It is proposed that the GAAR will override the DTAA provisions, even if they are not morebeneficial than the DTAA.Moreover, it is also proposed that the benefit of the DTAA shall not be allowed to anynon-resident unless he/it provides a certificate from the government of the country ofits/his residence of he/it being resident of that country.Section 90(3) provides that where certain term is not defined either in the DTAA or the Act, thenthe same shall have the meaning assigned to it by notification issued in that respect.It is now proposed to provide, effective from 1st October 2009, that when such notificationassigning meaning to any term is issued, then the same shall be effective in interpreting theDTAA, from the date such DTAA became effective. Similar amendments are also proposed insection 90A containing provisions of adoption by Central Government of agreement betweenspecified associations for double tax relief85 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER - 10 From 15G & Form 15H - NRIs are not eligible to submit these formsForm 15G is meant for non-senior citizens whereas Form 15H is meant to be used by seniorcitizens. If this form is submitted by the deposit holder in respect of his deposit, the bank doesnot deduct tax while paying interest. Most of us are aware that Form 15G and form 15H areused for avoiding the TDS deduction while computing the interest earned during the financialyear. There are some conditions which, if the deposit holder complies with, these forms can besubmitted. NRIs are not eligible to submit Form 15G and Form 15H.Form 15H :- Declaration under sub-section (1C) of section 197A of the Income-tax Act, 1961, tobe made by an individual who is of the age of sixty-five years or more (Sixty Years from A.Y.2012-13) claiming certain receipts without deduction of tax. • Form 15H can be submitted only by Individual above the age of 65 years. (Age limit reduced to 60 Years from A.Y. 2012-13) • Estimated tax for the previous assessment year should be nil. That means he did not pay any tax for the previous year because his income is not coming under the taxable limit. • This form should be submitted to all the deductors to whom you advanced a loan. For example you have deposit in three HDFC Bank branches Rs.2,00,000 each. You must submit the Form 15H to each branch • Submit this form before the first payment of your interest. It is not mandatory but it will avoid the TDS deduction. In case of the delay, the bank may deduct the TDS and issue TDS certificate at the end of year. • You need to submit form 15H to banks if interest from one branch of a bank exceeds 10,000/- in a year. • You need to submit for 15H If interest on loan ,advance, debentures , bonds or say Interest income other then interest on bank exceeds 5000/-.Form 15G:- Declaration under sub-sections (1) and (1A) of section 197A of the Income-tax Act,1961, to be made by an individual or a person (not being a company or a firm) claiming certainreceipts without deduction of tax of tax. • Form 15G can be submitted by Individual below the age of 65 years (Age limit reduced to 60 Years from A.Y. 2012-13)) and Hindu Undivided family. • The above points are applicable to the Form 15G as well, except the Form 15H is only for the senior citizen. • Form 15G should be submitted before the first payment of interest on fixed deposit.86 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Difference between form 15G and 15H:- 1. Form 15G can be submitted by individual below the Age of 65 Years while form 15H can be submitted by senior citizens i.e. individual’s above the age of 65 years. (60 Years from Assessment year 2012-2013). 2. Form 15G can be submitted by Hindu undivided families but form 15H can be submitted only by Individual above the age of 65 years. ( 60 Years from Assessment year 2012- 2013). 3. 15G CAN NOT BE filed by any person whose income from interest on securities/interest other than “interest on securities”/units/amounts referred to in clause (a) of sub-section (2) of section 80CCA exceeds maximum amount not chargeable to tax.Please note that, you are eligible to submit From 15G and 15H provided your estimated taxableincome that particular financial year is NIL. This is declaration, so you have to be very carefulwhile submitting this form. The deductor will tell you that, submit this form, we will not deducttax, but remember the ultimate responsibility is yoursHowever, both the concept of a senior citizen as well as submission of these forms is notapplicable in case of NRIs. In other words, NRIs, irrespective of their age, are not eligible to fileForm 15G or 15H as the case may be.87 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER - 11 Capital Gain Tax How many of us are really paying the capital gain tax for the shares/mutualfund units/land/house, jewellery etc sold and gained a profit out of this deal. As per the IncomeTax Law you are liable to pay tax on such gains even if you have no other income. Most of thepeople are not bothered to pay this tax, either because of ignorance or deliberately avoid payingtax.Capital gain, as the word denotes, some kind of financial benefits gained as a result of sale ofsome capital assets. Profit or gain arising from the transfer/sale of a capital asset made in aprevious year is taxable under the head “Capital Gains”. The important ingredients for capitalgains are, therefore, existence of a capital asset, transfer of such capital asset and profits orgains that arise from such transfer. If you sell an asset such as bonds, shares, mutual fundunits, property (house, land, and apartment) etc, you are liable to pay tax on the profit earnedout of it. This profit is called Capital Gains. The tax paid on this amount of capital gains is calledcapital Gains tax. On the contrary, if you make a loss on sale of assets, it is treated as capitalloss. 1) Capital AssetCapital asset generally means a property – house, an apartment, office space, factory,godown,jewellery or a plot of land or financial assets like shares, mutual fund units, bonds etcFor tax computation purpose the capital gain is dividend in two categories.2) Short Term Capital Gain (STCG) If Shares, Bonds or Equity Mutual Funds are held for less than 12 months before selling, thegain arising out of it is classified as Short Term Capital Gain. The only condition here is thatthe shares / equities should be sold on a recognized stock exchange (for example, BSE or NSEIf the sale of shares is off-market (that is, if the sale is not on a stock exchange), the gain wouldbe classified like that for other capital assets. In case of other capital assets like land,building,jewellery etc. the minimum holding period is 36 months. If those assets are held forless than 36 months before selling, the gain arising out of this deal also classified as Short TermCapital Gain. Capital gains from the sale of Equity Mutual Funds and Equity shares are fully88 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • exempted from the tax provided the STT (Securities Transcations Tax) has been alreadydeducted from the sale proceeds.This short term capital gain is clubbed with your income for the year, and is taxed at a rate asper the applicable tax slabs / brackets.Short Term Capital Gain = Sale Price - Purchase PriceExample:Full Value of Consideration (Sale Price) 10,00,000.00Less: Cost of Acquisition (usually the purchase value of the capital asset) 500,000.00Less: Cost of Improvement (the cost incurred for the improvement of the 100,000.00asset, if any)Less: Transfer Expenses (expenditure incurred wholly and exclusively in 25,000.00connection with transfer. (Includes the brokerage or commission paid, costof stamp fee and registrations fee, traveling expenses etc.)Short Term Capital Gain 375,000.003) Long Term Capital Gain (LTCG) If shares, bonds or mutual fund units held more than 12 months and other capital assets for 36months before selling, the again arising out of this transaction is classified as Long Term CapitalGains. In practice Long Term Capital Gains is applied for Sale of two types of Capital Assets.One is properties like house, building, land etc and the other is financial assets like shares /mutual funds units, Zero coupon bond etc. Any monetary benefits thus gained as a result of saleof either type of Capital Asset attract Capital Gains Tax.Example:Full Value of Consideration (Sale Price) 10,00,000.00Less: Indexed Cost of Acquisition (usually the purchase value of the capital 680,000.00asset)Less: Indexed Cost of Improvement (the cost incurred for the 110,000.00improvement of the asset, if any)Less: Transfer Expenses (expenditure incurred wholly and exclusively in 25,000.00connection with transfer. (Includes the brokerage or commission paid, costof stamp fee and registrations fee, traveling expenses etc.)Lees: Exemption Available -Short Term Capital Gain 185,000.0089 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • In Short Capital Asset Short-term Long-termShares held in a company, listed If held for a period not Capital Asset which is not a short termsecurities, units of Mutual Fund or exceeding 12 months capital asset is long term capital asset.zero coupon bonds. from the date of acquisition.All other Capital Assets like, If held for period not Capital asset which is not a short –termimmovable property, Jewellery etc exceeding 36 months capital asset is long term Capital Asset. from the date of acquisitionCost Inflation IndexAs we are all aware the value of money decrease over a period of time due the effect ofinflation. The real value of Rs. 100.00 during 1995 will be different from the value now. TheIncome Tax laws allows to you to reduce the net taxable gain allowing you to pay lower capitalgain tax by way of adjustments against inflation. This is the general rule that, the inflationreduces the real value of the asset over a period of time. In other words this provision allows toyou increase the purchase price of assets that you have sold. This indexation benefit providedby Income Tax laws is called indexation. 4) Computation of Indexation Benefits As per the Indexation procedure, the income tax assessee is allowedby Income Tax Laws to inflate the cost of his/her asset by a RBI/Government notified inflationfactor. This inflation factor is called the ‘Cost Inflation Index’. This inflation index is used tocompute the cost price of the Asset adjusted against the cumulative inflation on year-on-yearbasis. This helps to counter the erosion of value in the price of an asset and brings the value ofan asset at par with prevailing market price. Our India Government every year notifies this costinflation index factor. This index is in the form of a numerical value and is announced everyyear. The base year for Cost Inflation Index has been determined by Indian Income TaxDepartment as 1981 and had assigned 100 points for this yearThe purchase price of the asset that needs to be used for calculating the long term capital gainsis termed as Indexed Cost of Acquisition.90 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 5) What is the indexed cost of acquisition?S 48 defines "indexed cost of acquisition" as the amount, which bears to the cost ofacquisition the same proportion as Cost Inflation Index for the year, in which the asset istransferred, bears to the Cost Inflation Index for the first year in which the asset washeld by the assessee or for the year beginning on the 1st day of April, 1981, whicheveris later.The Cost Inflation Index, in relation to a previous year, means such Index as the CentralGovernment may, having regard to 75% of average rise in the Consumer Price Index forurban non-manual employees for the immediately preceding previous year to suchprevious year, by notification in the Official Gazette. Indexed Cost of Acquisition = Actual Purchase Price * (Cost Inflation Index during the year ofsale / Cost Inflation Index during the year of purchase)indexed cost of improvementS 48 defines indexed cost of improvement as the amount, which bears to the cost ofimprovement the same proportion as Cost Inflation Index for the year, in which the assetis transferred, bears to the Cost Inflation Index for the year in which the improvement tothe asset takes place.Cost Inflation Index, in relation to a previous year, means such Index as the CentralGovernment may, having regard to 75% of average rise in the Consumer Price Index forurban non-manual employees for the immediately preceding previous year to suchprevious year, by notification in the Official Gazette, specify in this behalf.b) Long Term Capital Gain = (Sale Price – Indexed Cost of Acquisition)The following example will give you a clear idea about, how the long term capital gain taxis worked out using Cost Inflation Index (CII) An apartment was purchased in FY 1993-94 for Rs. 10,00,000.00 • This asset was sold in FY 2009-10 for Rs. 32,00,000.00 • Cost Inflation Index in 1993-94 was 244 and in 2009-10 it was 632 • So, indexed cost of acquisition would be:Rs. 10,00,000.00* (632/244) = Rs. 25,90,163.00Long Term Capital Gains would be calculated as followsCapital Gains = Selling Price of an asset – Indexed Costi.e. Rs. 32,00,000.00– Rs. 25,90,163.00 = Rs. 6,09,837.00.91 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Therefore tax payable will be 20% of Rs. 6,09,837.00 which comes to Rs. 1,21,967.00In case you have not opted for indexation. The Capital Gains tax would be as followsSelling Price of an asset – Cost of acquisitioni.e. Rs. 32,00,000.00 – Rs. 10,00,000.00 = Capital Gains is Rs.22,00,000.00Therefore tax payable @ 10% of Rs. 22,00,000.00 would have come to Rs. 2,20,000.00So you saved Rs. 98,033.00 in taxes by using the benefit of indexation.The treatment of Capital Gain for Agricultural Land and Inherited Property is different from otherassets. List the circumstances in which benefit of indexation is not available Nature of LTCA Transferred Assessee Not Eligible for Bonds/Debentures except Capital Indexed Bonds Issued by Govt All Assesses Shares/Debentures of Indian Company acquired by using Convertible Forex under First Proviso to Section 48 Non-Residents Depreciable Assets All Assesses Slump Sale All Assesses Units Purchased in Foreign Currency u/s 115AB Off Shore Fund GDRs purchased in Foreign Currency u/s 115AC Non-Residents and Individual Resident Foreign Institutional Securitas u/s 115AD Investors. Foreign Exchange Asset u/s 1150 Non-Resident IndianNote: CAPITAL GAINS U/S 50B in case of SLUMP SALE U/S 2(42C)Slump Sale means the transfer of one or more undertakings as a result of the sale for a lumpsum consideration without values being assigned to the individual assets and liabilities in suchsales. Cost of acquisition and cost of improvement in case of slump sale: “Net Worth” of theundertaking or the division. (NO INDEXATION OF SUCH COSTS WILL BE ALLOWED).92 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 6)Cost Inflation Index Form 1981 to 2011 COST INFLATION INDEX FROM 1981 TO 2011Financial Year Cost Inflation Index Financial Year Cost Inflation Index1981-1982 100 1995-1996 2811982-1983 109 1996-1997 3051983-1984 116 1997-1998 3311984-1985 125 1998-1999 3511985-1986 133 1999-2000 3891986-1987 140 2000-2001 4061987-1988 150 2001-2002 4261988-1989 161 2002-2003 4471989-1990 172 2003-2004 4631990-1991 182 2004-2005 4801991-1992 199 2005-2006 4971992-1993 223 2006-2007 5191993-1994 244 2007-2008 5511994-1995 259 2008-2009 5822010-2011 711 2009-2010 6322011-2012 785Tax treatment of Capital Gain on transfer of shares, debentures of Indian Company heldby non-residents. [Section 48 (Proviso) read with Rule 115A].Applicability: 1) All Non-Residents Including Foreign Companies except persons covered u/s115AC &115AD.2. Assets Transferred: Shares or Debentures In an Indian Company.3. Nature of Capital Gain: Short Term or Long Term4. Average TT Rate = (Buying Rate + Selling Rate adopted by State Bank of India)/2Exemption from long-term capital gains on transfer of foreign exchange assetby a Non-Resident Indian [Section 115F]1. Condition : Long-term capital gain on transfer of foreign exchange asset Is entitled forexemption If the whole or part of the net consideration is Invested within 6 months after the dateof such transfer in prescribed assets.2. Prescribed Assets:(a) Shares of an Indian Company or debentures of an Indian Public Limited Company.(b) Deposit with an Indian Public limited Company.(c) Central Government securities.(d) National Savings Certificates VI and VII issue.3. Exemption: If the whole of the net consideration is invested, then entire capital gain isexempt. If a part of the net consideration is invested, then the deduction shall be computed asfollows:Amount Exempted = Capital Gains × Amount Invested/Net consideration4. Holding period of the asset: 3 years from the date of acquisition.93 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 5. Sale/conversion within the holding period: Amount exempted shall be chargeable to taxas Long Term Capital Gain In the year of transfer.Capital gain Gains by an NR on the sale of assets (i.e. shares and debentures of an Indiancompany acquired in foreign currency re computed differently. Capital Gains are computed byconverting the full value of consideration, expenses incurred in connection with the transfer, andthe cost of acquition in the same currency as was initially utilized for purchase. This conversiontakes care of exchange- rate fluctuations.Long term capital gain will be charged @ 10% plus applicable cess on the net capital gain.From gains on such transfers, only expenses incurred in connection with the transfer areallowed as a deduction to determine net capital gain. The valuation under these provisions isnot in foreign currency. Therefore exchange rate fluctuations are not considered.Capital gain arising on the transfer of specified assets are completely exempted from tax onfollowing conditions are full filled The asset transferred must be long term capital asset Net consideration must be invested in specified assets Net investment should be made within 6 months of the transfer Where only a portion of net consideration is reinvested, proportionate exemptions allowed New asset must be held for at least three years7) Capital Gain Exemptions can be availed: 1) Residential house property – purchase a house /residential property within one year or construct a house within two years 2) Any long term capital asset- Specified bonds NABARD, NHI, REC, SIDBI – within six months. The maximum amount allowed to invest in these types of bonds are Rs. 50,000,000.00 3) Any log term capital asset other than residential house - invest in residential house (net consideration to be invested not gains. Purchase within one year before or two years after the date of transfer or construct within three years. The pending unutilized amount can be deposited in a specified capital gain accountUnder S 54, capital gains, arising from transfer of house property, are exempt from tax providedthe following conditions are satisfied 1. The house is a residential house whose income is taxable under the head "income form house property" and transferred by an individual or a Hindu Undivided Family.94 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 2. The house property, which may be self-occupied or let out, is a long term capital asset (i.e. held for a period of more than 36 months before sale or transfer.) 3. The assessee has purchased a residential house within a period of 1 year before the transfer (or within 2 years after the date of transfer) or has constructed a residential house property within a period of 3 years after the date of transfer. In case of compulsory acquisition, the above time limit of 1-year, 2 years and 3-years is applicable from the date of receipt of compensation (whether original or additional). 4. The house property, so purchased or constructed, has not been transferred within a period of 3 years from the date of purchase or construction.The following points should also be kept in mind:- a. Construction of the house should be completed within 3 years from the date of transfer. The date of construction is irrelevant. Construction may be commenced even before the transfer of the house. b. A case of allotment of a flat under the self-financing scheme of DDA (or similar schemes of co-operative societies and other institutions) is taken as construction of house for this purpose.8) What are the consequences if a new house is transferred within 3 years?If the new house is transferred within a period of 3 years from the date of its purchase orconstruction, the amount of capital gain that arise, together with the amount of capital gainsexempted earlier, will be chargeable to tax in the year of the sale of the new house property.It is also provided that if the new house is transferred within 3years from the date of itsacquisition or date of completion of construction, the amount of exemption under S 54 shall bereduced from the cost of acquisition of the new house, while calculating short-term capital gainon the transfer of the new asset.9) Exemption available on capital gains that arise from transfer of house propertyIf the amount of capital gain is less than the cost of the new house property, including cost ofland, the entire amount of capital gains is exempt from tax. Alternatively, if the amount of capitalgains is more than the cost of the new house property, the difference between the amount ofcapital gains and the cost of the new house is chargeable to tax as capital gains.Full value of consideration: Whole price without any deduction whatsoever.Expenditure incurred wholly and exclusively in connection with such transfer: Expenditureincurred which is necessary to effect such transfer e.g. stamp duty, registration etc.Cost of acquisition of an asset: Value for which it was acquired. Expenses of capital nature forcompleting or acquiring the title to the property may be included in the cost of acquisition.Cost of improvement: a. In relation to goodwill of a business or a right to manufacture, produce or process any article or thing, the cost of improvement is taken to be nil.95 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • b. In relation to any other capital asset- 1. Where the capital asset became the property of the assessee before April 1, 1981 the cost of improvement includes all expenditure of capital nature incurred in making any addition/alteration to the capital asset on or after April 1, 1981 by the owner. 2. In any other case, the cost of improvement refers to all expenditure of a capital nature that is incurred in making any additions or alterations to the capital asset by the assessee or the previous owner.10) How to avoid paying capital gains taxThe Income Tax Act grants total/partial exemption of capital gains under Ss- 54, 54B, 54D,54EC, 54F, 54G and 54H. a. Under S 54 capital gains, arising from transfer of house property, are exempt from tax provided certain conditions are satisfied. (Refer to Q5) b. Under S 54B capital gains, arising from transfer of land, being used by an individual or his parents for agricultural purposes for a period of 2 years, immediately preceding the date of transfer, are exempt from tax, provided the assessee has purchased another land for agricultural purpose within a period of 2 years from the date of such transfer. In the case of compulsory acquisition, a period of 2 years from the date of receipt of compensation (whether original or additional) is applicable. c. Under S 54D, capital gains, arising on compulsory acquisition of any land or building forming part of an industrial undertaking, is exempt from tax, provided such land or building was used by the assessee for the purpose of the industrial undertaking for at least 2 years preceding the date of compulsory acquisition and, the assessee has, within a period of 3 years after that date, purchased any other land or building or right in any other land/ building or constructed any other building for the purpose of shifting or reestablishing the said undertaking or setting up another industrial undertaking. d. Under S 54E, where the capital gain arises from the transfer of a long-term capital asset before the 1st day of April, 1992, and the assessee has, within a period of six months after the date of such transfer, invested or deposited the whole or any part of the net consideration in any specified asset. e. Under S 54EA, where the capital gain arises from the transfer of a long-term capital asset before the 1st day of April, 2000 and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of the net consideration in any of the bonds, debentures, shares of a public company or units of any mutual fund referred to in clause (23D) of section 10, specified by the Board in this behalf by notification in the Official Gazette. f. Under S 54EB, where the capital gain arises from the transfer of a long-term capital asset before the 1st day of April, 2000, and the assessee has, at any time within a period of six months after the date of such transfer invested the whole or any part of capital gains, in any of the assets, specified by the Board in this behalf by notification in the Official Gazette. (l) Under S 54 F where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house, and the assessee has, within a period of one year before or two years after the date on which the transfer took place96 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • purchased, or has within a period of three years after that date constructed, a residential house. g. S 54 G provides exemption on transfer of assets in the case of shifting of industrial undertaking from an urban area, provided the capital asset (being plant, machinery, land or building or any right in land or building), used for the purpose of the industrial undertaking situated in an urban area, is transferred in the course of or, in consequence of the shifting of such industrial undertaking to any area other than an urban area, and the assessee has, within a period of 1 year ,before or 3 years after the date on which the transfer took place, purchased a new machinery or plant for the purposes of business of the industrial undertaking in the area to which the said undertaking is shifted or, has acquired building or land or constructed a building for the purposes of his business in the said area or shifted the original asset and transferred the establishment of such under- taking to such area; and incurred expenses on such other purpose as may be specified in a scheme, framed by the Central Government for the purposes of this section. h. S 54H, provides that where the transfer of the original asset is by way of compulsory acquisition under any law and the amount of compensation, awarded for such acquisition, is not received by the assessee on the date of such transfer, the period of acquiring the new asset under S 54, 54B, 54D, 54EC and 54F by the assessee or the period for depositing or investing the amount of capital gain shall be extended in relation to such amount of compensation as is not received on the date of transfer. The extended period shall be reckoned from the date of receipt of the amount of compensation. Moreover, when the compensation in respect of transfer of the original asset by way of compulsory acquisition under any law is received before April 1, 1991, the period(s) aforesaid, if expired, shall extend up to December 31, 1991. 11) Exemption of long term capital gains on transfer of residential property if invested in plant machinery through small/medium enterprise, for 5 years (Budget 2012 proposal) Section 54 GA is proposed to be inserted so as to provide exemption of long term capital gains arising toindividuals and HUFs from transfer of residential property (house or a plot of land) between 1st April 2012 and 31stMarch 2017, proportionate to the sale consideration thereof invested in a newly incorporated Indian company (to be owned atleast 50% by the concerned assessee, and engage in the business of manufacture and covered as small or medium business enterprise under Micro, Small and Medium Enterprises Act, 2006) from which such company purchases new plant or machinery; subject to fulfillment of the other conditions as prescribed therein 12) Relief from long-term capital gains tax on transfer of residential property if invested in a manufacturing small or medium enterprise The Government had announced National Manufacturing Policy (NMP) in 2011, one of the goals of which is to incentivise investment in the Small and Medium Enterprises (SME) in the manufacturing sector. It is proposed to insert a new section 546B so as to provide rollover relief from long term capital gains tax to an individual or an HUF on sale of a residential property97 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • (house or plot of land) in case of re-investment of sale consideration in the equity of a new start- up SME company in the manufacturing sector which is utilized by the company for the purchase of new plant andmachinery. This relief would be subject to the conditions that- (i) the amount of net consideration is used by the individual or HUF before the due date of furnishing of return of income under sub-section (1) of section 139, for subscription in equity shares in the SME company in which he holds more than 50% share capital or more than 50% voting rights. (ii) The amount of subscription as share capital is to be utilized by the SME company for the purchase of newplant and machinery within a period of one year from the date of subscription in the equity shares.(iii) If the amount of net consideration subscribed as equity shares in the SME company is not utilized bythe SME company for the purchase of plant and machinery before the due date of filing of return by theindividual or HUF, the unutilised amount shall be deposited under a deposit scheme to be prescribed inthis behalf. (iv) Suitable safeguards so as to restrict the transfer of the shares of the company, and of the plant andmachinery for a period of 5 years are proposed to be provided to prevent diversion of these funds. Further, capital gains would be subject to taxation in case any of the conditions are violated. (v) The relief would be available in case of any transfer of residential property made on or before 31st March, 2017. i. The proposed amendments in the provisions of the Income-tax Act shall be effective from 1st April, 2013 and would accordingly apply to assessment year 2013-14 and subsequent assessment years.98 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 13) Capital Gains Accounts SchemeCapital gains arise when the consideration received on transfer or sale of a property is morethan its indexed cost. The amount of capital gains that is not appropriated by an assesseetowards the purchase of another property within one year from the date of transfer of theoriginal property, or that is not utilised by him for the purchase or construction of a new propertybefore the date of furnishing the return of income, should be deposited by him in a specifiednationalised bank. The amount should be invested in a ‘Capital Gains Account Scheme’ underthe Capital Gains Account Scheme, 1988. The scheme is applicable to all assessees havingcapital gains. The deposits may be made in one lump sum or in installments at any time. Theamount should be deposited before the due date for filing income tax retunrs.14) Who are eligible to take the advantage? – Mainly, the advantage of Capital GainsAccount Scheme can be derived by individuals and Hindu Undivided Family. To be moreprecise, all those tax payers who would like to invest in buying a residential property or inconstructing a residential property so as to save tax in respect of long-term capital gain can findmuch advantage in this scheme known as Capital Gains Accounts Scheme 1988.Before analysing the salient features of this scheme, it may be recalled here that to save tax oncapital gain various provisions are contained in the Income Tax Act, 1961 whereby if investmentis made within two years from the date of sale one can save capital gain tax in respect of long-term gain, especially if the investment is made in acquiring another residential property.Similarly, if the tax payers were to construct a residential property then the time period forcompleting the construction is within three years from the date of sale. Now, in between comesthe role of Capital Gains Accounts Scheme.All those tax payers who are taking advantage of the above mentioned schemes of makinginvestment in residential property are advised to take advantage of the Capital Gains AccountsScheme, especially if they are not able to make investment in residential property by the lastdate of filing the income tax returnsFor example, if a person derives long-term capital gain on April 10, 2010, in that event he mustmake the investment in acquiring new residential property within two years from the date of saleor when the said property is proposed to be constructed then within three years from the date ofsale.However, there is also a condition that if the tax payer is not able to buy or construct the saidproperty by the last date of filing the income tax return, in that event the amount has to bedeposited in the Capital Gains Accounts Scheme. For example , as mentioned above, if theproperty is sold on April 10, 2010, the tax payers can buy or construct the property by July 31,2011, which happens to be the last date of filing the income tax return.In a situation where such purchase or construction is not completed by July 31, 2011 in thatevent the money must be deposited on or before July 31, 2011, that is, the last date of filing theincome tax return in terms of the Capital Gains Accounts Scheme.99 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 15) List of Banks who can Accept Deposit – The account under Capital Gains AccountsScheme cannot be opened in all the branches and with all the banks. The government hasidentified the following 28 banks to accept the deposit under Capital Gains Accounts Scheme1988. These banks are: State Bank of India, State Bank of Bikaner & Jaipur, State Bank ofHyderabad, State Bank of Indore, State Bank of Mysore, State Bank of Patiala, State Bank ofSaurashtra, State Bank of Travancore, Central Bank of India, Bank of India, Punjab NationalBank, Bank of Baroda, UCO Bank, Canara Bank, United Bank of India, Dena Bank, SyndicateBank, Union Bank of India, Allahabad Bank, Indian Bank, Bank of Maharashtra , IndianOverseas Bank, Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank ofCommerce, Punjab & Sind Bank & Vijaya Bank. All branches of these banks except the ruralbranches are authorized to receive the deposit and maintain account under Capital GainsAccounts Scheme, 1988. Other than the above, no other bank is authorized to accept thedeposit under Capital Gains Accounts Scheme.Account Type Under Capital Gains Accounts Scheme- Under the scheme there can be twotypes of accounts.Deposit Account A: This account is like a savings deposit account. Withdrawals may be madefrom the account from time to time, subject to other conditions of the scheme. This account issuitable for assessees who are planning to construct a house over a period of time.Deposit Account B: This account is like a term deposit that is payable after a fixed period oftime. The interest earned on the deposit may either be withdrawn periodically or it may bereinvested.In order to open the account, an assessee must fill up the prescribed application form induplicate. Further, the type of account – A or B – is to be specified. In case Deposit Account B isopted for, it has to be specified whether the account will be cumulative or non-cumulative. Theproof of such deposit should be attached with the income tax returns.Both the accounts will be eligible to interest as per the guidelines of the Reserve Bank of India.Moreover, a depositor may make or change nominations to the account by filling in the relevantforms.The amount can be utilised in accordance with the scheme which the Central Government mayframe. The amount withdrawn should be utilised for the purpose of purchase or construction of ahouse.The amount withdrawn should be utilised for the purpose within sixty days of thewithdrawal. Any unutilised amount should be redeposited in Deposit Account A.The amount already utilised by an assessee for the purpose of purchase or construction of anew property together with the amount deposited will be deemed to be the cost of the newproperty. In case the amount deposited is not utilised wholly or partly for the purchase orconstruction of the new property within the period specified, then the unutilised amount will becharged as income of the previous year in which the period of three years from the date of thetransfer of the original property expires.Further, an assessee will be entitled to withdraw the amount in accordance with the provisionsof the scheme.100 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • The withdrawals from Deposit Account A can be made through a prescribed form. In case ofDeposit Account B, a depositor will first have to transfer the amount to Deposit Account A,andthen make the withdrawal. The amounts can be transferred from one branch of a bank toanother branch of the same bank only. A depositor may close the account with the approval ofthe assessing officer.Forms C and D – Similarly, it is possible to convert the deposit Account B to the depositAccount A. As and when the money is required to be withdrawn for the purposes of makingpayment for the residential property, the assessee shall apply in form No C. After receiving theapplication the bank shall permit the withdrawal of the amount. It may also be noted here thatwhere the amount of withdrawal exceeds Rs 25,000, the bank will make the payment by way ofcrossed demand draft drawn in favour of the person to whom the depositor intends to make thepayment. Tax payers should also note that other than the initial withdrawal later on when thewithdrawals are made by the tax payers, they shall furnish in Form No D in duplicate, the detailsregarding the manner and the extent of utilizing of the amount in respect of the immediatelypreceding withdrawal. The bank after receiving two copies of Form D from the accountholderwill retain one copy and return the other copy to the tax payer.Forms E and G- The scheme further provides that the amount which has been withdrawnshould be utilized for purchase or construction of the property within 60 days from the date ofsuch withdrawal. The facility of nomination is also available to the deposit holder by filling upForm No E. Finally, when the property has been purchased or the construction has beencompleted and now the tax payer desires to close his Capital Gains Account Scheme then heshall make an application with the approval of the assessing officer. The application for closureof the account will be in Form G. Whenever you are contemplating to make a deposit in respectof Capital Gains Account Scheme, either by way of a savings account or a fixed deposit account, then please remember that you do not open the normal savings bank account or a normalsaving bank deposit but specifically fill up No A and then make the deposit with the concernedbank under the Capital Gains Accounts Scheme.16) Opening a bank account for Capital Gains Account Scheme- Once the deposit is madeby you either in the savings account or in the fixed deposit account, please ensure that it isclearly mentioned in the account opened that it is for Capital Gains Account Scheme. A largenumber of tax payers commit the mistake of just opening a bank account with a bank to savecapital gains and later on use the money for buying or constructing the residential property. Butplease do remember that the income tax law very specifically provides that the money whichhas not been used for buying or constructing a residential property, such money should be keptexclusively under Capital Gains Accounts Scheme under a separate bank account in terms ofCapital Gains Accounts Scheme. Also do remember that the deposits in these accounts can bemade in one lump sum or in installment.Things to Keep in Mind • CGAS does not allow any withdrawals, except for the specified purpose (of buying the house), even of interest. More, the investor is required to pay tax on this interest (to which he has no access) on an accrual basis out of his other income. • Even if the sale is effected in, say, the first month of the financial year (say, April 2011), the taxpayer may deposit the amount in CGAS on the last date for filing returns. In other words, he can freely utilize this money for 15 months (April 2011 to July 2012) as he likes.101 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • • We have already discussed the fact that if the amount is not utilised wholly or partly for the desired purpose, within the specified period, the unutilised amount shall be treated as capital gains of the year during which the specified period expires.17) Capital Gain treatment of Inherited or gifted properties The provision of capital gain tax does not attract any transferof a capital asset under a gift or a will or received by way of inheritance. In other words,one cannot be liable to pay capital gains tax just because of the fact that he/she hasinherited a property from their relatives. But If the inheritor wish to sell the inheritedproperty he/she needs to pay applicable capital gain tax.S 49(1) states where the asset has been inherited by the assessee or gifted to theassessee, the cost of acquisition of the asset for which the previous owner acquired it,shall be deemed to be the cost of acquisition of the asset as increased by the cost ofimprovement of the assets if any, incurred or borne by the previous owner or theassessee as the case may be.DEEMED COST OF ACQUISITIONa) Cost to the Previous owner u/s 49 (1): where the capital asset became property ofthe assesee, the cost of acquisition of the asset shall be deemed to be cost for whichthe previous owner of the property acquired it, in the following cases:(i) on the distribution of assets on total or partial partition of HUF;(ii) under a gift or will;(iii) by succession, inheritance or devolution;(iv) distribution of assets on the liquidation of a company;(v) transfer to a revocable or Irrevocable trust;(vi) transfer by a wholly owned Indian subsidiary company to Its holding company orvice versa;(vii) transfer In the scheme of amalgamation of two Indian companies u/s 47(vl);(viii) transfer in the scheme of amalgamation between two foreign companies;(ix) transfer of capital asset by a banking company to a banking Instltutition In. thescheme of amalgamation;(x) transfer in the case of business reorganization by a predecessor cooperative bank tothe successor cooperative bank(xi) on the conversion of a self acquired property of a member of an HUF to the jointproperty of the HUF.102 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • The cost and the date of acquisition to calculate this capital gains tax are to be taken asthat of the “the previous owner”. For example, if you have inherited the property fromsay your father, you will have to consider the cost that your father paid originally whenhe first purchased the property.Indexed Cost of Acquisition (ICA) and Indexed Cost of Improvement (ICI) [Section48]When asset is acauired by assessee himself(a) Acquired prior to 1.4.1981Indexed Cost AcquisitionFair Market Value on 01.04.1981 or cost of acquisition whichever is high × Cost ofInflation Index for the year of transfer/100.(b) Acquired after 1.4.1981,Indexed cost of AcquisitionCII for year of acquisition Cost of Acquisition ? CII for year of transfer ?Indexed Cost of Improvement in both the above casesCII for year of Improvement Cost of Improvement? CII for year of transfer ?ICI can be computed only if it is incurred after 01.04.1981As per Section 48 explanation (iii) defines ‘indexed cost of acquisition’ to mean anamount which bears to the cost of acquisition the same proportion as the cost inflationindex for the year in which the asset is transferred bears to the cost inflation index forthe first year in which the asset was held by the assessee or for the year beginning April1, 1981, whichever is later. This means that for calculating long-term capital gains, youmay use indexed cost or the cost on 1.4.81, whichever is higher.There is also another component of cost, which is the cost of improvement of the asset.Explanation (iv) defines ‘indexed cost of any improvement’ to mean an amount whichbears to the cost of improvement the same proportion as the cost inflation index for theyear in which the asset is transferred bears to the cost inflation index for the year inwhich the improvement to the asset took place.The following example will give more idea about how to calculate the capital gain on theinherited property. Mr. X father had bought a house on July 6, 1983, for Rs1 lakh. OnJuly 6, 1986, he spent Rs2 lakh for adding another room to the house. It was on July 6,1990, that he passed away leaving the house to his son. The market value of theproperty at that time was Rs10 lakh. Mr. X eventually sold this house on July 6, 2011,for a net consideration of Rs50 lakh. Now, let’s work out the capital gains.Let us first compute the indexed cost of the house. We shall come to the indexed cost ofthe improvement (adding the room) a little later. There is a bit of mathematics involved,but its really simple multiplication and division. And it is not the numbers that areimportant but the principle behind the issue.103 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • The market value in FY 1990-91, the first year in which the asset first came into Mr. X’spossession was Rs10 lakh. This value is of no consequence. His cost of acquisition,thanks to Sec 47(iii) is evidently Rs1 lakh, the same that his father paid in FY83-84.Consequently, Mr. X’s date of acquisition would also be July 6, 1983.The cost inflation index of FY11-12 is 785 and that of FY 83-84 is 116. Therefore, theindexed cost is Rs6,12,931 (1,000,00 x 785/116). This calculation seems all right at facevalue. However, there is an oversight. Without reading further, try and guess what it is.That’s the real challenge.Examine the above mentioned explanation (iii) once again. Yes, the date of acquisitionfor the son is certainly July 6, 1983, but it does not come into the picture at all for anypurpose whatsoever, including computation of indexed cost. The index for the year inwhich the son first held the asset is required to be taken for computation. The son cameinto possession of the house in FY 1990-91 and the index for that year is 182.Therefore, the indexed cost is Rs4,31,318 (1,00,000 x 785/182) and not Rs6,12,931 ascomputed earlier.Now, let us work out the indexed cost of improvement. Ironically, if we extend the sameprinciple here, we would be making a mistake. Re-examine explanation (iv) above. Aminute reading will tell you that here, unlike in the previous case, the index to beconsidered is that of FY 1986-87, the year in which the improvement of Rs2,00,000 wascarried out. The index for 86-87 is 140 and the indexed cost is Rs11,21,429 (200000 x785/140).Ergo, the total indexed cost is Rs15,52,747 (4,31,318+11,21,429).It is this computed cost that will be reduced from the net sale proceeds. The tax will be20% applicable cess of this amount.(Here it must be noted that in the case of DCIT v Manjula J Shah - 318 ITR (AT) 417(Bombay Special Bench), it was held if the cost and date of an acquisition had to betaken to be that applicable to the previous owner, indexation should also be availablefrom the same date when the previous owner acquired the property.However, this is what was decided in a judgment and the relevant laws have not beenamended. Therefore, the taxpayer will have to defend his stand if the income taxdepartment were to raise an objection).The character of long or short-term of the property would also depend upon the date ofacquisition of the original holder. In case this original holder has also acquired theproperty by way of gift or inheritance, then it will be the date on which the very firstholder purchased or constructed the property.104 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 18) Please note that the long-term capital gains earned by you from inheritedshares sold on any recognized stock exchange in India by paying the applicableSTT are exempt from tax provided:.(2) Where the capital asset is a share(s) in an amalgamated company, which is an Indiancompany, became the property of the assessee in consideration of a transfer in a scheme ofamalgamation, the cost of acquisition of the asset shall be deemed to be the cost of acquisitionto him of the shares(s) in the amalgamating company.(2A) Where the capital asset, being a share or debenture in a company became the property ofthe assessee in consideration of a transfer by way of conversion of bonds or debentures,debenture-stock or deposit certificates in any form, the cost of acquisition of the asset to theassessee shall be deemed to be that part of the cost of debenture, debenture- stock or depositcertificates in relation to which such asset is acquired by the assessee.(2AA) Where the capital gain arises from the transfer of the shares, debentures or warrants, thevalue of which has been taken into account while computing the value of perquisite underclause (2) of section 17, the cost of acquisition of such shares, debentures or warrants shall bethe value under that clause.(2C) The cost of acquisition of the shares in the resulting company shall be the amount whichbears to the cost of acquisition of shares, held by the assessee in the demerged company, inthe same proportion as the net book value of the assets transferred in a demerger bears to thenet worth of the demerged company immediately before such demerger.(2D) The cost of acquisition of the original shares held by the shareholder in the demergedcompany shall be deemed to have been reduced by the amount as so arrived at under sub-section (2C).What is the rule regarding period of holding if the assessee has inherited the propertyonly six months ago? Can this be considered to be a short-term capital asset?Under the definition of short-term capital asset, given in section 2(42A), it is specifically providedin sub-clause (b) that in the case of an acquisition by the modes provided in Section 49, thereshall be included the period for which the previous owner held the asset. Thus, if the presentholder inherited it only 6 months ago, but the previous holder had held it for three years, it willbe deemed that the present holder has held it for three and a half years105 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 12 Wealth Tax implications of NRIs Wealth tax is not a very important or high revenue tax in view of variousexemptions. Wealth tax is a socialistic tax. It is not on income but payable only because aperson is wealthy. Wealth tax is an annual tax like income tax. It is another type of direct tax bywhich tax is imposed on individuals coming within its purview. Pensioners, retired persons orsenior citizens have not been accorded any special benefits under this Act. The valuation datefor wealth tax computation is 31st March, The twelve months immediately before thecomputation date is considered as previous year for which wealth tax is calculated. Net wealthmeans taxable wealth. It means the amount by which the aggregate value of all assets(excluding exempted assets) belonging to the assessee on the valuation date including assetsrequired to be included in the net wealth, is in excess of the aggregate value of all debts owedby the assessee on the valuation date which have been incurred in relation to the taxableassets. The wealth tax needs to be paid at the rate of one per cent (1%) of the amount bywhich net wealth exceeds Rs. 30 lakhs. No surcharge or education cess is payable.The liability to pay tax in the case of an individual depends upon his residential status andnationality. Residential status is decided as per the provisions of the Income-tax ActThe scope of liability to wealth tax is as follows: 1. In the case of an individual who is a citizen of India and resident in India, a resident— HUF and company resident in India; Wealth tax is chargeable on net wealth comprising of a) All assets in India and outside India; b) All debts in India and outside India are deductible in computing the net wealth. 2. In the case of an individual who is a citizen of India but non-resident in India or not ordinarily resident in India, HUF, non-resident or not ordinarily resident in India and a company non-resident in India; a) All assets in India except loan and debts interest whereon is exempt from income-tax under section 10 of the Income-tax Act are chargeable to tax. b) All debts in India are deductible in computing the net wealth. c) All assets and debts outside India are out of the scope of Wealth Tax Act.106 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 3. In the case of an individual who is not a citizen of India whether resident, non-resident or not ordinarily resident in India: Same as in (b):The credit balance in a Non-resident (External) Account is exempt from wealth tax provided thedepositor is a person resident outside India as defined in the Foreign Exchange Regulation. Most of the people are bothered about preparation of Income Tax Returns but they are leastbothered about while dealing with Wealth Tax aspects and most of the people are not aware ofthe Wealth Tax provisions..If you are a Non Resident Indian with net wealth from assets in India aggregating more than Rs30 lakh in a financial year as per the prevailing rules, you may be liable to pay wealth tax.What are all the assets included for wealth tax purposes?Assets include:a) Urban Land (that is, non agricultural land)b) Residential or commercial propertyc) Jewellery, bullion, furniture, utensils and any other article made wholly or partly of gold, silver,platinum or any other precious metald) Cars, Aircrafts, Yachtse) Cash in excess of Rs 50,000 (this is cash in hand and not in the bank)Only if these assets are located in India would you fall under the purview of Wealth Tax in India.Any of these assets acquired through gift inheritance will also be considered as assets forWealth Tax purpose.It is very easy to identify the ownership of land, property and vehicles with the help of the relatedtitle deeds, in the case of gold or other precious metals "There are no specific criteria fordeciding the ownership of gold under the Wealth Tax Act. Hence on a general basis, if you havepurchased the gold and you are legal owner, it will be considered as your asset. If it has comethrough gift or inheritance then you will be considered as the legal owner because it yourproperty."Assets also include those assets that are transferred to the spouse, minor child or wife of sonwithout adequate consideration. So if you have gifted property to your spouse or transferredproperty in the name of your minor child or in the name of your sons wife, without anyconsideration, the asset will be considered to be held by you for Wealth Tax Purpose.In case an asset is held by an individuals minor child, such asset shall be included in the wealthof the parent. If a minor has earned on account of any manual work done by him or any activityinvolving application of his skill, talent or specialised knowledge and experience it shall not beincluded in the wealth of the parent."Assets not included for Wealth Tax purposesIf you hold any of the above assets as stock-in-trade, they will not be considered your assets forWealth Tax purposes. So if a developer holds apartments that he proposes to sell, they will not107 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • be considered assets for the purpose of Wealth Tax. Financial assets such as bank balance,stocks, mutual funds, bonds and deposits are not included in assets. Additionally, a propertywhich is given out on rent for at least 300 days in a year is not considered to be an asset.How net wealth is determined? Net wealth is the aggregate value of all the above assets minus anyloans taken in order to purchase these assets. So if you have taken a home loan to purchase aproperty, the outstanding value of the loan will be reduced from the value of the property whilearriving at net wealth.Another important inclusion to net wealth is Interest in Partnership. If you are a partner of a firmin India, the value of your interest in the assets of the firm will be included in your net wealth.Wealth tax is then calculated at the rate of 1% over and above the limit of Rs 30 lakh. Whileincome tax is a tax on the income earned in a particular year, wealth tax is a tax on the value ofassets held in a particular year. So if you sell a property before the 31st of March of a financialyear, you would not have to include that asset while calculating wealth tax. But the gains fromthe sale would be included in income tax.The method of valuation of assetsThere are different valuation mechanisms for each asset. In the case of property, a multiplierfactor is applied to the net rent. In the case of jewellery, value of jewellery shall be estimated tobe the price which it would fetch if sold in the open market on the valuation date. If the valueexceeds Rs 5 lakh a report of a registered valuer must be attached. In case of all other assets,the Assessing Officer may conduct the valuation himself or refer the valuation to a ValuationOfficer. Valuation can be a complicated and tedious process and it would be best to consult aprofessional for this.What are all the expectations availableAny property that is given out on rent for at least 300 days in the year is exempt from WealthTax. So suppose you are an NRI and own 2 properties in India. One property is given out onrent for the entire year and the second one is vacant. "The property which is let out for the fullyear will not be considered as an asset. The vacant property can be claimed as exempt underthe provisions of the Wealth tax Act." Therefore, neither of these properties will be consideredwhile arriving at the net wealth threshold of Rs 30 lakh.What about NRIs returning to India?NRIs returning to India with the intention to stay on permanently have some concessions withrespect to Wealth Tax. "The exemption is available only to an Indian citizen or to a person of108 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Indian origin who was ordinarily residing in a foreign country and has returned to India with theintention of permanent stay. In case of such individual, any asset brought by him or any propertyacquired out of the money brought by him within one year immediately preceding the date of hisreturn and at any time thereafter, shall be exempt from wealth tax and such exemption shall beavailable for a period of 7 successive years starting from the date of his return."How should NRIs file Wealth Tax Returns?The due date for filing wealth tax returns is the same as the due date for filing income taxreturns, that is, 31st July. Unfortunately for NRIs, there is no facility to file your Wealth Taxreturns online. However, the return can be signed by a person holding due power of attorney inIndia.The penalty for filing wealth tax returns is 1% per month from the due date.109 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 13Guide on filing of Income Tax Returns by NRIs in IndiaFiling of tax returns in India by a Non Resident Individual depends on the taxability of incomeearned by the individual which in turn depends on his/her residential status (as per tax laws).Here are some tips for you.Who is a Non resident in India?As per the provisions of the Income Tax Act, 1961 (Act), an individual is considered to be a taxresident of India if he is:a) Physically present in India for 182 days or more in that tax year; ORb) Physically present in India for 60 days in that tax year and 365 days or more in the precedingfour tax years. However, if an Indian citizen leaves India during the previous year for thepurpose of employment outside India or as a member of the crew of and Indian ship, the periodof ’60 days’ is extended to ‘182 days’.The above two conditions are termed as the basic conditions of residency. If neither of thesetwo basic conditions are satisfied, the individual is classified as a NRI.The first step to filing the Return would be making an application for allotment of PermanentAccount Number “PAN’ (Permanent Account Number). PAN is mandatory for filing income taxreturns also quoting PAN is now a day’s mandatory for most of the financial and non-financialtransactions in India.Normally July 31st of every year is fixed as the last date for filing of income tax returns in India,but most of the cases, this dead line has been extended by a notification from Income TaxDepartment. If you are a Non Resident Indian (NRI) and are looking at the best way to file yourtax returns, here is a quick guide on various options, including e-filing.If the value of transactions of purchase of immoveable properties exceeds Rs. 3,000,000.00that should be mentioned in the tax returns110 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Who is liable to file Income Tax ReturnsIf you are an NRI, you would have to file your income tax returns as per the present rules if youfulfill either of these conditions:a) Your taxable income in India during the year financial year is the above the basic exemptionas per the Income Tax Act, 1961. For the year 2011-2012 the basic the basic exemption limit isRs,.1,80,000.00 (from FY 2012-13 Rs. 200,000.00) ORb) You have earned short-term or long-term capital gains from sale of any investments or assets(moveable or immovable properties) , even if the gains are less than the basic exemption limit.Note: The enhanced exemption limit for senior citizens and women is applicable only toresidents and not to non-residents. As per Indian tax laws, the initial basic exemption incomelimit below which tax is not payable is Rs180, 000 .00 for FY 2011-12 (Rs. 200,000 from FY2012-13) For senior citizens, this limit is enhanced to Rs 250,000 as per Budget 2011. However,this enhanced limit is not applicable to NRIs, notwithstanding the fact that they may be seniorcitizens. other words, regardless of your age, the general limit of Rs 180,000 for FY 2011-12(Rs. 200,000 from FS 2012-13) would be applicable to NRIs. The basic tax exemptionavailable for women below the age of 60 years is at par with men from FY 2012-13.Are there any exemptions from filing tax returns?The following are the two exceptions:a) If your taxable income consisted only of investment income (interest) and/or capital gainsincome and if tax has been deducted at source from such income, you do not have to file yourtax returns.b) If you earned long term capital gains from the sale of equity shares or equity mutual funds,you do not have to pay any tax and therefore you do not have to include that in your tax returnTip: You may also file a tax return if you have to claim a refund. This may happen where the taxdeducted at source is more than the actual tax liability. Suppose your taxable income for theyear was below Rs 1,80,000.00 FY 2011-12 (Rs. 200,000 from FY 2012-13) but the bankdeducted tax at source on your interest amount, you can claim a refund by filing your tax return.Another instance is when you have a capital loss that can be set-off against capital gains. Taxmay have been deducted at source on the capital gains, but you can set-off (or carry forward)capital loss against the gain and lower your actual tax liability. In such cases, you would need tofile a tax return.111 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • What is the dead line for filing tax returns? The last date to file returns for the financial year is normally 31st July .However, remember the following:a) If you do not have any tax payable (that is all your tax has been deducted at source), you canstill file your tax return by 31st March of the next year without any penaltiesb) you do have tax payable, you can still file your returns by 31st March of next year but you willbe charged an interest of 1% per month for every month of delay starting from 31st July till thetime you file your tax returnsc) If you do not file your tax returns even by the 31st of March of next year , you may becharged a penalty of Rs 5,000 for every year of delay.Whats the best way to file returns?Traditionally, you could file your return either by giving a power of attorney to someone in Indiaor by sending your form and documents to a tax expert in India who would then file returns onyour behalf.But nowadays, the easiest option for NRIs to file their Indian tax returns is by using the onlineplatform. There are several options to file online.Online return filing - Income tax websiteThe income tax website allows you to efile your return. But the process maybe a bitcumbersome. You would need to download a software, fill in your details and upload an XMLfile. You would then need to print and send a copy of the acknowledgement (known as ITR-V) tothe tax office in Bangalore within 30 days. You can do this for free.A guide to filing of Income Tax Returns OnlineFiling income tax returns is not a laborious ordeal anymore. E-filing or filing tax returns online has made the process a whole lot simpler. E-filing of tax returns acts112 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • as one of the options for the direct tax payers in India. There are three different ways of filingreturns online:1. File returns using a digital signature. By this option there is no need for a paper return tobe submitted.2. File without using the digital signature. By this option the ITR-V form has to be filled. Thisform is a one-page receipt but also serves as a verification form.3. Take help from an E-filing intermediary who makes the filing returns and filling the ITR-Vform a whole lot easier.Details required before logging in to the siteYou will need an account with a bank that has net-banking facility. The bank must be one thathas e-payments. If you are a first time user, i.e if you have never e-filed your returns you willneed to register with this website www.incometaxindiaefiling.gov.in and create a user name andpassword. You will need your PAN card number for the same. Your address details areextracted from the PAN. You must enter other personal details carefully. The email address isimportant as all communication regarding this will be through the email address you provide.Once you have registered, an e-mail will be sent to you confirming registration after you activateyour account. Once this is done, you are ready to file your income returns online. You must nowdownload the appropriate ITR form.Steps to file Income Tax Return online • Log into www.incometaxindiaefiling.gov.in and create a username and password. • Go through all the heads of income under which you will be taxed and select the relevant Income Tax Return. • Download the Return Preparation software and fill in the details of your ITR. The Income Tax India website also provides an instruction sheet on how to fill the ITR form. • If there is any tax to be paid then make an online payment and generate the challan counterfoil along with the CIN. Now complete the Income Tax Return form with the details from the challan and CIN along with the payment details and the details of the bank through which the e-payment has been made. • After this generate an XML file from the filled return using the software downloaded earlier. An XML is a format that helps the IT Department enter the details into its database. • Now select the appropriate form on the left side of the page and click ‘Submit return’. Select the XML file and click ‘Upload’. Once the uploading is successful it will be acknowledged on the screen. • Click on ‘Print ’ to get a copy of the ITR-V form.If the return has a digital signature then the filing process is complete upon theacknowledgement notification and the print out is required only to keep a personal copy. But if itdoes not have a digital signature then the ITR-V form needs to be printed out by the tax payer.As mentioned earlier, this is an acknowledgment as well as a verification form and all the detailsneed to be filled in and verified. The tax payer has to fill-up the verification part and verify thesame. A duly verified ITR-V form should be mailed to “Income Tax Department – CPC, PostBag No – 1, Electronic City Post Office, Bangalore – 560100, Karnataka, “BY ORDINARY113 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • POST OR SPEEDPOST ONLY within 120 days after the date of transmitting the dataelectronically.Benefits of e-filing over paper filingOne of the foremost benefits of e-filing is the flexibility of filing your returns anywhere / anytimewith access to the internet. Online tax returns are processed much faster than paper returnsand the tax is worked out automatically as the payee completes the form. With this the payeealso gets the acknowledgment slip immediately. Also online filing is a safe and secure mode.What is an ITR-V? • ITR-V stands for ‘ Income Tax Return – Verification’ form. • This form is received when you e-file without using a digital signature • Income Tax Department needs to verify the authenticity of income tax return when filed online without using a digital signature. • On receipt of ITR-V you have to sign the copy and submit to the Income Tax Department to complete the filing process.What steps are to be followed when I e-file without using a Digital Signature?When you e-file without using a Digital Signature, you receive ITR-V as an attachment in the e-mail sent by the Income Tax Department. Since the return you filed was not signed, your filing isstill incomplete. To complete the return filing process, follow the below mentioned steps – • Print and sign ITR-V. • Do not fold this signed ITR-V. Enclose the same in A-4 size envelope. • Mail the envelope within 120 days of e-filing to – Income Tax Department CPC Post Box No.1, Electronic City Post Office, Bangalore 560100, Karnataka. • Upon receipt of ITR-V, Income Tax Department will send an e-mail acknowledging the receipt of signed copy of ITR-V. This is your acknowledgement. • Your filing is now complete..Can I submit ITR-V anywhere else in India?No, you cannot. You have to compulsorily mail your ITR-V in a sealed A-4 envelope to theaddress mentioned above.Is there any time limit for submitting ITR-V to Income Tax Department?Yes, you should mail your ITR-V within 120 days of e-filing your return.What if I do not submit ITR-V within 120 days?114 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • If you miss submitting your ITR-V within 120 days, your e-filing will be considered as null andvoid. It means that it will be considered that you have not yet filed your return. In such a caseyou will have to file revised return, get a new ITR-V and submit the same within 120 days.The due date for submission of ITR-V for A.Y. 2011-12 has been extended upto 31.03.2012or 120 days from the date of upload whichever is later .What is the Last Date for filing an Income Tax Return?The Due Date of filing your Income Tax Return for a financial year is 31st July after the end ofthe financial year. Thus, for financial year ended on 31st March, 2012, the due date of filingIncome Tax Return is 31st July, 2012.Does that mean that I cannot file return after the last date mentioned?No, it does not mean so. You can file return after the last date also. However, in such case youwill have to pay penal interest @ 1% per month for late filing. In case you have not filed yourIncome Tax Return for the financial year ended on 31st March, 2012 till 31st July, 2012, still youcan file the same till 31st March, 2013. You may be required to pay Interest. Further, in caseyou have still missed to file your Income Tax Return by 31st March, 2013, you can still file thesame till 31st March 2014, beyond which the return will become time barred and you would notbe able to file the same. Assessing Officer may require you to pay penalty up to Rs.10,000 forlate filing of Income Tax Return.115 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 14 WHAT IS CLUBBING OF INCOME? Certain provisions are included in the act as anti tax avoidancemeasures. Provisions for inclusion in assessee’s income, income of some other person, who isnot at arm’s length, are a kind of such provisions. Such provisions arrest tax leakage likely toresult from certain transactions with relatives or diversion of title without loosing control over thesame, etc.In the Indian Income Tax Act there are provisions of Clubbing of Income. Clubbing of incomemeans Income of other person included in assessee’s total income, for example: Income ofhusband which is shown to be the income of his wife is clubbed in the income of Husband andis taxable in the hands of the husband. Income of a minor child is taxable in the hands of hisparents. Under the Income Tax Act a person has to pay taxes on his income. A person cannottransfer his income or an asset which is his one of source of his income to some other person orin other words we can say that a person cannot divert his income to any other person and saysthat it is not his income. If he do so the income shown to be earned by any other person isincluded in the assessee’s total income and the assessee has to pay tax on it. For example: Mr .X purchased a residential apartment in the name of his wife Ms. Y. X let out this apartment. Therental income earned by X in name of his wife Y is taxable in the hands of X Clubbing of Incometakes place in the following situations: 1) Income of a minor child All income which arises to theminor shall be clubbed in the income of his parents. Income will be included in the income ofthat parent whose total income is greater.116 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • This case has two exceptions.(1) Income of minor child suffering from specified disability.(2) Income of minor child on account of manual work or involving application of his skill/talentetc.3) Remuneration to Spouse An individual is chargeable to tax in respect of any remunerationreceived by the spouse from a concern in which the individual has substantial interest. Thisprovision has an exception. If the remuneration is received by spouse by the application oftechnical or professional knowledge or experience clubbing provisions will not take place. Forexample, X has substantial interest in A ltd. and Mrs. X is employed by A ltd. without anytechnical or professional qualification. In this case salary income of Mrs. X shall be taxable inthe hands of X. 3) Transfer of income without transfer of Asset If any person transfers incomewithout transferring the ownership of the asset, such income will be taxable in the hands of thetransferor. Eg. A owns 15,000, 10% NCD of XYZ Ltd., he transfers interest income to his friendB without transferring the ownership of Debentures. In this case although interest will bereceived by B but it is taxable in the hands of A.4) Revocable transfer of Asset If any person transfers any asset to any other person in suchform and condition that such transfer is revocable at any time during the lifetime of thetransferee, the income earned through such asset is chargeable to tax as the income of thetransferor. For eg. A transfers a house property to B. However, A has right to revoke the transferduring the life time of B. It is a revocable transfer and income arising from the house property istaxable in the hands of A.5) Income from asset transferred to son’s wife If an individual, directly or indirectly transfersasset, without adequate consideration to son’s wife, income arising from such asset is includedin the income of the transferor. For example, Mr. X transfers 250 TISCO shares to his son’s wifewithout adequate consideration, Interest income on these shares will be included in the incomeof Mr.X.6) Income from asset transfer to a person for the benefit of spouse/ son’s wife If an individual,directly or indirectly transfers asset, without adequate consideration to a person or anassociation of persons for the benefit of his/her spouse /son’s wife, income arising from suchasset directly or indirectly is included in the income of the transferor. For example, X transfers8% Government of India Bonds without consideration to an association of persons, subject tothe condition that, the interest income from these bonds will be utilized for the benefit of Mrs. Xor Mrs. X son’s wife. Interest from bonds will be included in the income of X.7) Income from assets transferred to spouse Where an asset is transferred by an individual tohis spouse directly or indirectly, otherwise than for adequate consideration or in connection with117 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • an agreement to live apart, any income from such asset is deemed to be the income of thetransferor. For example, Mr. X transfers 1500 Shares of Reliance to his wife without adequateconsideration. Dividend income on these shares will be included in the income of Mr. X. Note:INCOME FROM THE ACCRETION TO ASSETSIn the above mentioned cases the income arising to the transferee from the propertytransferred, is taxable in the hands of the transferor. However, income arising to the transfereefrom such property is not includible in the total income of the transferor. Thus, if Mr. A transfers.60,000 to his wife without any adequate consideration and Mrs. A deposits the money in a bank,the interest received from the bank on such deposits is taxable in the hands of Mr. A. Ifhowever, Mrs. A purchases shares in a company from the accumulated interest, the dividendreceived by Mrs. A, will be taxable in her hands and will not be clubbed with the income of Mr.A.Another example, NRI transfer money from his NRE account or direct remittance to his spouseaccount in India and his spouse (wife) placed this money in demotic bank term deposits. Theinterest earned on these deposits will be treated as the income earned by NRI and clubbed withhis total income and liable to pay tax on it. Now a day’s NRE Term Deposits are offering theinterest rates at par with domestic term deposits and income earned on these deposits areabsolutely free from income tax. So it is advisable to place deposits from NRE account insteadof domestic savings bank accounts.CLUBBING OF NEGATIVE INCOMEThe income of a specified person is liable to be included in the total income of the individual inthe circumstances mentioned earlier. For the purposes of including income of the specifiedperson in the income of the individual, the word “income” includes a loss.118 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 15 Tax on Gifts – facts need to knowHigh value gifts were a safe mode to show ones love to others financially. But the tax authorities have made rules to tighten the provisions related to gifts. Infact the rule has become so strict to end the high value gifts people normally used to make toescape from paying tax. The rule thus effectively prevents money laundering in the in thename of high value gifts, on October 1, 1998, the gift tax was demolished entirely and Clause(vii) has been inserted in section 56(2) by the Finance (No. 2) Act, 2009. Under this clause if anindividual or a HUF receives on or after October 1, 2009 a gift (which falls in any of the followingfive categories), it is chargeable to tax in the hands of the recipients under the head “Incomefrom other sources”. . Under section 56 (2) of the Act, gifts received by an individual in excess ofRs.50, 000 during one assessment year would be taxable. The any gift clause means that not only cash but all gifts of any value. So if someone receivesa gift of a house worth Rs 20 lakh ,then he/she is automatically in the highest income bracketand has to pay 30% + surcharge on value of the house as tax.According to the law, individuals can receive gifts from the following sources: • Relatives or Blood Relatives • At the time of Marriage • As inheritance • In contemplation of deathGifts Exempted from TaxThere is exemption for gifts received from certain people. The gifts that one receives fromrelatives on the occasion of marriage, the gifts receives from parents and grandparents, the giftreceived by a daughter-in-law from her parents-in-law, and gifts received by way of a will andinheritance are exempt. The gifts received by a son-in-law from his parent-in-law will be taxed.A Non-Resident Indian can gift to his/her parents in India from their NRE (Non-ResidentExternal) account without their parents suffering any tax.119 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • The gifts received in the names of ones minor children will be clubbed with the parents incomefor taxation purpose. Also the tax authorities alert in saying that, in case of both parents havingincome, clubbing will be done with that parent who is earning more. So one cannot hide underthe cover of their minor children receiving the gifts.Not only gifts, but any real estate deal done for values lower than the state governments fixedrates, will also be taxed. Here the tax will be charged on the difference between the stategovernments rate and purchase price. The tax needs to be paid by the buyer of the property. Movable properties outside the country, unless the donora) Individual:is an Indian citizen, who is originally a resident of India, orb) No-individualis resident of India during the year of giftc) Out of balance gift by NRI (Non-Resident Indian) in his Non-resident account.d) Foreign currency gift of convertible foreign exchange, remitted from overseas by an NRIto a resident relative.e) Foreign exchange asset gifted by NRI to his/her relatives.f) Special Bearer Bonds, 1991.g) Saving certificates issued by the Central Government (notified as exempted).h) Capital Investment Bonds up to ` 10, 00,000 per year.i) Relief Bonds gifts by an original subscriber.j) Gifts of Certain bonds from the NRI to his/her relatives, which are subscribed in foreigncurrency (specified by the Central Government).k) Gift to government or any local authority.l) Gifts to any charitable institutions.m) Gifts to notified temples, churches, mosques, gurudwaras and other places of worship.n) Gift to children for educational purpose (Reasonable amount).o) Gifts by an employer to its employees in the form of bonus, gratuity or pension.p) Gifts under will.q) Gifts in contemplation of death.120 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 16 WHAT IS ADVANCE TAX?What is Advance Tax?It is obligatory to pay tax on every rupee you earned as income provided total income for aparticular financial year exceeds the minimum income limit specified in the Income Tax Act,1961 for various categories of assessee. Also, it is mandatory to pay tax in advance (in fourinstallments) if your estimated tax liability is above Rs. 10,000.00 in a particular financial year.Advance Tax is part payment of one’s tax liability before the end of the fiscal year, on 31stMarch. The provisions of the Income Tax Act make it obligatory for every individual, self-employed professional, businessman and corporate to pay Advance Tax, on any income onwhich TDS is not paid. So how much Advance Tax does one pay and what are its deadline?Who Needs To Pay Advance Tax?Advance Tax is to be paid on income which has not been subject to tax deduction at source,and where the tax liability is over and above Rs. 10,000 in a financial year. The tax that iscalculated is paid in three or four installments depending upon the category the assesseebelongs to. All individuals, corporate, self employed professionals, small scale businesses andHUF come under the purview of Advance Tax. For individuals with employer salary as the solesource of income, Advance Tax would not be applicable as tax deducted at source would betaken care of by the employer. In case of other sources of income of an individual assessee,such as, income from capital gains, shares and mutual funds, lottery jackpot, income fromhouse property, etc Advance Tax is mandatory if the tax liability exceeds the stipulatedamount of Rs. 10,000(Rupees Ten Thousand), in a single financial year. Steps to CalculateAdvance Tax While calculating Advance Tax payable, assessee needs to make only aprojection or estimate of his income, as the actual income could be calculated only by the fiscal121 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • year end. 1) Using the projected income for the fiscal year, the tax payable is to be calculated as per thetax slabs applicable for the current financial year.2) From the tax so computed, subtract the tax deducted at source.3) Include surcharge and educational cess while calculating advance tax.4) The amount arrived at is the advance tax payable, in installments. Deadlines for AdvanceTax The Income Tax Regulations have extended certain deadlines for payment of Advance Tax.a) For Corporate Entities Date Net Payable By 15 June Up to 15% of estimated tax payable By15 September Up to 45% of estimated tax payable By 15 December Up to 75% of estimated taxpayable By 15 March 100% Tax b) For Non Corporate Entities Date Net Payable By 15 September Up to 30% of Estimated taxpayable By 15 December Up to 60% of Estimated Tax payable By 15 March 100% TaxPenalties for Non Payment of Advance Tax If you have failed to pay your Advance Tax or, if youhave paid less than the stipulated percentage, you would be liable to pay a penal interestamount. This interest is calculated at 1% simple interest per month on the defaulted amount forthree months. The interest penalty would continue up to the next deadline. If even after the lastdeadline of 15 March, the tax is not paid, then the 1% would be on the defaulted amount forevery month, until the tax is fully paid. In case the last day for payment of any installment is aholiday, the payment can be made on the next working day. In such a case, penal interestwould not be applicable for the delay. An individual is required to pay advance tax in three installments as per Section 234C of theAct. So, if you have just realized that you have missed the December 15 timeline of the secondinstallment, you still have a chance. As per the provisions of the Act, you can discharge yourbalance advance tax liability by March 15 with interest of 1% per month. The interest will becalculated for six months if due taxes were not paid by September 15 and three months if taxeswere not paid by December 15. In Case of Excess Advance Tax Paid In case the Advance Taxpaid is a higher amount than the actual tax liability, then the excess amount is refunded back tothe assessee. Also an interest of 6% on the excess amount is paid, if, the excess amount is10% more than the actual tax. Where to Pay Advance Tax Advance Tax could be paid using aTax Payment Challan at designated branches of banks empanelled with the Income TaxDepartment. Branches of ICICI, HDFC and SBI accept Advance Tax Payment Challans.Alternatively, individuals could pay Advance Tax online through the Income Tax Dept / NSDLwebsite. https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp and use CHALLAN NO./ITNS 280NRIs are also liable to pay Advance Tax as explained above122 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Exemption for Senior Citizens from payment of advance tax (Budget Proposal 2012)Under the existing provisions of Income-tax Act, every assessee is required to pay advance tax if the taxliability for the previous year exceeds ten thousand rupees. In case of senior citizens who have passiveincome of the nature of interest, rent, etc., the requirement of payment of advance tax results in raisingcompliance burden.In order to reduce the compliance burden of such senior citizens, it is proposed that a resident seniorcitizen (not applicable to NRIs), not having any income chargeable under the head “Profits and gainsof business or profession”, shall not be liable to pay advance tax and such senior citizen shall be allowedto discharge his tax liability (other than TDS) by payment of self assessment tax.This amendment will take effect from the 1st April, 2012. Accordingly, the aforesaid senior citizen wouldnot be required to pay advance tax for the financial year 2012-13 and subsequent financial years.123 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 17 General Tax deductions available for NRIs The Section 80C deduction up to Rs100,000 is applicable for certaininvestments made in tax saving mutual funds, insurance plans, PPF, post office instruments andthe GOI schemes such as Senior Citizen Saving Scheme (SCSS). In this case note that NRIs/PIOs are eligible to claim the 80C benefit. However, certain investments such as PPF, SCSS,PO instruments, etc are not open for NRIs/PIOs. Putting it differently, from the tax law point ofview, Section 80C deduction may be claimed but certain investments are not allowed underSection 80C. If, however, these investments have been done as a resident, then these can becontinued till maturity (and deduction claimed) even after changing the resident status1. NRI Tax-saving tips NRIs can save on these taxes by investing in pension plans, lifeinsurance policies and tax-saving mutual funds(ELSS – Equity Linked Savings Schemes). Therepayment by an NRI towards principal amount of home loan is eligible for deduction up to 1lakh, while the interest payment is also allowed as a deduction. NRIs can also buy a healthinsurance policy in India for themselves, their family and dependent parents , and claimdeduction up to 35,000 for the annual premium paid.124 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 2) Section 80C of Income Tax Act2. a) Life Insurance and Retirement/Pension Plans – NRIs can buy retirement plan with orwithout life cover and also choose between a traditional plan (endowment, money-back) and aunit-linked plan depending upon your risk appetite. There is also a facility available with fewinsurers like LIC for NRIs to obtain insurance cover from their present country of residencewhere all formalities are completed in their present country of residence, subject to fulfillment ofcertain rules and restrictions on sum insured amounts and add-on riders. For more detailsplease contact the Insurance Company or your Insurance Agent.Tax-breaks in respect of Life Insurance Policies allowable only if yearly premium notmore than 10% of sum assured, as against existing 20%Section 10(10D) provides exemption of the amount received under any life insurance policyprovided that the premium on such policy for year during its term does not exceed 20% of thesum assured.Section 80C provides for deduction of Insurance Premium paid, subject to maximum of 20% ofthe sum assured.This limit of 20% in both the aforesaid sections, is now proposed to be reduced to 10% forpolicies issued after 31st March 2012, that is to say, in respect of policies issued after that date,the deduction u/s.80C shall be restricted to actual premium paid, subject to 10% of sumassured; and if any of the years’ premium exceeds 10% of the sum assured, then the maturityamount shall be taxable. 2.b) Investment in House property – Buying a house or flat in India availing of a home loanfrom Banks or Housing Finance Companies is a good investment/tax savings option for NRIs. The principal and interest payments made every year for a home loan availed in India areallowed as deductions subject to an overall limit of Rs 1 lakh per year on principal payments(under section 80C) and full interest payments made during the year (under section 24b) - incase of let-out property.2. c) ELSS (Tax saving Equity Mutual Fund schemes) – ELSS are equity-oriented mutualfund schemes that directly invest in a diversified portfolio of shares in the Indian Stock Market.The tax savers can buy units of ELSS schemes directly from the respective Mutual Funds of canbe purchased online, if they have enabled that facility with the Mutual Fund. There is lock-in-period of three years in the ELSS investments. These schemes are e ideal for long-term tax-free savings3. Section 80D - Health Insurance Premium125 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • NRIs can buy health insurance policy in India for themselves, their family and also dependantparents and claim deduction for the premium paid up to Rs 35,000 per annum Please note that,these deductions are available for a maximum amount of Rs 15,000 in case of non-seniorcitizens and Rs 20,000 for senior citizens.Reduction of the eligible age for senior citizens for certain tax reliefs (Budget 2012 proposal)For the purposes of section 80D [deduction in respect of health insurance premia] and section80DDB [deduction in respect of medical treatment, etc.], age for defining a senior citizen hasbeen reduced from 65 years to 60 years.NRIs – Deduction U/s 80D premium paid for Mediclaim PolicyDeduction in respect of Medical Insurance Premium (Mediclaim) paid to keep in force insuranceby individual either on his own health or on the health of spouse, dependent parents andchildren or HUF on the health of any members of the family.The benefits of Tax deduction U/s 80D is available for Non-Resident Indian’s also. Policy can betaken for the benefits of following persons • Dependent Children (i.e. legitimate or legally adopted children). Children above 18 years, if employed, can not be covered. Male children, if not employed, but a bonafide student can be covered upto age of 25 years. Female children, if not employed, can be covered until the time she is married. • parents need not be dependent on the Assessee. • parents of Individual or Spouse both are covered.The amount of deduction available under Section 80D • Basic deduction: Mediclaim premium paid for Self, Spouse or dependant children. Maximum deduction Rs 15,000. In case any of the persons specified above is a senior citizen (i.e. 65 years or more as of end of the year up to F.Y. 2010-11 and 60 years from F.Y. 2011-12) and Mediclaim Insurance premium is paid for such senior citizen, deduction amount is enhanced to Rs. 20,000. • Additional deduction: Mediclaim premium paid for parents. Maximum deduction Rs 15,000. In case any of the parents covered by the Mediclaim policy is a senior citizen, deduction amount is enhanced to Rs. 20,000. • Section 80 D Within the existing limit for deduction allowed for health insurance, budget 2012 proposed propose to allow a deduction of upto Rs. 5,000 (with in the overall limit) for preventive health check-up. Section 80D -Amendment -01.04.2013 -Additional rebate of Rs. 5000/- for expenditure on preventive health checkup of self, spouse, dependent children or parents. Payment by any other mode other than cash is now eligible for paying health insurance premium Note : Tax deduction (Rs. 20,00.00) applicable for investment under section 80CCF in Long Term Infrastructure Bonds will not be available from FY 2012-13126 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 4. Deductions u/s 80 Ga) Deduction u/s 80G – Donations made to certain specified charitable institutions are onlyeligible to claim deduction under this section.Deduction of donations above Rs.10,000/- allowable only if paid by any mode other thancash (Budget 2012 proposal)Section 80G allows deduction in respect of donations made to specified/approvedtrusts/institutions etc. Section 80GGA allows deduction in respect of donations forscientific research or rural development. Union Budget 2012 is proposed to amendthese sections to allow deductions in respect of such donations exceeding Rs.10,000/-only if the same is paid by any mode other than cash5) Deduction under 80E – for interest payment towards Educational loan taken from anybank/approved financial institution for higher studies (comprising full time as well as vocationalstudies pursued after passing senior secondary examinations studies) for self or any ofimmediate family members (children, spouse)NRIs can put their money in tax-saving bonds too. Capital gains up to 50 lakh earned fromselling a capital asset can be invested in bonds of NHAI or REC. Investment income foreigncurrency bonds, are subject to tax at 20% as against the maximum rate of 30%. NRIs can investin such assets and benefit from the lower rate. Also, an NRI can avail of lower tax rates oninterest income through beneficial treaty provisions.Note : The overall limit of deductions available on section 80C, 80CCC is Rs 1 lakh per annum.6. Bank Deposits and applicable taxAs per section 206AA introduced by Finance (No. 2) Act, 2009 wef 01.04.2010, every personwho receives income on which TDS is deductible shall furnish his PAN, failing which TDS shallbe deducted at the rate of 20%(as against 10% which is existing TDS rate) in case of Domesticdeposits and 30.90% in case of NRO deposits. Interest Income from NRE deposit is fullyexempted from income tax and also no TDS is applicable.Section 80TTA - Interest income upto Rs. 10,000/- of Individuals/HUFs from SavingsAccount with Bank/Post Office not taxableSection 80TTA is proposed to be inserted so as to allow deduction upto Rs.10,000/-, toindividuals and HUFs, in respect of interest on savings bank account with banks (including co-operative banks) or post office. I assume this tax deduction is applicable for NRIs related totheir NRO Account (waiting for more clarifications)127 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 7) Deduction of 50% to new retail investors with annual income below Rs.10 lacs,investing in equities upto Rs.50,000/- (2012 Budget proposal)It is proposed in 2012 Union Budget to introduce a scheme to be called Rajiv Gandhi EquitySavings Scheme, wherein a deduction of 50% would be allowed to new retail investors investingupto Rs. 50,000/- directly in equities, and whose annual income is below Rs.10 lacs, with a lock-in period of 3 years.It may be noted that the above has been mentioned by the Finance Minister in his Budget 2012Speech, wherein he also stated that the details of the scheme would be announced in duecourse. Accordingly, there is no proposed amendment included in the Finance Bill to allow theabove said deduction as of nowIndian fund managers want the proposed Rajiv Gandhi Equity Savings Scheme (RGESS) to berouted through mutual funds (MFs). Though there is no clarity yet on how the scheme wouldoperate to attract retail investors into the equity markets, industry executives and experts saythere is no other vehicle best suited for the proposed initiative except MFs, provided the productis structured well. We will wait for more details n the coming days.128 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 18 NRIs WELFARE SCHEMES 1) Budget 2012: Rs 50 crore to be spent on overseas IndiansIndia will spend close to Rs.50 crore on welfare schemes targeted at overseas Indians in 2012-13, according to budgetary estimates proposed by Finance Minister Pranab Mukherjee. TheMinistry of Overseas Indian Affairs (MOIA) has been allocated a total of Rs.114.77 crore for thenext fiscal, a 41 percent increase from the 2011-12 budget outlay of Rs.81 crore. The ministrywill also spend Rs.6 crore on celebrating the Pravasi Bharatiya Diwas. The rest of theRs.114.77 crore will go towards establishment and infrastructure expenses. India has theworlds second largest overseas community, next only to China. It is estimated that there areabout 25 million Indian diaspora spread over more than 110 countries around the world.The MOIA was established as a separate ministry in 2004 to look after the welfare of the Indiandiaspora and to provide them assistance across economic, social and cultural spheres. In orderto bring the provisions of the Finance Bill closer to those of the Direct Taxes Code (DTC), thefinance minister has done away with the distinction between "men" and "women" in so far theincome exempt from tax is concerned.Both men and women have now be brought under "General" category with income upto Rs2,00,000 exempt from taxes. In the 2011-12 budget, the finance minister had reduced theexemption gap between men and women when he had raised the limit for income exempt fromtaxes for men from Rs 1,60,000 to Rs 1,80,000 keeping the income exempt from taxes forwomen untouched at Rs 1,90,000.129 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 2) Pravasi Bharatiya Bima Yojana cover In an effort to further safeguard the interests of emigrant workers from India, the Government of India has introduced the Pravasi Bharatiya Bima Yojana (PBBY), an insurance scheme compulsory for all workers going abroad on ECR passports (except to countries for which emigration check is not required) for employment. Every day, thousands of Indians are travelling to different parts of the world for employment . But at the same time they are exposed to several perils like illness, accidents and various other misfortunes. In order to help cover such contingencies, with the help of various Insurance companies India Government launched this insurance policy. This policy is specially designed for emigrant Indians who are abroad on a valid visa for purposes of employment. This scheme was announced during the year of 2003. The scheme was revised in February 2006 to increase the insurance cover from Rs. 2 lakh to Rs. 5 lakh and add other benefits for the workers. In 2008 the cover was further enhanced to Rs 10 lakh. It is an indicator of the Government’s commitment to look after the interests of Indian workers employed abroad. Key Benefits a) Unique policy offering exhaustive coverage against different risks that emigrant Indians are exposed tob) Reimburses expenses towards hospitalization of the Insured in his/her country of employment and in Indiac) Medical expenses extension available for family members of the Insured residing in Indiad) Covers maternity expenses of women emigrantse) Reimburses expenses incurred for traveling back to India on grounds of the Insured being permanent disabled or adjudged to be medically unfit to continue employmentf) Provides for reimbursement of legal expenses in a litigation relating to the Insureds employmentg) Reimbursement of expenses related to covered contingencies can be claimed from country of employment or while in Indiah) Optional additional Personal Accident What are the other salient features of PBBY? Besides offering a cover of Rs. 10 lakh, the insurance scheme offers several other benefits to the emigrant worker and his/her dependants. In case of death, besides the cost of transporting the body, the cost incurred on the one-way airfare of one attendant is reimbursed by the insurance company. If a worker is not received by the employer on his arrival at the destination abroad or there is any substantive change in the employment contract to his disadvantage or if the employment is prematurely terminated within the period of employment for no fault of the emigrant, the insurance company reimburses one way economy class airfare provided the grounds of repatriation are certified by the Indian Mission/post concerned. In cases where the repatriation is arranged by the Indian Mission/post, the insurance company reimburses the actual expenses to the Indian Mission/post concerned. 130 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Personal Accident Benefitsa) Compensation for accidental bodily injury resulting in death or permanent total disablement of the Insured Person, while he/she is abroad. It can be extended to cover the Insureds family members, residing in Indiab) Provides for reimbursement of expenses incurred for repatriation of the mortal remains in the event of accidental death of the Insured Person whilst abroadc) It provides for reimbursement of transportation expenses to India on account ofo Permanent total disability of the Insured Person following an accidento The Insured Person falling sick or being declared medically unfit to continue workingo It provides for reimbursement of repatriation / transportation expenses to India in the event of termination of contract of employment of Insured Person Hospitalisation a) It provides reimbursement of Hospitalization expenses incurred by the Insured Person in the country of his/her employment or in India, due to any disease contracted or illness suffered or bodily injury sustained due to accident by the Insured Person, whilst abroad.b) The Policy also covers maternity expenses for a female Insured Person incurred in a Hospital/Nursing home in her country of employment or in India. Reimbursement of legal expenses – The Policy provides for reimbursement of legal expenses incurred by the Insured Person in any litigation relating to his/her employment. Actual Premium to be charged (without any hidden costs- subject to change ) Rs. 475/- for the contract period Rs. 275/-for 2 years policy period. Rs. 375/- for 3 years policy period. This policy is available from undernoted Insurance Companies:- 1. Oriental Insurance Company Ltd. 2. United Insurance Company Ltd. 3. National Insurance Company Ltd. 4. ICICI Lombard. 5. Star Health & Allied Insurance Co. Ltd. 6. IFFCO Tokyo 7. Bajaj Allianz General Insurance Co. Ltd. 8. Reliance General Insurance Co. Ltd. Claim Procedure Insured worker is supposed to have the copy of PBBY insurance policy with him. Name of the nominee is so mentioned on the policy, in view of the eventuality of death of insured. In the event of claim, insured worker/claimant has to lodge a claim under the policy, with the respective insurance company’s office wherefrom the policy was issued, if not specifically 131 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • provided by the insurance company otherwise. While doing so, claimant has to indicate thepolicy number and details of accident. In the event of death, nominee has to lodge the claim.After intimation of reported claim, insurance company intimates the insured/claimant the detailsof documents required to settle the claim. After processing such requisite documents, claimamount is paid to the insured worker/claimant, as the case may be. 3) Deserted NRI Women Welfare SchemeMinistry of Overseas Indian Affairs has brought out a guidance booklet on “Marriages toOverseas Indians” which contains information on safeguards available to women deserted bytheir NRI spouses, legal remedies available, authorities that can be approached for redressal ofgrievances. A pamphlet entitled “Thinking of the marriage of your daughter with an NRI?” hasalso been brought out by the Ministry highlighting the precautions to be taken before enteringinto marriage alliance. Apart from this, National Commission for Women (NCW), thecoordinating agency at the National level for dealing with the issues pertaining to NRI marriageshas brought out a pamphlet entitled “Problems Relating to NRI Marriages-Dos and Don’ts”. Itdescribes the problems related to NRI marriages and suggests precautionary dos and don’ts forIndian women considering marriage to a Non-Resident Indian (NRI) or a Person of Indian Origin(PIO). NCW has also brought out a report on problems relating to NRI marriages, titled “The ‘Nowhere’ Brides”.Beside this, a scheme was launched in 2007 to provide legal /financial assistance to thedeserted or divorced overseas Indian women through the Indian Missions/Posts. It was revisedand the revised scheme came into effect from November, 2011. The scheme would be availableto Indian women who have been deserted by their overseas Indian / foreign husbands or arefacing divorce proceedings in a foreign country, subject to the following conditions:-• The marriage of the woman has been solemnized in India or overseas with an overseas Indianor a foreigner• The woman is deserted in India or overseas within fifteen years of the marriage; or• Divorce proceedings are initiated within fifteen years of the marriage by her overseas Indian /foreign husband; or• An ex-parte divorce has been obtained by the overseas Indian / foreign husband within twentyyears of marriage and a case for maintenance and alimony is to be filed by her.The scheme would not be available to a woman having a criminal case decided against her,provided that a criminal charge of Parental Child Abduction shall not be a bar if the custody ofthe child has not yet been adjudicated upon. The assistance will be limited to US$ 3000 percase in developed countries and US$ 2000 per case in developing countries and will bereleased to the empanelled legal counsel of the applicant or Indian Community Association /Women’s organization / NGO concerned to enable it to take steps to assist the woman indocumentation and preparatory work for filing132 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Scheme for Deserted Indian WomenThis scheme has been initiated by the Ministry of Overseas Indian Affairs, Government of Indiafor the welfare of Indian women abroad. The scheme aims to provide financial, counselling andlegal assistance to women deserted by overseas Indian spouses.In the current year the Ministry of Overseas Indian Affairs would initially sanction Rs. 40 lakhseach to the Indian Missions in USA, UK, Canada, Australia, and the Gulf subject to review nextyear. Thus, in the current year the budget provision for this scheme is Rs. 2 crore.Scope of and Eligibility for the Scheme:The scheme would be available to the women who have been deserted by their overseas Indianspouses or are facing divorce proceedings in a foreign country subject to the followingconditions: 1. The woman is an Indian passport holder. 2. The marriage of the woman has been solemnised and registered in India. 3. The woman is deserted in India or after reaching abroad within two years of the marriage. 4. Divorce proceedings are initiated within two years of the marriage by her overseas Indian spouse. 5. An ex-parte divorce has been obtained by the overseas Indian spouse and a case for maintenance and alimony is to be filed. 6. The scheme would not be available to a woman facing criminal charges or having a criminal case decided against her. 7. The domicile of the woman seeking relief under the scheme is not relevant for allowing the benefit. The woman may be domiciled in the country of her overseas Indian spouse or in India at the time of making the application. 8. Preference may be given to applicants on the basis of financial needs. 9. Assistance will be limited to meeting initial cost and incidental charges for documentation and filing of the case by the Indian women’s organisation/NGO on the woman’s behalf. 10. The women organisation/NGO will make efforts to enlist community advocates, preferably women advocates, to extend further legal assistance/ appearance in court etc on a pro-bono basis.Whom to contact?In case of assistance or filing complaint against the exploitation at the hands of their husbandsor in-laws, Indian women overseas can contact Indian Missions in the country where they areresiding. Indian Women’s organisations, Indian Community Associations, and NGOs abroad canalso be contacted by the Indian women. These organisations provide legal aid to the victims indistress and whose names have been approved by the Ministry of Overseas Indian Affairs. Theapplications for providing legal aid received by the Missions would be examined by an officerdesignated by the Head of the Mission on case-to-case basis and approved by Head ofMission/Deputy Chief of the Mission.133 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 4) Indian Community Welfare Fund (ICWF) Ministry of Overseas Indian Affairs has established the Indian Community Welfare Fund (ICWF)in the 43 Indian Missions across the world in countries that have a significant overseas Indianpopulation.2. The Indian Community Welfare Fund (ICWF) is aimed at providing ‘on site welfare serviceson a means tested basis in the most deserving cases including:(i) Boarding and lodging for distressed overseas Indian workers in Household / domestic sectorsand unskilled labourers;(ii) Extending emergency medical care to the overseas Indians in need;(iii) Providing air passage to stranded overseas Indians in need;(iv) Providing initial legal assistance to the overseas Indians in deserving cases,(v) Expenditure on incidentals and for airlifting the mortal remains to India or localcremation/burial of the deceased overseas Indian in such cases where a sponsor is unable orunwilling to do so as per the contract and the family is unable to meet the cost.3. Overseas Indian workers duped by unscrupulous intermediaries in the host countries,runaway house maids, those who become victim of accidents, deserted spouses of overseasIndians or undocumented overseas Indian workers in need of emergency assistance or anyother overseas Indian citizens who are in distress would be the main beneficiaries of the Fund.The Fund will also be utilized to meet the expenditure for airlifting the mortal remains ofoverseas Indian citizens to India on a means tested basis, on the recommendation of respectiveHeads of Missions.4. The ICWF would be funded through budgetary support from the Ministry of Overseas IndianAffairs, funds raised by the Indian Missions by levying a nominal service charge on consularservices and through Voluntary contributions from the Indian community.5. Currently the Fund is administered by the following Heads Missions of to provide various on-site welfare services to the Indian citizens who are in dire distress:UAE, Saudi Arabia, Qatar, Oman, Kuwait, Bahrain, Malaysia, Libya, Jordan, Yemen, Sudan,Afghanistan, Indonesia, Syria, Lebanon, Thailand, Iraq and Maldives, Australia, Canada,Mauritius, Singapore, South Africa, Trinidad and Tobago, UK and USA, Fiji, Reunion Island,Guadeloupe/St. Martinique, France, Germany, Guyana, Israel, Italy, Jamaica, Kenya,Netherlands, New Zealand, the Philippines, Portugal, Suriname, Tanzania and Egypt134 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Both the Centre and the States in India are committed to the common interests and concerns ofNRIs. Various programs have been initiated for the engagement and welfare of the NRIcommunity.Initiatives:5) Facilitating investment in India1)The MOIA and the CII have set up the Overseas Indian Facilitation Centre (OIFC) for thefollowing:2) To promote Overseas Indian investments in India and facilitating business partnerships3) Establishing and maintaining a Diaspora knowledge network4) Assisting States in India to project investment opportunities for Overseas Indians and5) Offering a host of advisory services to PIOs and NRIs.The governments of Gujarat, Karnataka, Kerala, Orissa and Punjab have partnered with theOIFC to apprise the Diaspora of investment opportunities in their respective States. 6)Know India Program (KIP)The KIP is a three-week orientation program for Diaspora youth in the age group of 18–26years. It provides awareness around the diverse facets of the country and the progress thecountry has made in various fields.These are conducted in partnership with one or two State Governments.The participants, PIOs, are selected based on recommendations received from heads of Indianmissions and posts abroad. As part of the program they get the opportunity to interact with highdignitaries as well as faculty and students at prestigious institutions. 90% of the cost of air ticketis refundable on the successful completion of the program. 7) Scholarship Programme for Diaspora ChildrenUnder this scheme, 100 PIO and NRI students are awarded scholarships of up to US$ 3,600per annum for undergraduate courses in engineering, technology, humanities, liberal arts,commerce, management, journalism, hotel management, agriculture and animal husbandry,among other courses. The scheme is being implemented through EdCIL (India) Ltd. It is open toNRIs and PIOs from more than 40 countries with a substantial Indian population.Tracing their rootsPIOs who want to trace the roots of their ancestors in India can apply through the Indian missionor post in the country of their residence.Reservation of seats at Indian educational institutions135 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • The government has approved a scheme enabling the supernumerary quota of 15% seats in allinstitutions of higher education or universities offering higher and technical courses for foreignnationals, or PIOs and children of Indian workers in the Gulf countries.It has also been envisaged that one-third of the 15% supernumerary quota shall be reservedacross different disciplines for the children of Indian workers in the Gulf countries.Further, the concerned State Government or Union Territory shall notify the tuition and other feefor candidates to be admitted under the foreign national/ PIO category. There shall be no NRIfee. The children of Indian workers in the Gulf countries shall be treated at par with residentIndian citizens. 8) Migrant Resource Center, Kochi 1. The Migrant Resource Centre (MRC) has been established in Kochi, Kerala to work as a walk-in counselling centre and provide telephonic helpline for information dissemination and grievance redressal of the Overseas Indian Workers. Shri Vayalar Ravi, Hon’ble Minister Overseas Indian Affairs, inaugurated the Migrant Resource Centre (MRC) on 15th December, 2008. The centre has been established by the International Organization for Migration and Ministry of Overseas Indian Affairs at Kochi, as an institutional framework under the EC funded project “Regional Dialogue and Program on Facilitating Managed and Legal Migration between Asia and the European Union (EU)”. The primary idea behind the establishment of MRC is to disseminate information on legal, organized and humane migration; risks involved in the illegal migration and diversify the emigration base by informing intending emigrants about the various opportunities available in the member states of the European Union and the entry requirements for the same. The MRC can be contacted at 0484 – 2372040, 2372044. 2. Two more MRCs are also functional at Hyderabad (Andhra Pradesh) and Panchkula (Haryana). 3. OWRC at Delhi is functioning as information hub for the MRCs.Major Activates Assigned to MRC • Walk-in counselling for face-to-face interaction and provision of information/ advice on legal migration, specific migration related procedures for EU countries and available opportunities. Information is also provided on available job openings, country of destination, qualification, skill and entry requirements. Information is provided regarding risks of irregular migration to EU states in order to empower potential migrants and encourage them to make informed choices.136 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • • Telephone helpline to provide same information as provided through walk-in counselling to potential migrants. A tie-up with OWRC helpline of MOIA has been done to operate the MRC help lines. • Material dissemination including a basic facts brochure on migration, ‘Emigration and You’ handbook, country specific information flyers, press releases, posters, books and short films. • Verification Centre: of recruiters, foreign employers, procedures,fees to pay etc. • Centre for provision of pre-departure assistance including visa and travel assistance, language training and cultural orientation. • Counselling/Crisis Centre to handle complaints on recruitment and employment contract, first aid remedies to overcome crisis situations involving migrants and their families • Network Centre wherein the MRC will work in close coordination with a network of selected NGOs and other social partners in order to be more effective and reach out to a larger number of migrants. Information will therefore also be disseminated through the local structures of NGOs, and their capacities enhanced through training on labour migration opportunities, procedures, risks of irregular migration and migration laws in selected countries. • Referral Centre to provide advice on where to go for documentation, certification etc. 9) NRIs - Facilities for Returning IndiansA returning NRI should know and understand various aspects of Foreign Exchange Regulations(FEMA), Indian Taxation and Banking Regulations in order to rearrange his financial affairs inIndia and outside India. The decision to return to India would have both direct and indirect taximplications, such as income tax, wealth tax and customs duty. He would also need to take noteof implications from an exchange control regulations perspective. The overseas investments byIndian residents are regulated by the Foreign Exchange Management Act (FEMA), which isimplemented by the Reserve Bank of India (RBI). The FEMA has a wide network of notificationsand circulars, which lay down permissible avenues for each category of individual. The decisionto return to India may not be just an emotional one, but also needs to be made taking intoaccount the current regulatory environment and proposed changes being made to them. With aproper understanding, efficient planning and utilization of the benefits provided under the taxlaws in India, home-coming would not only feel good on the heart but also relatively easier onthe pocket.If your stay in India during the Financial Year is 182 days or more, your residential status will beas Resident Indian.There is a transitional status of RNOR between being an NRI and becoming a full-fledgedResident after returning to India permanently. An RNOR is not required to pay tax in India on hisforex income. Anyone who returns after 9 or more years of being an NRI will become RNOR for2 years.Resident but not Ordinarily Resident (RNOR) is a person who satisfies one of the followingconditions137 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • a) he has been a non-resident in India in nine out of the ten previous years preceding that year,orb) has during the seven previous years preceding that year been in India for a period of, orperiods amounting in all to, seven hundred and twenty-nine days or less.NRI benefits are available to a person till the time he holds the NRI status in India; a personloses his NRI status in the same year when he returns to India or within 2 years from the date ofarrival to India, depending on the number of days of stay in India. A returning Indian who hasbeen a Non Resident for 9 years or more, shall be a Not Ordinarily Resident (NOR) for 2successive years upon permanently returning to India.Immediately on return to India, NRIs should inform their bank to change the status of theiraccounts as domestic Resident accounts or transfer the balance in their NRE/FCNR accounts toResident Foreign Currency (RFC) accounts, but FCNR accounts can be continued till the dateof maturity and upon maturity, can be converted to RFC accounts. Resident Foreign Currency(RFC) Accounts Scheme - This is a Scheme approved by Reserve Bank of India permittingpersons of Indian nationality or origin, who have returned to India on or after 18th April 1992 forpermanent settlement (Returning Indians), after being resident outside India for a continuousperiod of not less than 1 year, to open foreign currency accounts with banks in India for holdingfunds brought by them to India.Whether RFC is tax-free or not, withholding tax will be applied @30.6% and if the interest isover Rs. 10 lakhs, the rate will be 33.99%.The NRE SB and NRO SB accounts will be re-designated as Ordinary SB accounts.It is also necessary to inform all the companies/Depository Participants (DPs) where you haveinvestments about the change in your residential status.The tax liability of each person in India is basically determined based on his residential status.The following are the tax liability of different categories of peopleResident – liable to pay tax on income earned in India as well as abroadNon-Resident (NRI) – liable to tax on the income ‘earned’ in IndiaNot Ordinary Resident (NOR) - liable to tax on the income ‘earned’ in IndiaOrdinary Indian Resident (ROR) - is liable to tax on his global incomeA) Overseas AssetsAll kind of Foreign exchange / Overseas assets such as properties, bank deposits, stocks andsecurities, life insurance policies, loans, company deposits, debentures, bonds etc. acquired,held or owned by an NRI while he was abroad can be continued to be so held and deal in anymanner even after the NRI’s return to India for permanent settlement.138 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • The Central Government has launched various initiatives for the welfare of the non-residentIndians. These are carried out through the MOIA which is the nodal Ministry for all mattersrelating to Overseas Indians. The measures are intended to promote a mutually beneficialengagement between the Overseas Indians and India in economic, social and cultural arena.Besides, various State Governments have also put welfare measures in place for OverseasIndians especially those from their respective states. All these and more are captured in theensuing pages for your ready reference.Central Government initiativesInitiatives: 10) Investment facilitation and knowledge networking The MOIA has set up an Overseas Indian Facilitation Centre (OIFC) in partnership withConfederation of Indian Industry (CII) as a one stop shop for the following:• Promoting Overseas Indian investment into India and facilitating business partnerships bygiving authentic and real-time information.• Establish and maintain a diaspora Knowledge Network• Functioning as clearing house for all investment elated information• Assisting States in India to project investment opportunities for Overseas Indians; and• Providing a host of advisory services to PIOs and NRIs including consular questions, stay inIndia, investment and financial issues. The governments of Assam, Bihar, Gujarat, Karnataka,Kerala, Orissa and Punjab have partnered with OIFC to appraise the diaspora about investmentopportunities in their respective states. 11) Bilateral Labour Co-operationIndia has entered into bilateral MOU with all the major destination countries for the protectionand welfare of Indian emigrants. Besides, the MOIA has also signed SSAs with 13 countriesand is conducting/concluding negotiations with many others. The Government is also enteringinto Human Resource Mobility Partnerships to position international labour mobility as a win-winfor the countries of origin, the countries of destination and the migrant workers. 12) Global Indian Network of Knowledge (Global Ink)MOIA has developed a diaspora knowledge network called Global Indian Network of Knowledge(Global INK) as an electronic platform that seeks to connect people of Indian Origin from avariety of disciplines, recognized as leaders in their respective fields, not just in their country ofresidence but globally as well, with knowledge users at the national and sub-national levels inIndia. 13) India Development Foundation of Overseas IndiansIndia Development Foundation of Overseas Indians provides a credible window for OverseasIndian Philanthropy in India’s social development. The objective of the Foundation is to facilitatephilanthropic activities by Overseas Indians including through innovative projects and139 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • instruments such as micro-credit for rural entrepreneurs, self-help groups for economicempowerment of women, best practice interventions in primary education and, technologyinterventions in rural health care delivery. 14) Scholarship Programme for diaspora Children (SPDC)The SPDC was launched in 2006-07 and is open to NRIs/PIOs from 40 countries with significantdiaspora population. Under this scheme, 100 scholarships of up to USD 3,600 per month areawarded to PIO and NRI students for undergraduate courses in engineering, technology,humanities, liberal arts, commerce, management, journalism, hotel management, agricultureand animal husbandry, besides other courses. The SPDC scheme is open to NRIs and PIOsfrom more than 40 countries with a substantial Indian population. It is implemented byEducational Consultants India Limited EdCIL (India) Ltd., which is an autonomous body underthe Ministry of Human Resource Development. The students have to apply for the scholarshipand applications of those who meet the eligibility criteria are evaluated and shortlisted by aselection committee of officer from the concerned departments, viz. the Ministry of HumanResource Development, EdCIL (India) Ltd. and MOIA. Besides, the Government has alsodecided to scrap the Common Entrance Test for selecting the eligible candidates for thescholarship. 15) Direct Admission to Students Abroad (DASA)DASA is a Government of India run scheme that provides deserving foreignnationals/PIOs/NRIs direct admission to undergraduate programs. EdCIL administers thescheme, which offers students the opportunity to pursue programs at the National Institute ofTechnology and other centrally funded institutes (other than the Indian Institutes of Technology,or IITs). 16) Reservation for NRIs at Indian educational institutionsThe Government of India has approved a scheme to enable a supernumerary quota of 15%seats at all higher education institutes for foreign nationals/PIOs/children of Indian workers inthe Gulf countries. There shall be no NRI fee and, in fact, the children of Indian workers in theGulf countries shall be treated as equal to resident Indian citizens. For this purpose, theGovernment has drawn up a list of institutes along with the courses offered. The same can beviewed in the MOIA website. 17) Assistance for problems relating to Overseas Indian MarriagesThe issue of Overseas Indian marriages falls within the purview of private international law thatrequires careful and meticulous handling. MOIA has taken initiatives to create awareness ofproblems associate with Overseas Indian marriages. The Ministry has brought out a reporton problems relating to NRI marriages titled “Nowhere Brides” that contains information onissues with NRI marriages, Indian legal precedence and so on. MOIA has launched a scheme toprovide financial assistance to women deserted by their Overseas Indian spouses for obtainingcounseling and legal services. These services would be provided through Indian Women’sOrganizations/Indian community Associations and NGOs that are on the panel of the IndianMissions/Posts in the USA, UK, Canada, Australia, New Zealand and the Gulf. The Ministry hasempanelled 25 NGOs with the Indian Missions/Posts overseas for this purpose and hasdisbursed a sum of `2,753,696 to the NGO through whom 47 women have benefited.140 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 18) Voting Rights to Non-resident IndiansThe Government has taken steps to have the Representation of People (Amendment) 2010notified to provide voting rights to Overseas Indians. Through this, Overseas Indian passportholders can register their names in the electoral roll of the constituency where addressmentioned in their passport falls. Pursuant to this, the overseas electors can participate in theIndian electoral process. For registering in the electoral rolls, overseas Indian passport holdershave to apply in the prescribed form to the concerned registration officer either directly orthrough post. The registration rules permit the overseas Indians to attest the supportingdocuments themselves.Dual nationality has been a persistent demand of the Indian diaspora that was addressedthrough the OCI scheme in 2005. This scheme provides for registration of all PIOs provided• they were citizens of India on or after 26th January, 1950; or • they were eligible to becomecitizens of Indian on 26th January, 1950 and are citizens of other countries, except Pakistan andBangladesh. Under the OCI scheme, a registration certificate is given together with Universalvisa sticker to the PIOs. The OCI scheme facilitates multiple entry, multi-purpose life-long visato a registered PIO for visiting Indian and also provides exemption from registration with FRRO.The OCI registration provides other benefits also such as parity with NRIs in inter-countryadoption of Indian children, entry fee for visiting national monuments and museums, practicingspecified professions [doctors,dentists, nurses, pharmacists, advocates, architects andchartered accountants] and with resident Indians in domestic air tariffs. However, it is to benoted that OCI is not dual PIO University The PIO University would be set up under theInnovation Universities Act (after approval) with support coming in the form of research supportand student scholarships. 19) Double Taxation related matersDual taxation of income – residence vs. citizenship Another concern for the returning Indian,having stayed abroad for many years is taxability in both the host country where he/she haslived, and in India, where he/she intends to settle down permanently. This issue is particularlyrelevant where the individual retains the citizenship or permanent resident status of the countryhe/she has left, and when he continues to earn income in that country. While India followsphysical presence as the residency criteria, many countries treat citizenship or permanentresidence as the benchmark for determining the residency.On returning to India to settle here permanently, the individual would become a ROR as per theAct, generally in the third or fourth year of returning. In that event, he/she becomes liable to paytaxes on global income in India. However, the returning Indian can avail credit for taxes on thedoubly taxed income if India has a DTAA with the concerned overseas country.To take an example - Mr. X (holding a US passport) is moving to India for good from the US,along with his family. He would continue to be taxed globally in US, based on his citizenship. Hewould become a ROR after a period of time in India. Once his residential status in Indiachanges to ROR, he would be taxed globally in two countries, in India and the US. Under theIndia-US DTAA, tax relief in the form of foreign tax credit may be availed in one of the twocountries, for taxes paid in the other country, so as to avoid double taxation. Even in theabsence of a DTAA with the concerned country, foreign tax credit may be claimed on the doubly141 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 20. Recruitment of maid for OmanThe Indian government has tightened service contract regulations to protect Indian housemaids,taking up employment in the GCC (Gulf Cooperation Council), from abuses. "The Ministry ofOverseas Indian Affairs has decided to introduce changes to the service agreements ofhousemaids being brought from India to Oman with effect from June 20, 2011. Under the newregulations it has been made mandatory for prospective employers to submit salary certificate ofminimum monthly wages of 1,000 Omani riyals. "Irrespective of employers nationality thosebelow 1,000 riyals monthly salary will not be able to hire Indian housemaids, however thecombined salary of husband and wife would be considered for the minimum 1,000 riyals wagealso employers will be required to provide a bank guarantee of 1,100 riyals while recruiting ahousemaid. "Every employer, including Indian nationals residing in Oman, will have to furnishbank guarantee if they wish to recruit an Indian housemaid,".142 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 19STATE GOVERNMENT WELFARE SCHEMES 1) Government of AssamTo bring the NRI from Assam closer to the people of the State and reinforcing their emotionalbonds, the Govenrment of Assam is proposing to start an NRI cell. The progressive NRIcommunity of the state desires to actively participate in the development of the state and workas a goodwill ambassador for the region. The State Government welcomes investmentinitiatives by the NRIs of the State.Useful contact details:-The Industrial Investment Secretariat Cell (IISC)Department of Industries & CommerceGovernment of Assam, Block C, 3rd Floor,Assam Secretariat, Dispur, Guwahati - 781 006Phone/Fax: +91-361-2237256E-mail: info@investinassam.comWebsite: http://investinassam.com 2) Government of BiharThere is a ‘Bihar Foundation’ which is an initiative of the Government of Bihar to realize thedream of a ‘Better Bihar’ through the participation of Non Resident Biharis (NRB), NRIs, PIOsand others. Conceived to act as a platform to facilitate interaction between the Government ofBihar and the diaspora at multiple levels, the Foundation solicits ideas, investments andknowledge resources across sectors and verticals that can help in the development of Bihar.The Foundation endeavors to unite Biharis and form local chapters of NRBs in regions whichhave substantial population of people of Bihari origin. Policy reforms undertaken by theadministration has enabled the people of Bihar to embrace a better and brighter future. TheFoundation works with an objective to communicate realities in Bihar and endeavors to let theuser know, why and how. It has, in a very brief period of the time become one of the fastestgrowing economies in India.Useful contact details:-Bihar Foundation6th Floor, Indira Bhawan, R.C.S. Path, PatnaPhone: +91-612-2521371Email: satyajit@biharfoundation.inWebsite: www.biharfoundation.in143 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 3) Government of GujaratThere is a NRI Division set up by the Government of Gujarat with a view to establish effectivecommunication with NRIs of Gujarati origin in various parts of the world. The main objectives ofthe Division are to:-• Prepare and maintain a comprehensive database about NRIs of Gujarati origin.• Study from time to time social and cultural issues of NRI of Gujarati origin and take steps toformulate schemes for meeting their requirements.• Take effective steps to survey and assess the technical and professional skills of NRIs and todovetail the same in the developmental efforts of the State.• Create a database on Non-Resident Gujaratis (NRGs), highlighting the professional areas ofinterest.• Enable Government of Gujarat and its agencies to communicate with NRGs with relevantinterest.• Facilitate Government of Gujarat to initiate steps to address the specific needs of NRGs indifferent fields.• Tap the technological, managerial and financial resources of the NRI so as to upgrade thetechnical and professional skills and the human resources of the State, for the economic andindustrial development of the State.• Channelize the savings and surplus financialresources of the NRIs in to the developmental efforts of the State for mutual benefits.• Monitor the general welfare of the NRI and, in times of crisis, identify specific problems ofGujarati Non Resident Indians groups and take up the same with and through Government ofIndia. In order to facilitate the achievement of above objectives, the Government has in additionset up the Gujarat State Non-Resident Gujaratis Foundation(NRGF).Useful contact details:-Gujarat State Non-Resident Indian DepartmentGeneral Administration DepartmentBlock No.7/1st Floor, Sardar BhavanSachivalaya, GandhinagarPh: +91 79 23250474, 23250478Email: ds-nri-gad@gujarat.gov.inWebsite: www144 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 4) Government of KarnatakaThe Government of Karnataka has set up ‘NRI Forum’ to forge a symbiotic relationship betweenKarnataka and its diaspora. The Forum will provide information on socioeconomic activities ofKarnataka State and its development and also coordinate investment in the state acrossall potential sectors. India has emerged as the country which attracts the largest quantum ofinvestment from its diaspora. With the State having earned a reputation as the most sought afterdestination for multinational corporations, especially in the technology area, the NRI forum hasbeen formed to attract more investment to the State. The NRI Forum will facilitate investorsamong NRIs (Non-Resident Indians) in setting up their ventures in the state.The main aim of NRI Forum is to assist NRIs:• With their requirements in India;• Motivate NRIs for development and promotion of Karnatakas literature, cultural and heritageactivities overseas; and,• Encourage NRIs for adoption of Educational Institutions in the backward areas of Karnataka soas to provide quality education to the children. The NRI Forum also hopes to draw up on theknowledge reservoir of diaspora for development of the State.Useful contact details:-NRI Forum KarnatakaNo. 6 & 7, Vikasa Soudha,Bangalore – 560 001Ph: +91 80 22034057, 22034058Email: info@nriforumkarnataka.orgWebsite: www.nriforumkarnataka.orgFor more information, log on to www.karnataka.gov.145 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 5) Government of KeralaIn order to ensure the welfare of the Non Resident Keralites, redress their grievances andsafeguard their rights the NORKA, the Non Resident Keralites Affairs Department was set up bythe Government of Kerala in 1996. Since then, NORKA has been playing a vital role in the livesof NRKs, supporting them in times of need and lending them a helping hand in every possiblemeans. Norka-Roots is the field agency of the Department of NORKA, set up in 2002. It acts asan interface between the Non-Resident Keralites and the Government of Kerala and a forum foraddressing the NRKs’ problems, safeguarding their rights and rehabilitating the returnees majorobjectives are:• Welfare of NRKs• Heritage village for parents of NRKs• Promotion of Malayalam language and culture• Cultural exchange programme between the nativesand Malayalees settled abroad.• Promotion of regional development with the active participation of NRKs• Social Security Network for NRKs• A relief fund for rendering immediate assistance to NRKs in need• Organization of annual meets for NRKs• Resettlement and reintegration of NRKs returning to Kerala• Employment mapping• To facilitate the creation of a high calibre human resource pool• Upgrading of skills of jobseekers• Data Bank of NRKs• Channelising investments to the State• Prevention of illegal recruitment.Useful contact detailsNORKA Department, Government SecretariatThiruvananthapuram – 695 001Ph: +91 471-2518182, 2518061Email: ds@norka.kerala.gov.inWebsite: www.norka.gov.inNORKA-ROOTS4th Floor, Centre Plaza, VazhuthacaudThiruvananthapuram – 695 014Ph: +91 471- 2332416, 2332452Email: mail@norkaroots.netWebsite: www.norkaroots.netFor more information, log on to www.kerala.gov.in146 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 5.a Pravasi Pension Scheme for Non-Resident KeralitesThere are a large number of people who are living outside India. Among them a goodpercentage belong to lower or middle income group. This large group of middle-lower incomegroup face many fundamental problems during their life in the Gulf and when they return to theirhomeland. The saving habits and rehabilitation facilities available to them are also not verypromising. Similarly a good percentage of keralites are living outside kerala and within India fortheir being. These Non-Resident Keralites (NRKs) are also facing similar circumstances as theNRIs. Realizing such circumstances, Kerala State came forward with an unique initiative, first of itskind in the country, to setup a welfare fund to provide welfare schemes to NRIs and NRKs.Kerala Non-Resident Keralites Welfare Board came in to existence as per government KeralaNon-Resident Keralites Wlefare Fund Act -2008. More than fifty thousand NRIs and NRKs intogether are members of the welfare fund. Current NRIs and NRKs , NRIs returned to India ifhaving at least two years of NRI status can avail membership in this welfare fund. The Boardorganized many welfare schemes such as pension schemes, family pension schemes, medicalaid, death assistance etc.The Act envisages the formation of the Welfare Fund through contribution from the registeredmembers @ of Rs. 300/- per month as contribution from each Non Resident Keralite (abroad).Every Non Resident Keralite (abroad) member when returned and settled down permanently inthe State has to pay Rs. 100 only. Non Resident Keralites (India) member has to pay Rs. 100as contribution per month. Every deemed member shall contribute Rs. 50 per month.Benefits to Member Pension to members and deemed members who had completed 60 years of age and had remitted contribution for not less than five years Family pension on the death of a member or a deemed member who had remitted contribution for not less than five years. Financial assistance on the death of a member due to illness or accident. Financial assistance for medical treatment of the members affected with serious illnesses Financial assistance for marriage of women members and daughters of the members and for maternity benefit to women members. Financial assistance or loans or advances to members for the construction of dwelling houses or for the purchase of land and building or for the purchase of land or for the maintenance of house. Financial assistance for education including higher education to the children of members. Self employment assistance to reputed persons Financial assistance to members incapacitated to attend work due to permanent physical disability Financial assistance investment in any company or firm or co-operative society or institution constituted under the Act.147 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • In case you need further information please visithttp://www.pravasiwelfarefund.org/index.php/For downloading application form, please click the following linkhttp://www.pravasiwelfarefund.org/index.php/application-forms5.b Pravasi Identity CardThe government of Kerala has instructed NORKA-ROOTS to issue photo identity cards for thenon-resident Keralites working for a minimum of 6 months in a foreign country. The ID Card willbe issued to all the NRK’s working abroad across the globe. The ID Card will be used as a basematerial for long-term policy formulation of Government. This is for the first time that a stategovernment is implementing such a major scheme for its people.The NRK who are either residing or working abroad atleast 6 months and have completed 18years of age are eligible for applying the card. The validity of the card is of 3 years. NRK’s canapply for the ID Cards by submitting their application form duly verified and attested by thepeoples representative, concerned embassies or the gazzetted officers of Government ofKerala. Copies of the relevant pages of passport and visa are to be enclosed along with theapplication. The registration fee is only Rs. 200/- per person.The New India Insurance Company will provide insurance coverage to the card holders. Thecoverage is given for accidental death, permanent or total and partial disability of the cardholder. A unique master policy number is depicted in each card. NRK Identity Card Cells havebeen constituted in Thiruvananthapuran, Kochi and Kozhikode districts for receiving theapplications of the NRKs. The districts are classified into three zones and the districts pertainingto each zone as detailed below can submit their applications in the three regional centers ofNORKA-ROOTSNorthen Zone –Kasargod, Kannur,Kozhikode,Malapuram,Wynad Middle Zone – Thrussur,Ernakulam, Palakkad, Kottayam, Alappuzha, Idukki Southern Zone – Pathanamthitta, Kollam,ThiruvananthapuramThe applicants pertaining to the Northern Zone has to submit their application forms in theKozhikode, Regional Office of NORKA-ROOTS, Middle zone in the Ernakulam office and theapplicants pertaining to the Southern Zone can submit their application in the Head Office ofNORKA-ROOTSThe address and phone number of the ID Cells of NORKA-ROOTS are detailed below.Norka- Roots Regional OfficeCertificate Authentication CentreLotus Villa, SasthamangalamThiruvananthapuramPhone: 0471- 2317950, 2317951e_mail: idcelltvm@norkaroots.net148 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Norka- Roots Regional OfficeCertificate Authentication CentreDoor No. 41/1313- B,V.M Complex, C.P.Ummer RoadErnakulamPhone: 0484 2371830, 2371810e_mail: idcellekm@norkaroots.netNorka Roots Regional OfficeCertificate Authentication Centre2nd Floor, Zamorine SquireLink Road, KozhikkodePhone: 0495- 2304882, 2304885e_mail: idcellclt@norkaroots.net 6) Government of OrissaIn Odisha, the Non Resident Oriya Facilitation Center (NROFC) is an organization that works inliaison with the NRO Cell of Government of Odisha to help the Non-Resident Oriyas (NROs) inthe following ways:• Collection of information on NROs and creation of database, mailing lists, discussion forumetc.,• Exchange of information of all manner with NROs,Government and people of the locality,representation of the interests of the Members including providing information,• Voluntary gathering of all Oriyas residing outside Odisha and abroad interested in thedevelopment of the state of Odisha in all conceivable forms,• Organization of designated events such as Pravasi Oriya Divas, Annual Orissa DevelopmentSymposium,• Facilitation of NRO projects by providing relevant information and help with Governmentinterface All other related activities with active support of the Government via the NRO cell inthe Government departments.Useful contact details:-Team OdishaIPICOL House, Janpath, Bhubaneswar-751022Orissa (India) Ph: +91 674-2542601/02/03E-mail: info@teamorissa.orgWebsite: www.teamorissa.orgNon-Resident Oriya Facilitation CenterD-3,B.J.B. Nagar, Bhubaneswar-751014Ph: +91 674 2432251, Email: sahadevas@yahoo.comWebsite: www.nrofc.orgFor more information, log on to www.orissa.gov.in149 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 7) Government of RajasthanRajasthan Foundation, an organization set up by Government of Rajasthan that works in thenoble direction of strengthening bonds between Non Resident Rajasthani community and thestate of their origin. Rajasthan Foundation is a platform through which eminent pravasiRajasthanis like Shri L.N Mittal, Shri Kumar Mangalam Birla, Shri Rahul Bajaj have participatedin the journey of Socio-Economic development of the state. Today there is hardly any field ofactivity, be it business, public welfare, education, art, literature, culture, sports, politics, science,medicine or engineering where Rajasthanis have not achieved remarkable and unprecedentedsuccess. No matter, where they went, Rajasthan remained in their hearts and emotions; theirdeep attachment to Rajasthan has kept the bond strong between the land and its people. Theestablishment of Rajasthan Foundation reflects the state governments determination to nurtureits interaction with its noble sons and they are committed to promote and facilitate every steptaken by our Non Resident Rajasthanis to contribute into the growth and development ofRajasthan.Useful contact details:-Rajasthan Foundation,Government of RajasthanYojana Bhavan, Yudhister Marg, C-Scheme,Jaipur, Rajasthan, IndiaPh: +91-141-2229111, 2229444, 2229091Email: rajfound-rj@nic.Website: www.rajasthanfoundation.gov.inFor more information, log on to www.rajasthan.gov.in150 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 20 NRI INVESTMENT OPTION 1) Investments in Shares and Securities listed in Indian Stock Market1.a. Portfolio Investment Scheme (PIS) for NRIs Reserve Bank of India (RBI) permits an NRI to invest in Indian ShareMarket through Portfolio Investment Scheme (PIS) Account. The NRI investor must obtainpermission from the RBI before investing in Indian capital market. Normally this permission isobtained through a designated schedule commercial bank where the NRI investor has theNRE/NRO account. This permission allows NRIs to invest in shares of Indian companies, insecondary market, under repatriation or non-repatriation basis in respect of shares orconvertible debentures sold or purchased through a registered stock broker on a recognizedstock exchange. Any other modes of acquiring shares are not covered under this scheme ie,shares purchased through IPOs, as resident individuals, bonus shares etc.NRIs have to designate a branch of an Authorized Dealer (Bank) for routing the transactionsrelating to purchase and sale of shares/ convertible debentures under PIS, and route all suchtransactions only through the branch so designated. The NRI has to sign an agreement with anapproved share broker to open the share trading account/depository account. The share brokerwill buy/sell shares on behalf of the NRIs as per the agreed terms and all the reports related to the buy/sell of shares and securities will be provided to the investor either manually orelectronically, the mode opted by the NRIs. In case the investor opted for online trading, theinvestors are given a login ID and password to access their web site to do the buy/selltransactions, cash transfer, verify the portfolio positions, transactions details etc.151 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • In short the following accounts are opened on behalf of the NRI investor1) NRE/NRO Account with any branches of a commercial Bank2) PIS account with the designated braches of the same bank3) Depository account with Share broker4) Share Trading account with a Share BrokerThe investor has to open a NRE account if he requires his investments to be repatriated and anNRO account if he does not want the repatriation facility. The broker will help the investor toopen the NRE/NRO/PIS account.Capital Gains (profits)Capital gains realized from shares that are held for more than one year is treated as long termcapital gains and are tax free. Gains realized within a period of less than one year will attractshort term capital gains at the applicable rate (presently @ 15% Plus Surcharge) which will bededucted at source by Bank. Tax is calculated and deducted for each transaction separately. Inother words, the gains made in one transaction cannot be set off against the loss made inanother. In case you are not liable to pay tax in a particular financial year, you can file your taxreturn and get the tax refund from the Income Tax Authorities.Dividend IncomeAs per the present Income Tax rules, the dividend received from equity shares are exemptedfrom income tax, so its fully tax-free in the hands of the investor.NRIs needs to complete the following applications for opening the PIS and Share TradingAccounts1. Agreement with Broker2. Trading Account application3. Depository Account opening form4. KYC Application5. PAN Application (if not already held by the investor)6. PIS Application formDocuments required:1. Six passport size colour photograph of the NRI2. Copy of PAN card3. Copy of passport with Visa page4. Overseas Address proof5. Indian Address proof6. Bank Statement7. One Canceled Cheque Leaf152 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Schedule 2 and 3 of the Notification No. FEMA 20/2000 RB containsprovisions relating to Portfolio Investment by NRIs. OCBs are not allowed to make freshinvestments in India under the Portfolio Investment Scheme vide Notification No. FEMA 46dated 29th November 2001. Further, in September 2003, RBI has banned OCBs from investingin any manner in India. In fact, the category of OCB has been abolished. However, they cancontinue to hold and sell shares purchased before 29th November 2001. Portfolio investment iscovered by general permission subject to following condition/provisions.(i) Investment is permitted on repatriation as well as non-repatriation basis.(ii) Purchases, sale of shares (Preference and Equity) and/or convertible debentures arecovered.(iii) Purchase/sale is done through a registered broker of a recognized stock exchange.(iv) One bank branch must be designated by NRIs and all purchase/sale must be routed throughthat designated bank branch only.(v) All transactions of sales and purchase must be delivery based. Speculative transactions arenot allowed.(vi) Mode of investment may be in any of the following ways:(a) For investment on Repatriation basis- inward remittances through normal banking channels- out of FCNR/NRE account.(b) For investment on non-repatriation basisBesides the above two, investment can be made out of NRO account.(vii) Ceiling on Investment(a) Per investor (Each NRI)- 5% of the paid-up value of shares of an Indian Company on both repatriation andnonrepatriation basis.- 5% of the value of each issue of convertible debenture of an Indian Company on bothrepatriation and non-repatriation basis.(b) Per investee Company(Total holding by all NRIs put together on both repatriable as well as non-repatriable basis.)10% of paid-up value of shares of an Indian Company.153 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • RBI/2011-12/453A.P. (DIR Series) Circular No. 94 March 19, 2012ToAll Category – I Authorised Dealer banksMadam / Sir, Clarification – Prior intimation to the Reserve Bank of India for raising the aggregate Foreign Institutional Investors / Non-Resident Indian limits for investments under the Portfolio Investment SchemeAttention of Authorised Dealers Category – I (AD Category – I) banks is invited to the provisionsof Schedules 2 and 3 to the Notification No. FEMA 20/2000-RB dated May 3, 2000, viz., ForeignExchange Management (Transfer or issue of Security by a Person Resident outside India)Regulations, 2000, as amended from time to time, in terms of which registeredForeign Institutional Investors (FII) and Non-Resident Indians (NRI) are allowed topurchase/sale shares and convertible debentures of an Indian company (through registeredbrokers) on recognized stock exchanges in India subject to, inter-alia, aggregate investmentlimit of 24 per cent and 10 per cent, respectively, of the paid up equity capital or value of eachseries of convertible debentures of the Indian company.2. It is hereby clarified that the Indian company raising the aggregate FII investment limit of 24per cent to the sectoral cap/ statutory limit, as applicable to the respective Indian companyor raising the aggregate NRI investment limit of 10 per cent to 24 per cent, should necessarilyintimate the same to the Reserve Bank of India, immediately, as hitherto, along with aCertificate from the Company Secretary stating that all the relevant provisions of the extantForeign Exchange Management Act, 1999 regulations and the Foreign Direct Policy, asamended from time to time, have been complied with.3. It may also be noted that the Reserve Bank of India monitors the ceilings on FII/ NRI/ PIOinvestments in Indian companies on a daily basis. For effective monitoring of foreigninvestment ceiling limits, the Reserve Bank has fixed cut-off points that are two percentagepoints lower than the actual ceilings. Once the aggregate net purchases of equity shares of thecompany by FIIs/NRIs/PIOs reaches the cut-off point of 2 per cent below the overall limit, theReserve Bank cautions all the designated bank branches not to purchase any more equityshares of the respective company on behalf of any FIIs/ NRIs/ PIOs without prior approval of the154 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Reserve Bank. The link offices are then required to intimate the Reserve Bank about the totalnumber and value of equity shares/ convertible debentures of the company proposed to bebought on behalf of their FIIs /NRIs /PIOs clients. On receipt of such proposals, the ReserveBank gives clearances on a first-come-first served basis till such investments in companiesreaches the respective limits (such as, 10 / 24 / 30 / 40/ 49 per cent limit or the sectoralcaps/statutory ceilings), as applicable. On reaching the aggregate ceiling limit, the ReserveBank advises all designated bank branches to stop purchases on behalf of their FIIs/ NRIs/PIOs clients. The Reserve Bank also informs the general public about the `caution’ and the`stop purchase’ in these companies through a press release and an updated list regarding thesame is placed on the RBI website (www.rbi.org.in).4. AD banks are advised to bring the above changes to the notice of their customers andconstituents immediately.5. The directions contained in this circular have been issued under sections 10(4) and 11(1) ofthe Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice topermissions / approvals, if any, required under any other law. Yours faithfully, (Meena Hemchandra) Chief General Manager-in-Charge155 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 1.b IPO Electronic Mode and Electronic VotingThe Budget 2012proposes tax incentive for new investors as well as tries to broaden theinvestor base and reach of IPOs. IPO equity offer above Rs 10 crore to be made electronicallyis a big step ahead. Allowing Electronic Voting facility shall provide opportunities for widershareholder participation. Simplification of process of issuing Initial Public Offers (IPOs) andlowering of cost would improve the investment climate in the country.1.c Securities Transaction Tax (STT) (2012 Budget proposal) Effective from 1st July 2012, Securities Transaction Tax is proposed to be reducedfrom 0.125% to 0.01% on delivery transactions of equity shares and units of equityoriented fund, conducted through stock exchange. Nature of taxable Payable Existing ProposedSl.No. securities transaction by Rates % rates%(1) (2) (3) (4) (5) Delivery based purchase of equity shares in a company/ units of an equity oriented fund entered into through a recognised stock 1. Purchaser exchange in India. 0.125 0.1 Delivery based sale of equity shares in a company / units of an equity oriented fund entered into through a recognised stock 2. exchange in India. Seller 0.125 0.1156 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • The proposed amendments in the rates of Securities Transaction Tax (STT) will beeffective from the 1st day of July, 2012 and will accordingly apply toany transaction made on or after that date. 2) NRIs investment in Mutual Funds Schemes Investments by NRIs in Mutual Funds can be made on a repatriableor on a non-repatriable basis, as preferred by the investor.Repatriable BasisTo invest on a repatriable basis, you must have an NRE Bank Account in India. The ReserveBank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fundschemes on repatriation basis, subject to the following conditions: 1. The mutual fund should comply with the terms and conditions stipulated by SEBI. 2. The amount representing investment should be received by inward remittance through normal banking channels, or by debit to an NRE account of the non-resident investor. 3. The net amount representing the dividend / interest and maturity proceeds of units may be emitted through normal banking channels or credited to NRE/ account of the investor, as desired by him subject to payment of applicable tax. Non-Repatriable Basis The Reserve Bank of India (RBI) has granted a general permission to Mutual Funds to offer mutual fund schemes on non-repatriation basis, subject to the following conditions: 1. Funds for investment should be provided by debit to NRO account of the NRI investor. Alternatively, funds may be invested by inward remittance or by debit to NRE Account. 2. The current income in the form of dividends is allowed to be repatriated. As an NRI one does not need any specific approval from the RBI for investing or redeemingfrom Mutual Funds. Only OCBs and FIIs require prior approvals before investing in MutualFunds.There are no investment restrictions on NRIs for investing in mutual funds. RBI does not restrictinvestment in mutual funds either on repatriable or non-repatriable basis.157 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Although SEBI regulations allow Mutual Funds to offer guaranteed returns subject to the Fundmeeting certain conditions, most Mutual Funds in India do not provide a guaranteed return ontheir schemes. In such cases, the sponsor, the AMC, or any other person, guarantees aminimum level of return and makes good the difference if the actual returns are less thanthe guaranteed minimum. The name of the guarantor and the manner in which the guaranteeshall be met must be disclosed in the offer document by the Mutual Fund. Investment in mutualfunds is not guaranteed by the Government of India, the Reserve Bank of India or any othergovernment body.If the investment is made on a repatriation basis, the net income or capital gains (after tax)arising out of investment are eligible for repatriation subject to regulatory guidelines in force atthe time of repatriation. If the investment is made on a non-repatriation basis, only the netincome, that is, dividend, arising out of investment is eligible for repatriation. If the investment is made on a repatriation basis, the net income or capital gains (after tax)arising out of investment is eligible for repatriation subject to regulatory guidelines in force at thetime of the repatriation. If the investment is made on a non-repatriation basis, only the netincome, that is, dividend, arising out of investment is eligible for repatriation.NRIs can redeem their units by signing on the tear-off portion of the account statement &sending it to any of the AMC or your personal MF investment advisor through post or by sendinga letter requestingredemption with the signatures and the amount to be redeemed. The redemption request wouldbe processed at the applicable NAV based price. The redemption proceeds will be sent directlyto the bank branch where NRE/NRO account depending upon whether repatriable or non-repatriable account within three business days. The redemption proceeds will be net of taxdeduction at source on the profits.Tax Liability . Mutual Funds Under Section 2(42A) of the Income Tax Act, units of the Schemeheld as a capital asset, for a period of More than twelve months immediately preceding the dateof transfer, will be treated as a long term capital asset for the computation of capital gains thusattracting long term capital gains tax rate. Tax at source is deducted, if you redeem units withina period of twelve months form the investments (short gain capital gian). In all other cases itwould be treated as a short-term capital asset and would attract short-term capital gains taxrate. Hence depending on the period of investments, long term or short capital gains and taxthereon is applicable on redemption. Though there is currently no long-term capital gain taxliability for redemptions from equity schemes, there is a liability at the time of redeeming from158 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • the debt schemes.As per Section 10(35) of the Income Tax Act, 1961, income received from mutual fund unitsspecified under Section 10(23D) is exempt from income tax in India and the mutual funds aresubject to deduction of distribution tax in debt oriented schemes. Hence all dividends are tax-free in the hands of non-resident investors and no TDS is applicable on the same.Wealth Tax - Units issued to FIIs/NRIs will not be treated as assets as defined under section2(ea) of the Wealth-Tax Act, 1957 and hence will not be liable to wealth tax.FAQ • Can an NRI fax a request followed by the original documents? Redemption original documents - Units cannot be redeemed or allotted on the basis of fax applications. A request that lacks a valid signature cannot be processed due to legal restrictions. Those who are having online account can redeem units online • Can a Power of Attorney (POA) invest on behalf of the NRI investor? Yes, Unlike banks where a POA holder cannot open an account on behalf of the NRI/FIIs, in a mutual fund the POA has the authority to invest on behalf of the investor and sign documents for initial and additional purchases as well as redemptions. While applying for purchase of units the POA holder needs to submit the original POA or a copy duly notarized should be submitted. The Power of attorney should contain the signature of both the first holder and the POA holder. Only when the POA is registered does the POA holder have the right to transact on behalf of the NRI/FII investor. His signature will be verified for processing any transaction/request. • Is nomination by NRIs allowed in Mutual Funds? Yes, It is allowed only for Individuals/HUFs. • Can a resident Indian have an NRI as nominee? Yes, The same rules apply for nominees to resident Indian accounts. An NRI can be a nominee to an account which is in the name of a resident Indian. • Will the fund accept an NRI application with an overseas bank account detail? No. You need PAN and also you need to complete the KYC (Know your client) formalities beforeinvesting in mutual funds schemes in India. Please note that, investments in Mutual Funds aresubject to market risk. Please take advice from your Financial Adviser before investing inmutual fund schemes159 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 3) FDI (Foreign Direct Investment) in Partnership Firm / Proprietary Concern: (i) A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO)resident outside Indiacan invest by way of contribution to the capital of a firm or a proprietary concern in Indiaon non-repatriation basis provided; (a) Amount is invested by remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers / Authorized banks.(b) The firm or proprietary concern is not engaged in any agricultural/plantation or realestatebusiness or print media sector.(c) Amount invested shall not be eligible for repatriation outside India.(ii) Investments with repatriation benefits: NRIs/PIO may seek prior permission of Reserve Bankfor investment in sole proprietorship concerns/partnership firms with repatriation benefits. Theapplication will be decided in consultation with the Government of India.(iii)Investment by non-residents other than NRIs/PIO: A person resident outside India other thanNRIs/PIO may make an application and seek prior approval of Reserve Bank for makinginvestment by way of contribution to the capital of a firm or a proprietorship concern or anyassociation of persons in India. The application will be decided in consultation with theGovernment of India. (iv)Restrictions: An NRI or PIO is not allowed to invest in a firm or proprietorship concernengaged in any agricultural/plantation activity or real estate business (i.e. dealing in land andimmovable property with a view to earning profit or earning income there from) or engaged inPrint Media.NRI, POI are also permitted to set up private/public limited companies in India subject to certainterms and conditions160 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 4) Company Fixed Deposit Investments for NRIs Deposits from Non-Resident Indians and Persons of Indian Originresident outside India holding PIO Card are accepted in accordance with the regulationsgoverning the acceptance of deposits from NRIs. . NRIs are permitted to keep deposits withpublic limited companies in India for a period ranging from 12-36 months subject to ceilingsprescribed under the Companies (Acceptance of Deposits) Rules,1975. Application for thepurpose is required to be made by the company receiving the deposits through an authoriseddealer. Permission for placement of funds in fixed deposits with firms/ companies in India isgranted by Reserve Bank on application by the depositor or the deposit acceptingfirm/company, on non-repatriation basis. The total deposits received by the firm/company fromnon-residents/residents, however, should be within the ceiling prescribed under the Companies(Acceptance of Deposits) Rules, 1975.TAX DEDUCTION AT SOURCE Income tax will be deducted at source under Section 195 of theIncome Tax Act, 1961, at the rates in force. Wherever there exists a Double Taxation AvoidanceAgreement (DTAA) between the Government of India and government of other countries(country of residence of the respective NRI), the rate of tax deducted at source will be appliedas per the DTAA. The NRI has to give the declaration every financial year in two respects, viz.,that he is a resident of a foreign country and he is not resident in India during the relevantFinancial Year, failing which TDS will be deducted at normal rates. Where income tax isdeducted at source on the monthly interest, a consolidated TDS certificate maybe issued for thefinancial year. Sub-section 5A to Section 139A of the Income Tax Act, 1961, requires every161 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • person receiving any sum or income from which tax has been deducted, to intimate hisPermanent Account Number (PAN) to the person responsible for deducting such tax. Further,Sub-section 5B to section 139A requires the person deducting such tax to indicate the PAN onthe TDS certificate. Please mention your PAN in the application form. 5) Non-Banking Financial Company (NBFC) Deposits A non-banking financial company (NBFC) is a company registeredunder the Companies Act, 1956 and is engaged in the business of loans and advances,acquisition of shares/stock/bonds/debentures/securities issued by government or local authorityor other securities of like marketable nature, leasing, hire-purchase, insurance business, chitbusiness, but does not include any institution whose principal business is that of agricultureactivity, industrial activity, sale/purchase/construction of immovable property. A non-bankinginstitution which is a company and which has its principal business of receiving deposits underany scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (residuary non-banking company).Effective from April 24, 2004, NBFCs cannot accept deposits from NRI except deposits by debitto NRO account of NRI provided such amount do not represent inward remittance or transferfrom NRE/FCNR (B) account.However, the existing NRI deposits can be renewed. Tax will be deducted from the interest dueon deposits as per the prevailing tax laws.All NBFCs are not entitled to accept public deposits. Only those NBFCs holding a validcertificate of registration with authorisation to accept public deposits can accept/hold publicdeposits. The NBFCs accepting public deposits should have minimum stipulated net ownedfund and comply with the directions issued by the bank. i) The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand. ii) NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. The present ceiling is 11 per cent per annum. The interest may be paid or compounded at rests not shorter than monthly rests. iii) NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors. iv) NBFCs (except certain AFCs) should have minimum investment grade credit rating.162 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • v) The deposits with NBFCs are not insured vi) The repayment of deposits by NBFCs is not guaranteed by RBI. vii) There are certain mandatory disclosures about the company in the Application Form issued by the company soliciting deposits. Please ensure the following while depositing in NBFCs (i) Public deposits are unsecured. (ii) A proper deposit receipt which should, besides the name of the depositor/s state the date of deposit, the amount in words and figures, rate of interest payable and the date of maturity should be insisted. The receipt shall be duly signed by an officer authorised by the company in that behalf. (iii) The Reserve Bank of India does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company. (iv) Only deal with trusted NBFCs having long good track records The details applicable to rating of NBFCs An unrated NBFC, except certain Asset Finance companies (AFC), cannot accept public deposits. An exception is made in case of unrated AFC companies with CRAR of 15% which can accept public deposit up to 1.5 times of the NOF or Rs 10 crore whichever is lower without having a credit rating. A NBFC may get itself rated by any of the four rating agencies namely, CRISIL, CARE, ICRA and FITCH Ratings India Pvt. Ltd. The symbols of minimum investment grade rating of the Credit rating agencies are: Name of rating agencies: Level of minimum investment grade credit rating (MIGR)• CRISIL: FA- (FA MINUS)• ICRA: MA- (MA MINUS)• CARE: CARE BBB (FD)• FITCH Ratings India Pvt. Ltd: tA-(ind)(FD)• It may be added that A- is not equivalent to A, AA- is not equivalent to AA and AAA- is not equivalent to AAA. NBFC cannot accept deposit without rating except an EL/HP company complying with prudential norms and having CRAR of 15%, though not rated, may accept public deposit up to 1.5 times of NOF or Rs 10 crore whichever is less. 163 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Word of caution: In case you wish to deal with NBFCs, please ensure the credibility and good track records over and above the incentives and gift offered by them unofficially to attract customers. 6) Investment in Commercial Papers (CD) by NRIs General permission has been granted by Reserve Bank to Indian companies toissue CP to NRI individuals subject to the conditions that the amount invested will notbe repatriated outside India and the CP will not be transfer. 164 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 21 National Pension System (NPS) – NRIs are eligible to invest(Pension Fund Regulatory and Development Authority – Government of India) Pension Fund Regulatory and Development Authority(PFRDA) has been stablished by the Government of India, Ministry of Finance videNotification F.No.5/7/2003-ECB & PR dated 10th October, 2003 to promote old ageincome security. The overnment authorized PFRDA vide Ministry of Finance,Department of Financial Services letter No. 11(11)/2008-PR dated 29th July 2008 toextend NPS on a voluntary basis to all citizens of India including workers of theunorganized sector. The New Pension System has been designed to enable the subscriber to makeoptimum decisions regarding his/her future and provide for his/her old-age throughsystemic savings from the day he/she starts his/her employment. It seeks toinculcate the habit of saving for retirement amongst the citizens. NPS is now available to all citizens of India with effect from May 1, 2009, other thanGovernment employees already covered under NPS. Under NPS following twotypes of accounts will be available to you: 165 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Tier-I account: You shall contribute your savings for retirement into this non-withdrawable account. Tier-II account: This is a voluntary savings facility. You will be free to withdrawyour savings from this account whenever you wish.While Tier-I account is available from May 1, 2009, the facility of Tier II account isoffered from December 1, 2009 to all citizens of India including Governmentemployees mandatorily covered by NPS.Who can join in this Scheme? A citizen of India, whether resident or non-resident, subject to the followingconditions:a) You should be between 18 – 60 years of age as on the date of submission ofhis/her application to the POP/ POP-SP. (Point of Presence)b) You should comply with the Know Your Customer (KYC) norms as detailed inthe Subscriber Registration Form. The Subscriber Registration form should be dulyfilled-in by the applicant and all terms and conditions mentioned therein should beduly complied with. All the documents required for KYC compliance need to bemandatorily submitted.How to enroll in the NPS?To enroll in the NPS, you need to submit the Composite Registration Form (UOS-S1) to the POP/SP of your choice. The list of POP – SPs is available on the PFRDAwebsite www.pfrda.org.in, on the CRA website www.npscra.nsdl.co.in and on thewebsite of the concerned POP. NRIs are also eligible to join provided the NRIs should have an account with a bankbased in India to open an account under NPS. The contributions made by the NRIwould be subject to regulatory requirements as prescribed by RBI from time to timeand FEMA requirements. After the account is opened, CRA shall mail a “Welcome Kit” to you containing thesubscriber’s uniquePermanent Retirement Account Number (PRAN) Card and thecomplete information provided byThe subscriber in the Subscriber Registration form. This account number will be theprimary means of Identifying and operating the account. You will also receive aTelephone Password (TPIN) which can be used to access your account on the callcentre number (1-800-222080). You will also be provided an Internet Password(IPIN) for accessing your account on the CRA Website (www.npscra.nsdl.co.in) on a 166 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 24X7 basis.How much does a subscriber need to contribute?For Tier-I You are required to make your first contribution at the time of applying forregistration at any POP - SP.You are required to make contributions subject to the following conditions:a) Minimum amount per contribution - Rs 500b) Minimum contribution per year - Rs 6,000c) Minimum number of contributions -01 per year Over and above the mandated limit of a minimum of 1 contribution, you may decideon the frequency of the contributions across the year as per your convenience.Mode of PaymentThe subscriber can contribute the amount through cash, local cheque,demand draft or Electronic Clearing System (ECS) at his/her chosen POP-SP.No outstation cheques shall be accepted.There will be a time lag between the time you deposit Cash/ Demand draft/cheque/Electronic Clearing System (ECS) with the POP-SP and the time of credit of units tothe PRA, which may range upto 15 working days at the time of initial registration andupto 7 working days for subsequent contributions. PFRDA will impose penalties onintermediaries in case of delay beyond this period.What are the benefits of joining the NPS?a) It is voluntary- NPS is open to every Indian citizen. You can choose theamount you want to set aside and save every year.b) It is simple- all you have to do is to open an account with any one of the POPsand get a PRAN.c) It is flexible- You can choose your own investment option and Pension FundManager and see your money grow.d) It is portable- You can operate your account from anywhere in the country,even if you change your city, job or your pension fund manager.e) It is regulated- NPS is regulated by PFRDA, with transparent investmentnorms and regular monitoring and performance review of fund managers by NPS 167 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Trust.On attaining the Normal Retirement Age (NRA) of 60 years – You will be requiredto compulsorily annuitize at least 40% of your pension wealth and the remaining60% can be withdrawn as a lump sum or in a phased manner; in case, you opt for aphased withdrawal:a) Minimum 10% of the pension wealth should be withdrawn every year.b) Any amount lying to the credit at the age 70 should be compulsorily withdrawn inlump sum. Withdraw any time before 60 years of age– In such case, you will have tocompulsorily annuitize 80% of your accumulated pension wealth. The remaining 20%can be withdrawn as a lump sum.) The facility of Tier II account is available from December 1, 2009 to all citizens ofIndia including Government employees mandatorily covered by NPS, who hold aTier I account.b) Unlike Tier I which is a non-withdrawable pension account, Tier II is awithdrawable account with an aim to provide a window of liquidity to NPSsubscribers.c) Both Tier I (Pension Account) and Tier II (Savings Account) will be pureretirement savings products, the only distinction being thatd) Tier- I is a non- withdrawable account while Tier-II is a withdrawable account tomeet financial contingencies.e) 3. The Tier-II would enable the existing Permanent Retirement Account (PRA)holders to build savings over and above the investments in the Tier I pensionaccount. An active Tier I account is a pre-requisite for opening a Tier II account.Key features of Tier-II account a) No additional CRA charges will be levied for account opening and annualmaintenance in respect of Tier II. However, CRA will charge separately for eachtransaction in Tier II, the charges being identical to the transaction charge structurein Tier I.b) There will be no limits on the number of withdrawals from Tier II account.c) There will be facility for separate nomination and scheme preference in Tier II.d) The subscriber would have the same choice of PFMs and schemes as in thecase of Tier I account in the unorganized sector. 168 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • e) Contributions can be made through any POP/POP-SP.f) There will be facility of one-way transfer of savings from Tier II to Tier I but fundscannot be transferred from Tier I to Tier II.g) Bank details will be mandatory for opening a Tier II account.h) No separate KYC for opening Tier II account will be required; the onlyrequirement is a pre-existing Tier I account.Minimum contribution requirement:a) Minimum contribution at the time of account opening - Rs.1000/-b) Minimum amount per contribution - Rs.250/-c) Minimum Account Balance at the end of FY - Rs.2000/-d) Minimum number of contributions in a year – 01Penalty of Rs. 100/- to be levied on the subscriber for not maintaining the minimumaccount balance and/ or not making the minimum number of contributions.Investing in the NPSThe NPS offers you two approaches to invest in your account:a) Active choice - Individual Funds (E, C and G Asset classes)b) Auto choice - Lifecycle FundActive choice - Individual Funds You will have the option to actively decide as to how your NPS pension wealth is tobe invested in the following three options:E - “High return, High risk” – investments in predominantly equity marketinstrumentsC - “Medium return, Medium risk” – investments in predominantly fixed incomebearing instrumentsG - “Low return, Low risk” – investments in purely fixed income instruments. 169 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • You can choose to invest your entire pension wealth in C or G asset classes andupto a maximum of 50% in equity (Asset class E). You can also distribute yourpension wealth across E, C and G asset classes, subject to such conditions as maybe prescribed by PFRDA. In case you decide to actively exercise your choice about investment options,youshall be required to mandatorily indicate your choice of Pension Fund fromamong the six Pension Funds appointed by PFRDA.Auto choice - Lifecycle Fund NPS offers an easy option for those participants who do not have the requiredknowledge to manage their NPS investments. In case you are unable/unwilling toexercise any choice, your funds will be invested in accordance with the Auto Choiceoption. In this option, the investments will be made in a life-cycle fund. Here, thefraction of funds invested across three asset classes will be determined by a pre-defined portfolio. At the lowest age of entry (18 years), the auto choice will entailinvestment of 50% of pension wealth in “E” Class, 30% in “C” Class and 20% in “G”Class. These ratios of investment will remain fixed for all contributions until theparticipantreaches the age of 36. From age 36 onwards, the weight in “E” and “C” asset classwill decrease annually and the weight in “G” class will increase annually till it reaches10% in “E”, 10% in “C” and 80% in “G” class at age 55. Like the active choicesubscriber must choose one PFM under auto choice.Active choiceWhile exercising an Active Choice, remember that your investment allocation is oneof the most important factors affecting the growth of your pension wealth. If youprefer this “hands-on” approach, keep the following points in mind:a) Consider both risk and return. The E Asset class has higher potential returnsthan the G asset class, but it also carries the risk of investment losses. Investingentirely in the G asset class may not give you high returns but is a safer option.b) You can reduce your overall risk by diversifying your account. The threeindividual asset classes offer a broad range of investment options, its good not to put“all your eggs in one basket.”c) The amount of risk you can sustain depends upon your investment timehorizon. The more time you have before you need to withdraw from your account,the more is the risk you can take. (This is because early losses can be offset by latergains.)d) Periodically review your investment choices. Check the distribution of youraccount balance among the funds to make sure that the mix you chose is stillappropriate for your situation. If not, rebalance your account to get the allocation you 170 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • want.Net Asset Value (NAV) will be released on a regular basis so that investors may beable to takeinformed decisions. The system for scheme preference change has been madeavailable with effect from 1st June, 2010. The window for scheme change preferenceshall remain open throughout the year. The subscriber shall be allowed to excercisethe choice only once, at any time during the financial year.Neither the Active Choice nor the Auto Choice provide assured returns.Power of Choice NPS allows you to choose from any one of the following six entities (in alphabeticalorder) tomanage your pension fund:-a) ICICI Prudential Pension Funds Management Company Limitedb) IDFC Pension Fund Management Company Limitedc) Kotak Mahindra Pension Fund Limitedd) Reliance Capital Pension Fund Limitede) SBI Pension Funds Private Limitedf) UTI Retirement Solutions LimitedYou can also switch from one Pension Fund (Fund Manager) to anotherPension Fund (Fund Manager) subject to certain conditions.A word of caution The concept and working of this scheme is little complicated to understand, moreover there is no guaranteed pension amount. NPS is a defined contributionscheme and the benefits would depend upon the amounts contributed and theinvestment growth up to the point of exit from NPS and more over investments aresubject to market risk. Please keep in mind that, Investment options should bechosen carefully. Remember there is a tradeoff between risk and return. Youngsubscribers who enter the NPS at early age would normally be in a better position totake risks as compared to subscribers who enter the system late. The choice ofPension Fund and Investment option rests with you. In case you are unable/unwilling 171 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • to exercise choice regarding your investment strategy, your funds will be invested inaccordance with Auto choice option. Please seek the advice of a Professional Financial Planner before investing in thisPension Scheme and select the scheme option judicially based on your risk appetiteand investment criteria and return expectations. 172 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 22 PERMENANAT ACCOUNT NUMBER (PAN) 1) NRIs and PAN (Permanent Account Number) Though PAN number these days are mandatory for lot of financial andinvestment related transactions, but it does not mean that you have to pay tax If you have aPAN or you need to file Income Tax Return for the simple reason that, you have been allotted aPermanent Account Number (PAN) by the Income Tax Authorities. Basically, you need to paytax or file Income Tax Return only if you earn or accrue taxable income in India or to get a taxrefund if any tax amount is deducted from your income, but your total income is below theincome limit prescribed as per the relevant rules and regulations of Income Tax Act, 1961.Permanent Account Number (PAN) refers to a ten-digit alphanumeric number, issued in theform of a laminated card, by the Income Tax Department in India. It is a must to have a PANnumber for all those who file their income tax returns, now it is mandatory to quote the PAN onIncome Tax Returns plus so many other financial transactions.Also, it is now compulsory to quote PAN in all documents pertaining to financial transactionsnotified from time to time by the Central Board of Direct Taxes, such as sale and purchase ofimmovable property or motor vehicle or payments in cash, of amounts exceeding a certain limitto hotels and restaurants, or in connection with travel to any foreign country. Likewise, PAN hasto be mentioned for making a time deposit exceeding Rs. 50,000/- with a Bank or Post Office orfor depositing cash of Rs. 50,000/- or more in a Bank.173 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 2) Advantages of Having a PANThe following are some of the benefits of having a PAN card: • PAN number acts as an Identity proof, showing your relation to India. • Even if you dont file taxes returns in India, you should still have a pan card. • Sale or purchase of immovable property valued at Rs 500,000 or more. If there are co- owners (buyer or seller), the PAN of both the owners will have to be mentioned. If a nominee holds the property, the PAN of the legal owner must be mentioned. The PAN should be disclosed in the document pertaining to purchase or sale of the property • Sale or purchase of a motor vehicle requiring registration other than two-wheelers. This does not include vehicles running on fixed rails or special vehicles for use only in factories or in other enclosed premises or vehicles of less than four wheels with engine capacity of not more than 25 cc. • A time deposit of more than Rs.50,000 with any banking company and deposit of more than Rs.50,000 with post-office savings bank. This requirement is not mandatory when investing in post-office National Savings Certificate or Kisan Vikas Patra, and the PAN will be required only if the time deposit exceeds Rs.50,000. • Sale or purchase of securities including shares, bonds, debentures, derivatives, units of Mutual Funds and government securities. • Cash payment of Rs.50,000 or more for purchase of bank drafts, pay orders or bankers cheques during any one day. • Cash payment exceeding Rs.25,000 in connection with travel to any foreign country (fare or purchase of foreign currency). • Payment to hotels and restaurants against bills exceeding Rs.25,000 at any one time. • Opening a bank account. • A cash deposit of Rs.50,000 or more with any bank during any one day. • Payment of Rs.50,000 or more to a mutual fund for purchase of units or to a company for acquiring its shares or to a company/institution for acquiring its debentures/bonds or to RBI for acquiring bonds. • As per the amendments in the income tax rules, , quoting PAN (Permanent Account Number) will be mandatory for any payment of Rs 5 lakh or more for purchase of bullion or jewellery. • Tax will be deducted at 20% from your fixed deposit interest income for non-disclosure of your PAN. Whereas till now tax was deducted at 10% only from your fixed deposit interest income when interest earned on your deposit was more than Rs 10,000 in a year in case of Resident Indians • Minor intending to open time deposit or bank account should quote the PAN of either father or mother or guardian in whose hands income is likely to be clubbedPAN should be quoted on all: 1. Income-tax / TDS / TCS Returns 2. Correspondence with tax department , 3. Tax challans, 4. Correspondence, bills, vouchers and other documents which are send by deductee of tax to deductor, 5. Documents pertaining to prescribed transactions174 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • a. Sale & purchase of immovable property valued Rs 500,000 or more b. Sale & purchase of motor vehicle other than two wheelers c. Time deposits with bank or banking institution exceeding Rs 50,000 d. Any deposits exceeding Rs 50,000 with post office e. Purchase or sale of securities contract exceeding Rs 100,000 f. Opening account with bank or banking institution PAN of father or mother or guardian can be quoted, in case minor’s account. g. Application for installation of landline/mobile telephone connection. h. Payment of bill exceeding Rs 25,000 to hotel and restaurants. i. Payment in cash for purchase of bank draft, pay order to bank or banking institution aggregating of Rs 50,000 or more, during any one day, j. Deposit of cash with bank or banking institution exceeding aggregate of Rs 50,000 or more during any one day, k. Payment in cash in connection with travel (including fare, purchase of foreign currency from authorised person) to any foreign country of an exceeding Rs 25,000 at any one time. However foreign travel does not includes travel to neighbouring countries viz. Bangladesh, Bhutan, Maldives, Nepal, Pakistan, and Sri Lanka, places of pilgrimages viz. Saudi Arabia, on Haj Pilgrimage organised by the Central HAJ Committee and China on pilgrimage to Kailash Mansarovar organised by the Ministry of external Affairs, GOI. l. Application to bank or other company/institution for issue of credit/debit card. m. Payment of Rs 50,000 or more to a mutual fund for purchase of units n. Payment of Rs 50,000 or more to a company for acquiring shares issued by it, o. Payment of Rs 50,000 or more to a company or institution for acquiring bonds, debentures issued by them p. Payment of Rs 50,000 or more to a RBI for acquiring bonds issued by it. q. Payment of an life insurance premium amount aggregating Rs 50,000 or more in a year to an insurer r. Payment to the dealer, of an amount of Rs 500,000 or more, or against bill of an amount of Rs 500,000 or more, against purchase of bullion or jewelleryPermanent Account Number is basically a method of identifying a taxpayer on the computersystem through a unique All-India number so that all information relating to that taxpayer, e.g.taxes paid, refunds issued, outstanding arrears, income disclosed, transactions entered etc. canbe linked to him through the computer system. Processing of return of an assessee or otheractions on AST software is not possible unless PAN has been allotted to him and is linked to theAO code of the Assessing Officer who is trying to process that return.175 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • A typical PAN look like ALTPM8952K. • First three characters i.e. “ALT” in the above PAN are alphabetic series AAA to ZZZ • Fourth character of PAN i.e. “P” in the above PAN represents the status holder. “P” stands for Individual, “F” stands for Firm, “C” stands for HUF, “A” stands for AOP, “T” stands for TRUST etc. • Fifth character i.e. “M” in the above PAN represents first character holder’s last name/surname. • Next four characters i.e. “7190” in the above PAN are sequential from 0001 to 9999. • Last character i.e. “K” in the above PAN is an alphabetic check digit. 3) How to apply for a PAN ?The Income Tax Department has ensured that applying for a PAN is a simple and convenientprocedure. All you need to do is submit the requisite Application Form No. 49A . The PANapplication can also be downloaded from the website of UTI Investor Services Ltd (theauthorised agency to manage IT PAN service Centres in various cities) or from the website ofNational Securities Depository Ltd (NSDL) or printed by local printers or photocopied (on A4size 70 GSM paper) or obtained from any other source. The form is also available at IT PANService Centres and TIN Facilitation Centres.You will need a recent colour photograph (stamp size: 3.5 cm x 2.5 cm) to attach on the form.You must mention the designation and code of the concerned Assessing Officer of the IncomeTax department in Form 49A. You can get this from the IT PAN Service Centres. Also, theapplication shall have to be accompanied by a proof of identity as well as a proof of residence.a) Individual and HUF (Hindu Undivided Family) Applicants who are citizens of Indiaand located within India at the time of application for PAN:a) Copy of any one of the following will serve as a proof of identity: • School leaving certificate • Matriculation certificate • Degree of recognized educational institution • Depository account statement • Valid Credit card • Bank account statement • Water bill • Ration card • Property tax assessment order • Passport • Voters identity card • Driving license • Certificate of identity signed by a Member of Parliament or Member of Legislative Assembly or Municipal Councilor or a Gazetted Officer. •176 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Note: • Document being submitted should be in the full name of the applicant as mentioned in the PAN application. • In case the PAN applicant is a minor, any of above documents of any of the parents or guardian of such minor shall serve as proof of identity. • In case PAN application is made on behalf of a HUF, any of above documents in respect of karta of the HUF will serve as proof of identity.b) Citizen of India located outside India at the time of application for PAN - Copy of passport willserve as a proof of identityc) Foreign Citizen located in India at the time of application for PAN - Copy of passport andCopy of Person of Indian Origin (PIO) card issued by Government of India will serve as a proofof identityd) Foreign Citizen located outside India at the time of application for PAN - Copy of any one ofthe following will serve as a proof of identity: • Passport • Other National ID attested by Indian Embassy/Consulate/High Commission/Apostille • Person of Indian Origin (PIO) card issued by Government of Indiab) One of the followong documents should be submitted as proof of address forindividual applicants and HUF applicantsa) Individual and HUF Applicants who are citizens of India and located within India at the timeof application for PAN - Copy of any one of the following will serve as a proof of address: • Electricity bill* • Telephone bill* • Depository account statement* • Credit card statement* • Bank account statement* • Rent receipt* • Employer certificate* • Ration card • Passport • Voters identity card • Property tax assessment order • Driving license • Certificate of address signed by a Member of Parliament or Member of Legislative Assembly or Municipal Councilor or a Gazetted Officer.177 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Note: • *For serial numbers 1 to 7, proof of address should not be more than six months old from the date of application. • Document being submitted should be in the full name of the applicant as mentioned in the PAN change request application. • In case the PAN applicant is a minor, any of above documents of any of the parents or guardian of such minor shall serve as proof of address. • In case PAN change request application is made on behalf of a HUF, any of above documents in respect of Karta of the HUF will serve as proof of address. • It is mandatory for individuals and HUF to mention their address for communication on the PAN change request application and to submit valid proof of the same.b) Citizen of India located outside India at the time of application for PAN - Copy of any oneof the following will serve as a proof of address: • Passport • Bank account statement in country of residence • NRE bank account statement**c) Foreign Citizen located in India at the time of application for PAN . Copy of any one of thefollowing will serve as a proof of address: • Passport • Bank account statement in India • Residential permit issued by the State Police Authorities • Registration certificate issued by the Foreigners Registration Officer • Person of Indian Origin (PIO) card issued by Government of India • NRE bank account statement** • Visa application to Indian authorities & Visa granted & appointment letter/contract from Indian Company & Certificate (in original) of address in India of applicant issued by authorized signatory of employer on employer’s letter head mentioning the PAN of the employer & copy of PAN card for the PAN mentioned in the employer’s certificate*** • Foreign Citizen located outside India at the time of application for PAN. Copy of any one of the following will serve as a proof of address: • Passport • Other National ID attested by Indian Embassy/Consulate/High Commission/Apostille • Bank account statement in country of residence, duly attested by Indian Embassy/High Commission / Consulate / Apostille in the country where applicant is located • Person of Indian Origin (PIO) card issued by Government of India • NRE bank account statement**The filled application form has to be submitted at your nearest IT PAN Service Centre orTINFacilitation Centre along with the requisite fee.Also, there is a facillity to apply PAN online. Further, requests for changes or correction in PANdata or a request for a new PAN card (for an existing PAN) may also be made through theInternet. If an application for allotment of PAN is submitted through the Internet and payment178 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • made through a nominated credit/dbit card, the PAN is allotted on priority and communicatedthrough email.4) New PAN Application From 49A and 49AA w.e.f 01/11/2011Income Tax department has notified new PAN application form. New form is applicable from01.11.2011. Now there will two set of Form. Click the following link to download the formhttp://www.incometaxindia.gov.in/download_all.asp 1. First is Form 49A to be used by Indian ,HUF,Companies ,firm, AOP, BOI, LLP ,Trusts registered in India 2. Second 49AA is to be used by person not a Indian Citizen and Companies,Firms,LLP,BOI,AOP,trust not registered in IndiaFurther a New reason to obtain the Pan form has been added ie in the case of a person who isentitled to receive any sum or income or amount , on which tax is deductible under ChapterXVII-B in any financial year, before the end of such financial year."There is no more significant changes in new forms except few minor changes.5) INSTRUCTIONS FOR FILLING FORM 49A 1. Form to be filled legibly in BLOCK LETTERS and preferably in BLACK INK. 2. Each box, wherever provided, should contain only one character (alphabet /number /punctuation sign) leaving a blank box after each word. 3. Individual applicants should affix two recent colour photographs (size 3.5 cm x 2.5 cm) in the space provided on the form. The photographs should not be stapled or clipped to the form.The clarity of image on PAN card will depend on the quality and clarity of photograph affixed on the form. 4. Signature / Left hand thumb impression should be provided across the photo affixed on the left side of the form. 5. Signature /Left hand thumb impression should be within the box provided on the right side of the form. The signature should not be on the photograph affixed on right side of the form. If there is any mark on this photograph such that it hinders the clear visibility of the face of the applicant, the application will not be accepted. 6. Thumb impression, if used, should be attested by a Magistrate or a Notary Public or a Gazetted Officer under official seal and stamp. 7. AO code (Area Code, AO Type, Range Code and AO Number) must be filled up by the applicant. These details can be obtained from the Income Tax Office or TIN Facilitation Centre (TIN-FC) may assist in doing so. 8. Applicant can also search for AO details on www.tin-nsdl.com6) GENERAL INFORMATION FOR PAN APPLICANTS179 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 1. Applicants may obtain the application form for PAN (Form 49A) from TIN-Facilitation Centres (TIN-FCs) / PAN Centres, any other stationery vendor providing such forms or download from the TIN website (www.tin-nsdl.com). 2. The fee for processing PAN application is Rs. 85/- (plus service tax, as applicable). 3. Those already allotted a ten digit alphanumeric PAN shall not apply again as having or using more than one PAN is illegal. However, request for a new PAN card with the same PAN or/and Changes or Correction in PAN data can be made by filling up Request for New PAN Card or/and Changes or Correction in PAN Data form available from any source mentioned in (a) above. The cost of application and processing fee is same as in the case of Form 49A. 4. Applicant will receive an acknowledgment containing a 15–digit unique number on acceptance of this form. This acknowledgment number can be used for tracking the status of the application. 5. For more information / Application status enquiry – Visit us at www.tin-nsdl.com – Call TIN Call Centre at 020-27218080 – e-mail us at tininfo@nsdl.co.in – 6. SMS NSDLPANAcknowledgement No. & send to 57575 to obtain application status. 7. Write to: INCOME TAX PAN SERVICES UNIT (Managed by National Securities Depository Limited), 3rd Floor, Sapphire Chambers, Near Baner Telephone Exchange,Baner, Pune - 411 045.INSTRUCTIONS FOR FILLING FORM 49AA (To be used by QFIs only)(a) Form to be filled legibly in BLOCK LETTERS and preferably in BLACK INK.(b) Each box, wherever provided, should contain only one character (alphabet /number/punctuation sign) leaving a blank box after each word.(c) Individual applicants should affix two recent colour photographs (size 3.5 cm x 2.5 cm)in the space provided on the form. The photographs should not be stapled or clipped to theform.The clarity of image on PAN card will depend on the quality and clarity of photographaffixed on the form.(d) Signature /Left hand thumb impression should be provided across the photo affixed onthe left side of the form.(e) Signature /Left hand thumb impression should be within the box provided on the right side ofthe form. The signature should not be on the photograph affixed on right side of the form.If there is any mark on this Photograph such that it hinders the clear visibility of the face of theapplicant, the application will not be accepted.(f) Thumb impression, if used, should be attested by a Magistrate or a Notary Public or aGazetted Officer under official seal and stamp.(g) AO code (Area Code, AO Type, Range Code and AO Number) must be filled up by theapplicant. These details can be obtained from the Income Tax Office or TIN Facilitation Centre(TIN‐FC) may assist in doing so.Please note that, an individual can have only one PAN. If an individual has applied and beenallotted a second PAN, he must surrender the same. If a person fails to comply, then, the taxauthorities can impose a penalty.180 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 23 Know-Your-Customer (KYC) requirementsChange in KYC process with effect from 1st January, 2012 1. Background To simplify KYC norms and make it more investor friendly and uniform across all intermediaries SEBI has recently laid down certain changes in the existing KYC process vide circulars MIRSD/SE/Cir-21/2011 dated October 5, 2011 and MIRSD/Cir- 26 /2011 dated December 23, 2011. Primary objective of this circular is to implement uniform KYC norms and eliminate duplication of KYC across intermediaries in the securities market. Intermediaries include stock brokers through stock exchanges, Depository Participants (DPs) through depositories, Mutual Funds (MFs), Portfolio Managers (PMs), Venture Capital Funds (VCFs) and Collective Investment Schemes (CIS). For this purpose, KYC registration is being centralised through KYC Registration Agencies (KRA) registered with SEBI. Thus each investor has to undergo a uniform KYC process only once in the securities market and the details would be shared with other intermediaries by the KRA. CVL (CDSL Ventures Ltd.), who was retained by the mutual funds for centralised registration and record keeping of KYC records, has recently obtained SEBI registration as a KRA. 2. Key changes in the KYC norms181 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • a. In-Person Verification (IPV) – Information provided in the KYC form has to be verified in person by the AMC or distributors who are AMFI / NISM certified and compliant with Know Your Distributor (KYD) guidelines. b. KYC application form – Some changes have been made in the KYC application form and listed below for ready reference. Kindly refer to the uniform KYC forms posted on the AMFI website. Individual investors: Marital status to be provided. Proof to be submitted for PAN exempt investors has been listed. Income details – the slabs have been modified and an option of providing net worth as on a recent date in lieu of gross annual income has been provided. Address proof – there are some changes in the list of acceptable proofs. Non-individual investors: a. Place of incorporation, date of commencement of business have been added. b. Income details – the slabs have been modified, and additional information on the net worth as on a recent date has been sought. c. Following details of Promoters / Partners / Karta / Trustees / Whole time directors are required: Name, PAN with proof, DIN (for directors) / UID (for others), address proof and photographs. d. Photograph of any one of the authorised signatories. e. Copy of the balance sheets for the last 2 financial years and thereafter to be submitted every year. f. Copy of latest share holding pattern 3. Impact on investors 1. Existing and new investors who have successfully completed the KYC process with CVL for investments in mutual funds (in the old format) - No action is required and they can continue to use the KYC acknowledgment issued to them for mutual fund investments. However it will not be applicable for investments in with other intermediaries in the securities market. 2. Investors who have NOT completed the KYC process with CVL for investments in mutual funds in the old format – New uniform KYC norm as explained above is applicable and the KYC acknowledgment issued by the KRA can be used for all investments in securities market, including mutual funds. 3. Investors who have completed KYC process through any of the intermediaries such as DP, PMS, etc., on or after 1st January, 2012 and hold a valid acknowledgement issued by KRA (currently CVL) for the same may invest with any of the mutual funds with the same acknowledgement. However, a mutual fund may carry out enhanced due diligence based on its internal client due diligence policy.182 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 4. New KYC form can be submitted by an investor along with an investment application (purchase / additional purchase / switch / SIP mandate form / STP mandate form) and not on a stand alone basis, as was possible prior to 31/12/2011. However, an investor who has investments in any mutual fund and is not KYC compliant may submit new uniform KYC form to the mutual fund by quoting the folios number. 4. Who can carry out uniform KYC: The following SEBI registered intermediaries are required to carry out a uniform KYC process at the time of account opening:  Stock brokers  Depository Participants (DPs)  Mutual Funds (MFs) or Registrar and Transfer agents (RTA) on their behalf.  Portfolio Managers (PMs)  Venture Capital Funds (VCFs)  Collective Investment Schemes (CIS) 5. Impact on current arrangements with CVL: Effective January 1, 2012 CVL will discontinue the activity of registering new investors for mutual funds as per the CVL-AMC agreement. However, CVL will be maintaining the KYC information and documents for registrations done upto December 31, 2011. The current AMC-CVL agreement will be modified to reflect this change. CVL has terminated their agreements with Points-of-Service (PoS) effective January 1, 2012. PoSs have been given seven days to upload/update KYC information in the CVL system and forward the documents for KYC forms collected till December 31, 2011. AMCs are requested to approach CVL / other KRA to get access to their system. With effect from January 1, 2012 all new KYC registrations, therefore, can be carried out by SEBI registered intermediaries only under the new uniform KYC guidelines with any of the SEBI registered KRAs. AMFI committee is in the process of designing a KYC update form covering the additional information as per the new uniform KYC norms and IPV for specific use by investors, who had complied with mutual fund KYC with CVL prior to 31st December, 2011. Once this form is available, you may get this completed for your existing clients There will be no impact in the CVL-RTA interface as any KYC query from RTAs will be checked against the erstwhile CVL records and the new KRA records.183 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 6. Due diligence in the KYC process i. Please exercise necessary and sufficient care for establishing the identity of the person for whom you do In-person Verification (IPV). ii. In case of IPV carried out by ARN holder, please ensure the following while processing the KYC form: a. AMFI / NISM certification of the distributor is valid. b. Distributor is KYD compliant. c. The distributor has furnished necessary mandatory requirements such as self declaration, etc. d. The distributor is empanelled with the AMC (if such requirement exists) where the investment application is to be submitted. e. The ARN on the investment application and related KYC form and IPV need to be one and the same.For more details on information / document required to complete the uniform KYC process,please refer the detailed instructions available in the uniform KYC forms posted on the websiteof AMFI. You are requested to carefully read the instructions on the form and guide investors incompleting the uniform KYC procedure.You are requested to go through the SEBI guidelines carefully and ensure implementation withimmediate effect.184 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 24 NRIs guide to deal with inherited property Buying a property in India is a decision that most NRIs can take afterweighing the pros and cons of various tax and regulatory implications. But getting a property asinheritance is often not a choice, especially for first generation NRIs or PIOs whose parentsbequeath to them, property situated in India. In such cases, NRIs must know how to deal withsuch inheritances.Can an NRI inherit property in India?Yes, a Non Resident Indian (NRI), Person of Indian origin (PIO) or even a foreign national ofnon-Indian origin can inherit and hold property in India. This includes residential and commercialproperty, agricultural, plantation and farm land.From whom can an NRI inherit property?An NRI, PIO or foreign national as mentioned above can inherit property from:(a) a person resident in India(b) a person resident outside IndiaHowever, the person from whom the property is inherited should have acquired the same inaccordance with the foreign exchange law in force or FEMA regulations, applicable at the timeof acquisition of the property.Is there tax payable in India at the time of inheriting the property?No income tax is payable at the time of inheriting the property.However, the property may be subject to wealth tax. According to the Wealth Tax Act, tax ispayable if the net value (market value minus any loans taken to finance the assets) of theassets of an individual exceeds Rs 30 lakh.185 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Now, there are certain exceptions to the definition of assets.i. Only one houseIf you own only one residential house, you do not have to pay wealth tax. So after inheritance, ifthis is the only property that you own, you do not have to pay wealth tax on it.The question arises as to whether this includes global properties. For instance, if an NRI owns aproperty abroad and inherits one in India, will he be subject to wealth tax on the property inIndia?"For an Indian citizen who qualifies as a Resident but Not Ordinary Resident (NOR) or Non-Resident (NR) of India (as per the Income Tax Act 1961) as well as for a foreign national,wealth tax is applicable only on the specified assets located in India. Specified assets locatedoutside India are subject to wealth tax only in the case of Indian citizens who qualify asOrdinary Resident (OR) of India as per the IT Act.In the instant case, if the NRI qualifies as NOR or NR of India, the US house property will notbe considered as a specified asset for wealth tax. Further, the house property inherited orpurchased in India may be considered as exempt under Section 5 of the Wealth Tax Actprovided thats the only house he owns in India.The US house property will be considered as specified asset for wealth tax, only if this NRI(assuming Indian citizen) qualifies as Ordinary Resident of India for the relevant financial year.In such case, as one residential house property is exempt for wealth-tax, either of the property(US or India) can be considered as exempt (as per Section 5 of the WT Act) and the balancewill be taxable. "ii. House given on rent for more than 300 daysIf you have given the property on rent for more than 300 days during a financial year, you do nothave to pay wealth tax.If the net value of all your assets, including the inherited property exceeds Rs 30 lakh, wealthtax will be charged at 1% of the amount exceeding Rs 30 lakh.Can an NRI rent inherited property? What are the various implications?Yes, an NRI can rent inherited property. The implications are the same as those applicable forrenting out purchased property.Can an NRI sell inherited property?An NRI can sell inherited property to a person resident in India, an NRI or a PIO. A PIO can sellproperty in India to a person resident in India or an NRI. In case a PIO wants to sell to anotherPIO, he will need to get prior approval from RBI.186 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • An NRI holding agricultural land, plantation land or farm house may sell these properties only toa person resident in India and who is a citizen of India.Can an NRI repatriate proceeds of inherited property?Yes, general permission is available to NRIs and PIOs to repatriate the sale proceeds ofproperty inherited from a person resident in India subject to the conditions mentioned below. Ifthose conditions are fulfilled, the NRI need not seek permission from the RBI. However, if theproperty has been inherited by an NRI from a person resident outside India, then the NRI mustseek specific permission from the RBIConditions for repatriation in case of property inherited from person resident in India:(i) The amount of repatriation should not exceed USD 1 million per financial year(ii) The NRI must produce documentary evidence in support of the inheritance and anundertaking and certificate by a Chartered Accountant in the formats prescribed by the CentralBoard of Direct Taxes 2. Inheriting Financial Assets and Investments in IndiaIf an NRI inherit financial assets India, the NRI needs to make a decision of retaining theinvestments in India or moving them to the outside the country. Keeping assets in India meansmanaging them and filing annual income tax returns in India, as well as declaring the incomeand accounts on the USA tax return, and filing FBARs Some investments in India are not permissible for NRIs to hold. These must be sold out. Youneed the help of an expert financial adviser to segregate the investments and make a choice tocontinue with the investments or cash out. Some investments such as mutual funds and ETFswill create difficulties when paying USA/other countries taxes, complicating the returns andincreasing taxation. It would be wise to sell these assets as well, replacing them with moreappropriate investments or selling them.US tax law dictates you must declare worldwide income. You may not need to pay taxes on aninheritance but if the inheritance brings you assets that produce income you will need to paytaxes on that income. You may also owe taxes on the sale of investments, depending on thecost basis.Inheriting mutual funds or ETFs can prove tricky because the US tax implications for holdingnon USA-based mutual funds/ETFs are complex. These are considered Passive ForeignInvestments which involve special rules: You will pay income tax on any dividends, interest orother income as earned income, not with the favorable tax treatment of “capital gains”.The Authorised Dealers in India have been permitted to allow the facility of repatriation of fundsby NRIs/PIOs in their Non-Resident Ordinary Rupee (NRO) account up to US $1 million percalendar year representing sale proceeds of both financial and immovable property, acquired byway of inheritance/legacy.187 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 3. Remittance Exchange Control RegulationsAs of Regulation 4 of the Foreign Exchange Management (Remittance of Assets Amendment)Regulations, 2009, remittance of up to US $ 1 Million per calendar year is allowed without RBI(Reserve Bank of India) permission.Documentary evidence in support of acquisition, inheritance or legacy of assets by the remitteris required as well as a tax clearance/no objection certificate from the Income Taxauthority.Regulation 6 of the Foreign Exchange Management (Remittance of Assets Amendment)Regulations, 2009 states that persons who wish to make remittance of assets over that levelmay, in the following cases, apply to RBI. RBI permission is required for remittance exceedingUS $ 1 million per calendar year.Application to be made as per instructions in Form LEG on account of legacy/ bequest orinheritance to a citizen of foreign State permanently resident outside India; Remittance to a person resident outside India on the ground that hardship will be caused tosuch a person if remittance from India is not made;Application must originate from an NRI / PIO regarding assets in India acquired by him byinheritance / legacy.Note: Even if an NRI does not wish to repatriate funds, it is advisable to remit the funds and re-invest the same into NRE/Foreign Currency Non Resident (B) (FCNR) or Foreign CurrencyPlan ( FCP ) account due to the following reasons –Do check with your accountant about taxability and repatriation planning using NRE/FCNR/FCP/NRO accounts.Remittance is permitted up to US $1 million per calendar year, out of balances held in NROaccount. 4) Inheritance and Gifting rules in IndiaThe Gift Tax was abolished in India in 1998. However, gifts exceeding Rs 50,000 received fromany person who is not a close relative. Close relatives includes immediate family members andclose blood line of parents and spouse’s parents. of the receiver is to be included in the taxableincome of the receiver as per the provisions of the Indian Income Tax Act, 1961.The above provision will be applicable to the recipient irrespective of his residential status -resident or on-resident.188 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 5) Exclusions to taxing of gifts in the hands of recipient -Taxing of gifts shall not apply to any money or property received:i) From any relative; orii) On the occasion of the marriage of the individual; oriii) Under a will/by way of inheritance; oriv) In contemplation of death of the payer or donor, as the case may be; or From any localauthority; orv) From any Fund, Foundation, University, Educational institution, hospital, other type of medicalinstitution, or any trust or Institution (referred to in clause (23C) of section10 of the Income TaxAct; orvi) From any trust or institution registered under section 12AA of the Income Tax Act.189 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 25 How its useful for NRIs to use Power of Attorney (POA) in India A power of attorney is a document in writing empowering a particularperson to act for and in the name of a person executing it. In other words, a power of attorney(POA) is an authorization to act on someone else’s behalf in a legal or business matter specifiedin the POA document. The person authorizing the other to act is the grantor/principal of thepower and the one authorized to perform the act is the attorney/agent. It is a unilateraldocument signed and executed only by the grantor or principal. A power of attorney may berevoked at the instance of the grantor or due to his death or incapacity. A power of attorney isusually construed very strictly.Special Power of Attorney - A power of attorney conferring on the agent the authority to act in asingle transaction in the name of the principal is a Special Power of Attorney. eg authorizationgiven for sale/registration of a particular property for specific period of time. A single act ortransaction is meant to imply either a single act or acts so related to each other as to form onejudicial transaction.General Power Of Attorney - If the power of attorney authorises the agent to act generally or inmore than one transaction in the name of a principal, it is a General Power of Attorney eg.Authorization given to deal on behalf all financial and other dealing of the principal withoutspecifying any particular transaction.Most of the NRIs (Non-Resident Indians) are facing lot of difficulties to carry out the importantfinancial and other required transactions in India without his presence. He may have ownproperties (commercial/residential) in India which provides rental income, bank accounts whichprovides interest income, etc. must be reinvested and used accordingly when he is not in India.It is not easy for an NRI staying outside the border to invest his income in India, but now as aresult of advancement of technology an NRI act do most of the financial transactions online.But most of the transactions, his presence is very much required. To avoid this situation, he canappoint a Power of Attorney (POA) to carry out his activities in India on behalf of him. It has itsown merits and demerits.The following are some of the examplesReal Estate190 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • a) To execute all contracts, deeds, bonds, mortgages, notes, checks, drafts, money orders, b) To manage, compromise, settle, and adjust all matters pertaining to real estate. c) To lease, collect rents, grant, bargain, sell, or borrow and mortgageSigning Agreements, Contracts a) To enter into contact or sign agreements b) Perform any contract, agreement, writing, or thing c) To make, sign, execute, and deliver, acknowledge any contract, agreement,Buy/Sell Stocks, Bonds and Securities a) To sell any and all shares of stocks, bonds, or other securities b) To make, execute, and deliver any assignment, or assignments, of any such shares of stock, bonds, or other securities.Opening/ Operating Bank Accounts, Term Deposits, Mutual Funds etc. a) To add to or withdraw any amounts from any of my bank accounts, Certificates of Deposit, Money Market Accounts, etc. b) To make, execute, endorse, accept and deliver any and all cheques and drafts c) Execute or release such deeds of trust or other security agreements as may be necessary d) Deposit and withdraw funds Acquire and redeem certificates of deposit, in banks, savings and loanFiling of Income Tax Returns, Insurance and other a) To file, sign all tax returns, insurance forms and any other documents b) To represent in all matters concerning the foregoing. A power of attorney executed outside India has to be executed before and authenticated by a Notary Public and also consularised/apostilled by the Indian Consulate present in the country of execution. In international law, consularisation is the act of authenticating any legal document by the consul office of the country in which it is to be used, by the consul signing and affixing a red ribbon to the document for it to be acceptable in the country of use. Foreign countries, who are party to the Hague Convention, require the bearer of a document to obtain an apostle from authorities of the country in which the document was issued. An apostille involves the addition of a certificate, either stamped on the document itself or attached to the document. It certifies the country of origin of the document, the identity and capacity in which a document has been signed and the name of any authority which has affixed a seal or stamp to the document. The apostille enables the presenter to bypass further certification and immediately send or take the documents to the country of intended use. Only certain countries will accept the apostille. Such a power of attorney so authenticated is recognized as valid under the Indian Evidence Act, 1872. The same will also be valid/recognizable under the Registration Act, 1908 for purpose of registration of a document by an agent of a person, or a representative or an assign (where the person executing the document cannot be present for registration).191 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • A power of attorney to be used for the specific purpose of registration of a document in respect of an immoveable property of value more than R. 100 by an agent of a person, or a representative or an assign (where the person executing the document cannot be present for registration) has to be executed before or authenticated by the Registrar or Sub-Registrar within whose district or sub-district the principal resides. This is as per the requirements of the Registration Act, 1908. This being an exception, no other power of attorney, either special or general requires registration under the Registration Act, 1908 In normal case the following documents are required for consulate POA attestationPower of Attorney (Property Matters)Requirements for attestation of Power of Attorney (Property Matters): a) Photocopy of inside cover pages and other relevant pages of the passport. b) Two recent Passport Size ( 35 mm x 45 mm) photographs. c) Original and one photocopy of the Power of Attorney to be signed before the Consular Officer of the Embassy.Power of Attorney (other than Property Matters)Requirements for attestation of Power of Attorney (other than Property Matters):-a) Photocopy of inside cover pages and other relevant pages of the passport.b) Original POA document to attest. Please note that requirements varies from country to countryPower of Attorney can be revoked or would stand revoked if : • Revoked by the principal himself • The principal dies or becomes insane or becomes bankrupt or legally incompetent • The business for which the agent was appointed is over • Mutually agreed upon by the principal and agent • The right under the power of attorney is renounced by the agent Note : This article is prepared for the general information of the readers. Please contact your legal adviser or advocate for more information. CHAPTER 26192 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Top 10 Home buying tips for NRIs 1. Don’t buy home for short duration stay If you are planning to buy a home for short duration stay for 2-3 years and if you cant commit to remaining in one place for at least few years, then owning a home is probably not for you. With the registration fees and other transaction costs of buying and selling a home, you may end up losing money if you sell within a short period even a rising real estate market. Suppose, if prices of properties are falling you may end up with huge loss. So before going to buy a house/apartment first decide how long you are going to reside there, if your answer is long term say above 5 years, go ahead and buy the house otherwise drop your idea. 2. Explore the possibility of availing a loan at a competitive rate Since you most likely will need to get a loan to buy a house, you must make sure that you will be able get the loan as much as required for the full/part payment of the property value. Please note that, the interest rate varies from Bank to Banks and now after NBFCs started competitive rates, you have more choices. In this context, you should also check other fees such as processing fee, documentation fee, and any prepayment penalty associated with the home loan. At the same time do research on the best option that banks offer. Home loan is a huge amount and hence even a difference of 0.5% can make big difference in pay-outs. You should also get the maximum tax benefit from your home loan. See if you can make your spouse as co-applicant and avail the tax benefits. You will simply double the tax benefits if there are two co- applicants. 3. Aim for a home you can really afford. The rule of thumb is that you can buy housing that runs about 30-40% of your annual salary. But you will do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford. This is one of the most crucial decisions. Know the amount of loan you can afford. The banks may sanction loan based on your income but you should look at your monthly expenditure and see if you can afford the maximum that banks offers. 4. If you cant put down the usual 20 percent, you may still qualify for a loan. There are a variety of public and private lenders who, if you qualify, offer low-interest loans that require a down payment of 10-20% of the value of the property you are planning to buy. In case you are unable to find source to this basic 10-20%, you may have to pay interest at higher rates. 5. Buy in a good location with all basic facilities The most important part of a real estate piece is location. Even if you have to pay little extra, you should do it. The most important aspect of the right location is future prospect of big construction such as mall, IT Park,193 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • company, SEZ, airport, railway lines, or any other commercial space. Apart from this, the points to consider in any location are the following: Availability of civic amenities such as power, water, roads, calm environment, and closeness to main road, markets, shopping malls, schools, and hospitals etc, possibility of renting out your home if required. Good schools located nearby are an added advantage. In most areas, this advice applies even if you dont have school-age children; the reason is that, when it comes time to sell, you will realize that good schools and other basic facilities around are a top priority for many home buyers, thus helping to boost property values. 6. Do your homework before taking the decision Do your home work before decided to buy a home and to ensure that the home you are planning to buy is suitable for your living at least for the coming 10-15 years and also have enough space to accommodate the expected increases in the number of family members. Also, ensue that the prices you are paying is worth to the facility provided. 7. Avail the service of a professional Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the entire process. 8. Select a builder with good track records Before buying an apartment, please check the credibility of the builder and also make sure that, the builder has delivered all his past projects within the time limit with specified quality. In case you observed any delay or failure form the part of the builder to deliver the project don’t buy apartment from that builder. You have to have long term view of your investment. The property should be stable enough to last 40-50 years so that if you want to sell it and buy another home, you should be able to do it without much hassle. This is where buying from a reputed builder becomes more important. At the same time, explore the possibilities of linking your loan disbursal based on the progress of the construction work instead of pre-determined specified timings. 9. Verification of Legal Documents- Always look for apartments which are pre-approved by the financial institutions. This will one way ensure that, the property title and other documents are verified and approved by the financial institutions and they are supposed to be in order in all respects. Also insist the builder to show you the original title document of the land. For your safety and to ensure that, all documents are in order, you need to engage a lawyer who can search and verify the title and associated documents before you buy the home. You should get everything in writing from the builder. The sale deed should be duly signed by both the buyer and the seller. You should also ensure that lay out plan, building plan, number of floors, and ownership documents are in order and builder has got necessary approval from the concerned Government authorities. You should take legal help from a lawyer if you do not understand any document. Apart from these documents, make sure to get the encumbrance certificates from the sub-registrar. The encumbrance certificate tells you the details of property dealings and other ownership transfer of the property for the last 30 years. All taxes (including land tax and panchayat/municipal/corporation tax) should have been paid on the property. You should get the proof of paying this tax from the builder; also verify the, the NOC certificate from water and electricity authorities. 10. Hire the service of an expert civil engineer Sure, your lender will require a home appraisal anyway. But thats just the banks way of determining whether the house/apartment194 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • is worth the price youve agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road In many states in India, the Agreement of Sale between the builder and purchaser is required by law to be registered. You are advised in your own interest to lodge the agreement for registration within four months of the date of the Agreement at the office Duration of Investment - Expected duration of investment is an important factor you need to keep in your mind before buying a property in India. In case you sell your property within three years from the date of purchase, you are liable to pay short term capital gain tax on the entire gains you made out of the deal. Short term capital gain will be added to your income and tax applicable is as per the tax category you belongs for a particular financial year. If you sell the property after three years, the gain will be considered as long term and you need to pay only 10% of the gain as tax without indexation benefits and 20% with indexation benefits. It is better to stay invested at least for 3 years. It is always advisable to take a conservative approach in both Capital Appreciation and Rental returns. In case you are planning to give your residential property (apartment/villa) on rent, you will not be able to get 3-4% of your total investment as annual rent. The other factor to be considered is Investing in property means also an entry load by paying stamp duty and registration fees and other incidental charges, labor welfare charges etc., to the Builder. If you are planning to investing it is better to invest as soon as the project is launched as this gives you enough time for. Also, please keep it in mind that, in addition to the per sqt rate quoted by the builder, you may required to pay lot additional amounts as a percentages of total cost like electricity connection charges, water connection charges, resident association deposits, local tax, registration fees etc. Pre-Launch offers - Investing in property means also an entry load by paying stamp duty and registration fees and other incidental charges, labor welfare charges etc., to the Builder. If you are planning to investing it is better to invest as soon as the project is launched as this gives you enough time for . Invest with Deep Thought - The present market is volatile in Mumbai and it is imperative for you to give a deep thought on various accounts, which begins from the Project, Infrastructure available within the Project, Outside the project in the neighborhood, Selling prospects, Leasing prospects, Neighborhood development, Distances to Schools, Markets, Malls, Hospitals, Highways, Airports, Railway stations etc. These should act as your analysis points. For NRIs - especially before coming to India, make sure you are carrying most of the relevant papers with you. You should always have an NRE and an NRO account in India and if you are looking to invest in Mumbai then one should have an account in Mumbai for easiness. Review your NRI allowances by the Government of India every budget etc. Home Loans - You can set off your EMIs if you invest wisely in a property as the rates are presently around 8% and your rental returns are around 4-6%. You can be a happy man if195 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • you do this fool proof homework as your EMI can be hedged off against the rent receipts to a certain degree. Re-Sale Properties - In a booming market every property owner wants to cash on in his property at the best value. A few issues which we face are the commitment level of the seller and we can stumble on to good transactions at times, but this is more of a time consuming process at times. The repair value, old building and other property documentation issues can be challenging in certain transactions. NRIs, PIOs not required to report property deals in India: RBI Returns - It is always advisable to take a conservative approach in both Capital Appreciation and Rental returns. However one can safely expect appreciations anywhere upwards of 15% Per Year and Rental Yields of 4 to 6%. The clarification follows confusion over whether Non- Resident Indians (NRIs) and Persons of Indian Origin (PIOs), like foreigners, too have to file a declaration with the Reserve Bank within 90 days from the date of acquisition of properties. RBI (Reserve Bank of India) clarified that NRIs and PIOs are not required to report to the central bank the details of transactions while purchasing immovable property in India, an announcement which is likely to encourage Indian diaspora to invest in the country. "It is clarified that the extant regulations do not prescribe any reporting requirements for transactions where a person resident outside India who is a citizen of India or a PIO... acquire/s immovable property in India," the Reserve Bank said. The clarification follows confusion over whether Non- Resident Indians (NRIs) and Persons of Indian Origin (PIOs), like foreigners, too have to file a declaration with the Reserve Bank within 90 days from the date of acquisition of properties. Foreigners make the declaration in IPI form. "Form IPI has been, accordingly, amended for196 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • greater clarity," RBI said. NRI property buying tips Regulations regarding acquisition and transfer of immovable property in India by a person resident outside India has been notified vide RBI Notification No. FEMA 21/2000-RB dated May 3, 2000 as amended vide Notification No. FEMA 64/2002-RB dated June 29, 2002 and Notification No. FEMA 65/2002-RB dated June 29, 2002 and relevant directions issued in the form of A.P. (DIR Series) Circulars. General Permission is available to purchase only a residential/commercial property in India to a person resident outside India who is a citizen of India (NRI)) and who is a Person of Indian Origin (PIO).For the purpose of acquisition and transfer of immovable property in India, a PIO means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who (i) at any time, held Indian passport; or (ii) who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955). NRI/PIO who has purchased residential/commercial property under general permission is not required to file any documents with the RBI. There is no restriction on number of residential/commercial property that NRI/PIO can purchase under the general permission available. No. Under section 2 (ze) of the Foreign Exchange Management Act, 1999 ‘transfer includes among others, ‘purchase. Therefore, a foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of purchase. A person resident outside India cannot acquire by way of purchase agricultural land/plantation property/farm house in India. . A 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 may acquire only residential accommodation on lease, not exceeding five years for which he/she does not require prior permission of RBI. Buying a property is not a difficult task for the NRIs anymore because the easy availability NRI Housing Loan makes property investment lot more convenient. Any NRI or POI staying abroad are eligible for NRI loans subject to the certain conditions. Apart from that, government servants posted abroad on duty with the Indian missions or deputed abroad on assignments with foreign Governments or regional/international agencies are also entitled to these loans. CHAPTER 27 Facilities for Returning NRIs197 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • A returning NRI should know and understand various aspects of Foreign Exchange Regulations (FEMA), Indian Taxation and Banking Regulations in order to rearrange his financial affairs in India and outside India. The decision to return to India would have both direct and indirect tax implications, such as income tax, wealth tax and customs duty. He would also need to take note of implications from an exchange control regulations perspective. The overseas investments by Indian residents are regulated by the Foreign Exchange Management Act (FEMA), which is implemented by the Reserve Bank of India (RBI). The FEMA has a wide network of notifications and circulars, which lay down permissible avenues for each category of individual. The decision to return to India may not be just an emotional one, but also needs to be made taking into account the current regulatory environment and proposed changes being made to them. With a proper understanding, efficient planning and utilisation of the benefits provided under the tax laws in India, home-coming would not only feel good on the heart but also relatively easier on the pocket. If your stay in India during the Financial Year is 182 days or more, your residential status will be as Resident Indian. There is a transitional status of RNOR between being an NRI and becoming a full-fledged Resident after returning to India permanently. An RNOR is not required to pay tax in India on his forex income. Anyone who returns after 9 or more years of being an NRI will become RNOR for 2 years. Resident but not Ordinarily Resident (RNOR) is a person who satisfies one of the following conditions a) he has been a non-resident in India in nine out of the ten previous years preceding that year, or b) has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less. NRI benefits are available to a person till the time he holds the NRI status in India; a person loses his NRI status in the same year when he returns to India or within 2 years from the date of arrival to India, depending on the number of days of stay in India. A returning Indian who has been a Non Resident for 9 years or more, shall be a Not Ordinarily Resident (NOR)198 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • for 2 successive years upon permanently returning to India. Immediately on return to India, NRIs should inform their bank to change the status of their accounts as domestic Resident accounts or transfer the balance in their NRE/FCNR accounts to Resident Foreign Currency (RFC) accounts, but FCNR accounts can be continued till the date of maturity and upon maturity, can be converted to RFC accounts. Resident Foreign Currency (RFC) Accounts Scheme - This is a Scheme approved by Reserve Bank of India permitting persons of Indian nationality or origin, who have returned to India on or after 18th April 1992 for permanent settlement (Returning Indians), after being resident outside India for a continuous period of not less than 1 year, to open foreign currency accounts with banks in India for holding funds brought by them to India. Whether RFC is tax-free or not, withholding tax will be applied @30.6% and if the interest is over Rs. 10 lakhs, the rate will be 33.99%. The NRE SB and NRO SB accounts will be re-designated as Ordinary SB accounts. It is also necessary to inform all the companies/Depository Participants (DPs) where you have investments about the change in your residential status. The tax liability of each person in India is basically determined based on his residential status. The following are the tax liability of different categories of people Resident – liable to pay tax on income earned in India as well as abroad Non-Resident (NRI) – liable to tax on the income ‘earned’ in India Not Ordinary Resident (NOR) - liable to tax on the income ‘earned’ in India Ordinary Indian Resident (ROR) - is liable to tax on his global income Overseas Assets 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 an NRI while he was abroad can be continued to be so held and deal in any manner even after the NRI’s return to India for permanent settlement.199 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Tax Treatment of overseas Financial Assets. Foreign exchange and overseas assets (such as bank accounts, stocks/securities, life insurance policies, loans, company deposits, debentures, bonds etc.) acquired/held/owned by NRI while he was abroad can be continued to be so held and owned even after the NRI returns to India for permanent settlement. Such foreign exchange and overseas assets can accumulate or accrue income outside India and the balances can be utilized for reinvestment or repatriated to India at any time (without attracting Wealth tax in India) within 1 year immediately preceding the date of his return or later. This exemption period is limited to 7 successive years which immediately follow the year in which the NRI permanently returns to India. Immoveable Properties NRIs can continue to hold immovable properties outside India. Such properties can be rented out and rentals can be credited to overseas bank accounts. The properties can be sold and the sale proceeds credited to overseas bank accounts. Expenses relating to such properties, such as maintenance, insurance premium etc. can be paid out of the overseas balances. k) as per the FEMA, any person resident in India may hold, own, transfer or invest in foreign currency, foreign security and immovable property situated outside India; if the person had acquired, held, owned or inherited the same while he was resident outside India. Further, the FEMA also requires that where any amount of foreign exchange is due or has accrued to a person resident in India, such person shall take reasonable steps to realise and repatriate the same within such period and manner as specified by RBI. l) Even after returning to India, the NRI can continued remitting funds out of India and investing in overseas markets, these remittances under the Liberalised Remittance Scheme (LRS) of the RBI. LRS has liberalised and globalised many Indian investors in the true sense. It has allowed Indian resident individuals to remit funds upto USD 200,000 per financial year outside India freely, without the prior approval from RBI for permissible transactions, including acquisition of immovable property, shares, debt instruments and any other assets subject to certain conditions m) As per the Indian income-tax laws, NRs are taxable in India only on income which accrues in India or is received in India. In the case of an NR, once an income is earned and received outside India and it is brought to India at a later date, it would not be taxable in India. n) It is beneficial to persons could sell his residential property in aboard, while he is an NR or a Not Ordinarily Resident (NOR) in India, and he would not be taxable in India on the gain that he makes from the sale. Similarly, he would not be taxable in India on the income earned and received by him in abroad from his investments till200 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • he qualifies as a NR or NOR in India. Once he/she loses the status of a NR or NOR and qualifies as an Ordinary Resident in India, he/she would be taxable in India on his global income. o) The provisions for determining residency under the wealth tax laws are the same as that of the Income Tax laws. In the case of NRs and NORs, the current wealth tax provisions provide that any assets located outside India would be excluded from the ambit of wealth tax in India. Hence, the returned NRIs will not be required to pay wealth tax in India on the assets that are located outside India, as long as he qualifies as a NR or NOR in India p) If the returned NRI intends to reside in India permanently, she/he would not be required to pay wealth tax on money and the other assets brought by him into India from abroad, within one year immediately preceding the date of his return or later. This exemption is limited to seven successive years which immediately follow the year in which she/he returns to India. Under wealth tax law, wealth tax is payable at the rate of 1% for the net wealth in excess of Rs 30 lakhs. However, assets located outside India owned by NRI shall not come under wealth tax bracket. Further, a NRI returning to India for good can claim wealth tax exemption for the assets brought by him /her to India or assets acquired by such money up to seven years commencing from the year in which such person returned to India subject to fulfillment of other conditions q) As per Baggage Rules, 1998, since, the used car in the abroad for personal purposes for more than a year and he/she is transferring residence to India now, he/she could bring his/her car with him but would be required to pay customs duty on the same. However, considering the quantum of custom duty liability likely to arise due to the import, it may be a better idea to buy a new car in India subsequent to shift of his residence. In addition to the car, he/she would be able to get certain specified used personal effects upto a specified threshold without payment of customs duty. r) With regards to exchange control implications, the returned NRI would be able to open a Resident Foreign Currency Bank Account (RFC Account). He/she could then transfer, through appropriate banking channels, the amount that he has in his/her foreign Bank account into such RFC account without any limit. He/she can continue to hold his other investments in abroad, since he/she had acquired these when he/she was a resident outside India. The dividend from the foreign companies and mutual funds and interest income from his/her foreign bank account which he/she receives from his investment that he continues to hold in the foreign country can also be credited to the RFC account. s) There are some special provisions under Indian tax laws wherein NRIs can opt for special tax rates (instead of progressive slab rates applicable in India) for specific investment incomes or capital gains from foreign exchange assets (eg: Shares in Indian company purchased in convertible foreign exchange). Further, the interest earned by NRI on his NRE, FCNR or RFC account is tax free subject to certain201 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • conditions. t) Further, an Indian Citizen or Person of Indian origin who is outside India visits India in any year, would be regarded as Resident, even if he stays in India for less than 182 days, but 60 days or more in the relevant tax year and 365 days or more in preceding four tax years, (the extended stay benefit of 181 days shall be removed under DTC). CHAPTER 28 NRIs guide to selling property in India202 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • A guide to selling property in India by NRIs An NRI is eligible to hold property or buy property even after become an NRI subject to the rules contained in the FEMA regulation. NRIs are not eligible to buy plantation and agricultural properties in India. NRIs need to take special approval from RBI. The following are the rule and regulation related to the selling of properties by an NRI for those properties acquired before or after he becomes an NRI. NRIs are allowed to sell residential or commercial properties in India, He/She can sell properties to a person resident in India (as per FEMA definition, to an Non-Resident Indian to a Person of Indian Origin (PIO). But there is one exception, an NRI can sell agricultural or plantation land or a farm house only to a person who is resident in India and a citizen. The sale proceeds would have to be credited in the Non-Resident Ordinary (NRO) account of the NRI provided the sale of property is related to the property purchased him/her when he/she was a Resident Indian. But, if the property was purchased out of rupee resources, that is, income earned in rupees, or the home loan is repaid by a relative who is a resident of India, the amount must be credited in the NRO account in case the property was acquired by the NRI when he was residing outside India (NRI). Repatriation rules related to sale proceeds of properties in India If the property was purchased while you were a resident of India, then the sale proceeds must be credited to the NRO account. You can repatriate up to USD 1 million per calendar year from your NRO Account (including all other capital transactions), provided you have paid all taxes due. In case the property was purchased while you were a non-resident, you can repatriate the proceeds outside India provided that you fulfill the following conditions: 1. NRI should have purchased the property in accordance with the foreign exchange laws prevalent at the time you bought the property 2. The amount to be repatriated will follow these limits: a. If NRI purchased by remitting foreign exchange to India through normal banking channels, then the repatriation cannot exceed the amount that you remitted. b. If NRI purchased using funds in the Foreign Currency Non Resident (FCNR) Account,203 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • then the repatriation cannot exceed the amount paid through this account. c. If NRI purchased using funds lying in your Non Resident External (NRE) Account, then the repatriation cannot exceed the foreign exchange equivalent, as on date of purchase, of the amount paid through NRE Account. d. If NRI purchased a property by taking a home loan, then repatriation cannot exceed the amount of loan repayment that has been done using foreign inward remittances or debit to NRE/FCNR Accounts. e. If NRI purchased the property using balance in your NRO account, then the sale proceeds must be credited to your NRO account and you can repatriate to the extent of USD 1 million (including all other capital account transactions). In all these cases, the balance sale proceeds can be credited to the NRO account and you will be able to repatriate up to USD 1 million per calendar year (including all other capital account transactions). This limit of USD 1 million is the limit upto which you can repatriate without any permission from RBI. If you have a genuine need to repatriate above this limit, you can make a specific application to RBI for increasing the repatriation limit In all cases, repatriation is restricted to sale of two residential properties. Capital Gains tax applicable on sale of properties in India Please note that for Income Tax purposes the definition of NRI would be the one prescribed in the Income Tax Act. For all repatriation purposes, the definition of NRI would be one under FEMA. While in most cases, a person who qualifies under one would qualify under the other, it is better to review both definitions. If you sell the property after three years from the date of purchase, you will be liable for long term capital gains tax of 20 %. The gains are calculated as the difference between sale value and indexed cost of purchase. Indexed cost of purchase is nothing by the cost of purchase adjusted to inflation. The long term capital gain is 10% without indexation benefits and 20% with indexation benefits. As an NRI, you will be subject to a TDS of 20 per cent on the capital gains. If you sell the property within three years of purchase, you will be liable for short term capital gains tax at your respective tax slab. Short term capital gain is calculated as the difference between the sale value and the cost of purchase (no indexation benefit is available). You will204 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • be subject to a TDS of 30 per cent irrespective of your tax slab. The short gain capital gain amount will be added to your total income and liable to pay tax as per your tax brackets for the particular financial year. CHAPTER 29205 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CUSTOMS AND BAGGAGE RULES REALTED TO INTERNATINAL PASSENGERS Source: Indian Customs Department website as on 21/01/2012 (Please note that rules, provisions and duties related to customs are subject to change, this is just for information purposes only) 1) Clearance of arriving passengers: Every passenger entering or leaving Indian border has to pass through Customs check. Airlines generally provide the Disembarkation Card to the passengers in the aircraft itself and each passenger must fill up the same clearly mentioning the quantity and value of goods brought. On landing, the passenger is first cleared by Immigration authorities, who retain the Immigration portion of the Disembarkation Card. Thereafter, the passenger takes delivery of baggage, if any, from the conveyer belt and approaches the Customs where the passenger exercises the option of seeking clearance through the Green Channel or through the Red Channel. 2) Green Channel or Walk through Channel - applies to passengers who have nothing to declare and are carrying dutiable goods within the prescribed free allowance. On the basis of their Oral Declaration/Declaration on their Disembarkation Card such passengers cross the Green Channel without any question being asked by Customs and exit the airport after handing over the Customs portion of the Disembarkation Card to the Customs Officer/Sepoy at the exit. 3) Red Channel - is meant for passengers who have something to declare or are carrying goods in excess of the duty free allowance. The passenger hands over the Customs portion of the Disembarkation Card to the officer on duty at this Channel. In case the card is incomplete the Customs Officer helps record the Oral Declaration (O.D) of the passenger and thereafter countersigns/stamps the same, after taking the passenger’s signature. In order to identify the frequent ‘short visit’ passengers the Customs Officer also scrutinizes the passport/other travel Documents of the passengers. The declaration of goods and their values is generally accepted and duty assessed. On payment of this duty the passenger is allowed clearance. 4)Passenger crossing Green Channel with Dutiable Goods - Any passenger found walking through the Green Channel with dutiable/prohibited goods or found misdeclaring the quantity, description or value of dutiable goods at the "Red Channel" (the baggage is examined where misdeclaration suspect), is liable to strict penal action including206 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • arrest/prosecution apart from seizure/confiscation of the offending goods depending upon gravity of violation detected. In case the passenger brings any goods in baggage that are essentially for commerce and not for personal use, or imports goods in commercial quantity, these goods become liable to confiscation and the passenger liable to strict penal action. Only bonafide baggage items for personal use or use by members of his family are allowed to be imported as baggage. In case of frequent ‘short visit’ passengers and repeat offenders, the Customs officers would impose higher levels of fines and penalties and for deterrent effect even consider prosecution in a Court of law. 5)clearance of arriving passengers: Airlines generally provide the Disembarkation Card to the passengers in the aircraft itself and each passenger must fill up the same clearly mentioning the quantity and value of goods brought. On landing, the passenger is first cleared by Immigration authorities, who retain the Immigration portion of the Disembarkation Card. Thereafter, the passenger takes delivery of baggage, if any, from the conveyer belt and approaches the Customs where the passenger exercises the option of seeking clearance through the Green Channel or through the Red Channel. 6) Duty free allowances and entitlements for Indian Residents and Foreigners Residing in India: 6.a Duty Free Entitlements - The duty free entitlement of passengers includes used personal effects (excluding jewellery) required for satisfying the daily necessities of life. In addition, articles valued at upto Rs.25,000/- are allowed free of duty if carried as accompanied baggage of the passenger. This amount is proportionately reduced to Rs.12,000/- if stay abroad is of 3 days or less. For children below 10 years, the free allowance is Rs.6,000/- (Rs3,000/- if stay abroad is of 3 days or less). However, for such passengers coming from Nepal, Bhutan, Myanmar or China, by routes other than by Land route, and for such passengers coming from Pakistan by land route, the free allowance is Rs.6,000/-. Budget Proposal 2012- Duty Free baggage allowance has been increased from Rs. 25,000 to 35,000.00. Baggage allowance for Indians travelling abroad was last revised in 2004. This budget it is d proposed to increase the duty-free allowance for eligible passengers of Indian origin from Rs. 25,000 to Rs.35, 000.00 and for children of up to 10 years from Rs. 12,000 to Rs. 15,000.00 6.b Tobacco, Alcoholic liquor - In addition, to the above such passengers are allowed the following quantities of tobacco products and alcohols within the aforesaid duty free allowances: (i) 200 cigarettes or 50 cigars or 250 gms tobacco. (ii) Alcoholic liquor & wines upto 2 litre each. 6.c Not Allowed Items - The items that are not allowed free of duty include firearms, cartridges of firearms, cigarettes/ cigars/ tobacco or alcoholic liquor and wines that is in excess of what is allowed within the free allowance, gold or silver, in any state (other than207 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • ornaments) unless specified otherwise. 6.d Applicable Customs Duty - The bonafide baggage items that are in excess of the duty free allowance can be cleared on payment of a uniform rate of Customs duty that is currently @35%+ Cess, as applicable, except for items like liquor, cigarette etc. that are charged to a higher rate of duty as applicable to imports other than as baggage. 6.e Duty Allowance applicable for Professionals - Professionals, who are returning to India after at least 3 months stay abroad are eligible for additional free allowance of Rs.12,000/- for used household articles such as utensils, linen, kitchen appliances, iron etc. and Rs.20,000/- for professional equipment. The allowance is proportionately higher if passenger is returning after 6 months stay or 1-year stay abroad. 7) Import of jewellery/gold/silver: An Indian passenger who has been residing abroad for over 1 year is allowed to bring jewellery, free of duty upto an aggregate value of Rs.10,000/- in the case of a male passenger or Rs.20,000/- in the case of a lady passenger. Any passenger of Indian origin (even if a foreign national) or a passenger holding a valid passport issued under the Passport Act, 1967 if coming to India after a period of not less than 6 months of stay abroad is allowed to import specified quantities of gold and silver as baggage on payment of duty, which has to be paid in foreign currency. Such passenger can also obtain the permitted quantity of gold and silver from authorized Banks - SBI, Bank of Nova Scotia etc. The specified quantities and rate of duty are as follows: 8)Duty free allowances and entitlements for tourists: A tourist is a passenger who is not normally resident in India or who enters India for a stay of not more than 6 months in the course of any 12-month period for legitimate non-immigrant purposes, such as touring, recreation, sports, health, family reasons, study, religious pilgrimage, or business. The duty free allowances andentitlements for tourists are as follows: 9)Item Permitted Quantity Present Duty Gold Upto 10 kgs. @ Rs.300/- per 10 gms + 3% Education Cess Silver Upto 100 kgs. @ Rs.1,500/- per kg. + 3% Education Cess 10) Category of Tourist Duty Free Allowance Tourists of Indian origin coming to India (other than those coming from Pakistan by land route) Same as for Indian passengers or foreigners residing in India Foreign tourists Rs.8,000/- Tourist of Pakistani origin Rs.6,000/- Tourist of Nepalese and Bhutanese origin Nil 11) Allowances and entitlements on Transfer of Residence (TR): A person transferring his residence to India after a minimum stay of 2 years abroad, immediately preceding the date of his arrival on transfer of residence, is entitled to certain208 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • benefits in addition to those available to a passenger, subject to certain conditions. Short visits are permitted during the 2 preceding years but total stay in India on short visits should not exceed 6 months. Further, a shortfall in period of stay abroad can be relaxed upto 2 months by the Assistant/Deputy Commissioner and shortfall in period of stay abroad exceeding 6 months by the Commissioner of Customs in deserving and exceptional cases. The person transferring his residence to India after 2 years stay abroad as mentioned above is eligible to clear free of duty, articles such as used personal and household articles of a value of upto Rs.5/- lakhs. However, goods such as firearms, cartridges of firearms, cigarettes/ cigars/ tobacco or alcoholic liquor and wines in excess of what is allowed within the normal free allowance, gold or silver, in any state (other than ornaments) are not allowed to be imported. Moreover, few specified goods are not eligible for a complete duty exemption and are charged to a lower concessional duty that is presently @31%. These goods are: T.V, VCR/VCP/VTR, washing machine, air conditioner, microwave oven, personal computer, dish washer, music system, electrical/LPG cooking range (other than cooking range with not more than 2 burners and without any extra attachment), refrigerator, deep freezer, video camera or a combination of video camera and TV receiver; sound recording or reproducing apparatus; video reproducing apparatus, word processing machine, fax machine, vessels, aircraft, cinematographic films of 35 mm and above, gold or silver, in any form, other than ornaments. TR concession is available provided the passenger has not availed this facility in the preceding 3 years. In other words there is no bar if the passenger who returns for stay in India on TR goes abroad but on his return again the TR concession is available for another 3 years. 12) Import of baggage of deceased person: In terms of Customs/Government Notification No.21/2002-Cus., dated 1-3-2002 used, bonafide personal and household articles of a deceased person are allowed free of duty subject to the condition that a Certificate from the concerned Indian Embassy / High Commission is produced regarding the ownership of the goods by the deceased person. 13) Import of unaccompanied baggage: The unaccompanied baggage is required to have been in the possession abroad of the passenger and dispatched within 1 month of his/her arrival in India or within such further period as the Assistant Commissioner of Customs may allow. The unaccompanied baggage may arrive in India upto 2 months before the passenger or within such period, not exceeding 1 year, as may be permitted by the Assistant Commissioner of Customs if he is satisfied that the passenger was prevented from arriving in India within the period of 2 months due to circumstances beyond his control. The unaccompanied baggage may land in India upto 2 months before the arrival of the passenger or within such period, not exceeding one year, as the Assistant Commissioner of Customs or Deputy Commissioner of Customs may allow, for reasons to be recorded, if he is satisfied that the passenger was prevented from arriving in India within the period of two months due to circumstances beyond his control such as sudden illness of the passenger or a member of his family, or natural calamities or disturbed conditions or disruption of the transport or travel arrangements in the country or countries concerned or any other reasons, which necessitated a change in the travel schedule of the passenger. 10.(1) Application of209 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • these Rules to members of the crew. - The provisions of these Rules shall apply in respect of members of the crew engaged in a foreign going vessel for importation of their baggage at the time of final pay off on termination of their engagement. Provided that except as specified in this sub-rule, a crew member of a vessel shall be allowed to bring items like chocolates, cheese ,cosmetics and other petty gift items for their personal or family use which shall not exceed the value of rupees six hundred. No free allowance is admissible in respect of unaccompanied baggage, which is charged the normal baggage rate of duty (35% ad valorem + Cess, at present). 14) Aircraft Crew Members - a crew member of an aircraft shall be allowed to bring items gifts like chocolates, cheese, cosmetics and other petty gift items at the time of the returning of the aircraft from foreign journey for their personal or family use which shall not exceed the value of rupees six hundred. 15) Import of foreign exchange/currency: Any person can bring into India foreign exchange without any limit. However, declaration of foreign exchange/currency is required to be made in the prescribed Currency Declaration Form in the following cases: (a) Where the value of foreign currency notes exceeds US$ 5000/- or equivalent; and (b) Where the aggregate value of foreign exchange (in the form of currency notes, bank notes, traveler cheques etc.) exceeds US$10,000/- or its equivalent. 16) Import of Indian currency: The import of Indian currency is prohibited, however, passengers normally resident in India who are returning from a visit abroad may import Indian currency not exceeding Rs.7,500/-. 17) Import of fire arms as baggage: Import of firearms is strictly prohibited. Import of cartridges in excess of 50 is also prohibited. However, in the case of persons transferring their residence (as per conditions specified in the rules) to India for a minimum period of 1 year, one firearm of permissible bore can be allowed to be imported subject to the conditions that: (i) The firearm was in possession and use abroad by the passenger for a minimum period of 1 year and also subject to the condition that such firearm, after clearance, shall not be sold, loaned, transferred or otherwise parted with, for consideration or otherwise, during the lifetime of such person; and (ii) The firearm is subjected to applicable duty; and (iii) The passenger has a valid arms licence from the local authorities in India. 18) Import of pet animals as baggage: Domestic pets like dogs, cats, birds etc. may be imported. Import of animals and birds is governed by strict health certificate regulations 19) Detained baggage:210 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • There may be occasions when the passenger is not in a position to clear his baggage for any reason e.g. inability to pay the Customs duty demanded. In such a situation, the passenger may request the Customs to detain his baggage either for re-export at the time of his departure from India or for clearance subsequently on payment of duty. The detained baggage would be examined and its full details inventorised before being taken in the custody of Customs. 20) Mishandled baggage: There are numerous occasions when passenger baggage gets lost or mishandled by the Airlines. In all such cases the passenger is required to obtain a certificate to that effect from the airlines and get it countersigned by Customs indicating specifically the unutilized portion of the free allowance. This would enable the passenger to avail the unutilised portion of the duty free allowance when his baggage is delivered by the airlines. 21) Clearance of departing passengers: On the departure side, the principal task of Customs is enforcement related. These include checks to prevent narcotic drug trafficking, smuggling of other sensitive items such as Indian including foreign currency, wild life products, antiques etc. Customs also plays an important role in facilitating the re-import of the high valued articles including jewelry, being carried out of the country by issuing to the departing passengers a re-export certificate. 22)Export of gold jewellery as baggage: There is no value limit on the export of gold jewellery by a passenger through the medium of baggage so long as it constitutes the bonafide baggage of the passenger 23) Export of currency: Export of Indian currency is strictly prohibited. However, Indian residents going abroad are allowed to carry Indian currency not exceeding Rs.7,500/-. Indians going abroad are permitted to take with them foreign currency without any limit so long as the same has been purchased from an authorised foreign exchange dealer. Tourists while leaving India are allowed to take with them foreign currency not 24) International Passenger Facilitation Introduction: 1.1 Customs is mandated to ensure passengers entering or leaving India by international flights carry on person/handbag or accompanied baggage, goods in accordance with the permissible quantity/value and legal provisions and do not attempt to smuggle prohibited or banned or sensitive goods. Also, all passengers including businessmen, trade delegations, professionals expect speedy Customs clearance at the airports. Thus, Customs officials at the airports have a challenging role of ensuring quick clearance and passenger facilitation, as well as enforcing the Customs Act, 1962 and various allied laws that protect the interests of society/economy/revenue.211 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Over the time Indian Customs have aligned its procedures in tune with the best international practices in terms of duty free baggage allowances and other facilities and procedures. Steps have also been taken to educate general public and incoming and outgoing passengers of the extant Customs rules and regulations. In this direction Customs prominently display the relevant provisions/baggage allowances and list of prohibited/restricted items (endangered species or articles made from flora and fauna such as ivory, musk, reptile skins, furs, shahtoosh, antiques, satellite phones, etc.) at all international airports, with the ‘dos and don’ts’ or benefit of passengers. A booklet on "Customs Guide to Travellers" is also brought out periodically and circulated at airports as well as to our Embassies/Consulates abroad. Passenger related Customs information is also made available on theCBECs web-site 25) Import and Export through Courier Imports and exports through courier are becoming increasingly popular. At present, the courier clearances are allowed both under manual mode as well as electronic mode. The courier clearances under the manual mode are governed by Courier Imports and Exports (Clearance) Regulations, 1998, and courier clearance under electronic mode are governed by Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010. The courier goods are cleared through a fast track basis on observance of simple formalities by courier companies Examination of parcels is kept to the minimum and clearance is allowed on the basis of selective scrutiny of documents. The duty, where leviable, is paid by the courier company on behalf of importers/exporters before taking delivery of the parcels. The facility of imports and exports through courier mode is allowed to only to those courier companies which are registered by the Customs. These courier companies are called "Authorized Couriers". The courier parcels are normally carried by assenger/cargo aircrafts. In the case of clearance through Land Customs Stations (LCS), other mode of transport is used. Both of them are allowed to file the Courier Import Manifest. At present, the facility of courier clearance under the manual mode is available at Customs airports in Mumbai, Delhi, Chennai, Calcutta, Bangalore, Hyderabad, Ahmedabad, Jaipur, Trivandrum, Cochin, Coimbatore and Land Customs Stations at Petrapole and Gojadanga. The courier clearances under the electronic mode of Customs clearance will be soon made operational at Delhi and Mumbai airports. The scheme of Customs clearance of imports and exports by courier mode introduces certain procedural relaxation. Such imports and exports shall, however, continue to be governed by the applicable provisions of the FTP or any other law, for the time being in force. 26) Categories of goods allowed import through courier: Except for certain excluded categories, all goods are allowed to be imported through the courier mode. The exclusion of certain categories of goods is upon the fact that these broadly require specific conditions to be fulfilled under any other Act or rule or regulation such as testing of samples etc. on reference to the relevant authorities or experts before their clearance. In these cases, due to additional compliance requirements, the assessment and clearance takes time. These goods, therefore, do not fit into the scheme, which envisages212 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Customs clearance on a fast track basis. Further, air terminals and LCS are not equipped to handle certain goods. Thus, in general the following categories of goods are not allowed import through the courier mode: (a) Precious and semi precious cargo; (b) Animals and plants; (c) Perishables; (d) Publications containing maps depicting incorrect boundaries of India; (e) Precious and semi precious stones, gold or silver in any form; (f) Goods under Export Promotion Schemes including EOU scheme; (g) Goods exceeding weight limit of 70 kgs. (individual packages) imported though courier under manual mode. However, under the electronic mode, no such restriction regarding weight has been provided. Clearance of goods under EOU scheme is permitted under the electronic mode. 27) Categories of goods allowed export through courier: As in the case of imports, all goods are allowed to be exported though courier except for the following excluded categories: (a) Goods attracting any duty on exports; (b) Goods exported under export promotion schemes, such as Drawback, DEPB, DEEC, EPCG etc.; (c) Goods where the value of the consignment is above Rs.25,000/- and transaction in foreign exchange is involved (the limit of Rs.25,000/-does not apply where the G.R. waiver or specific permission has been obtained from the RBI). 28) Import and export of gems and jewellery: Import of gems and jewellery including samples thereof by EOUs or SEZ units is allowed through courier. Likewise, export of cut and polished diamond, gems and jewellery under any scheme of FTP from EOUs, SEZs or DTA is allowed through courier subject to the condition that the value of each export consignment under such export does not exceed Rs.20 lakhs. 29) Import and Export through Post Introduction: 1.1 The facility for import and export of goods by Post Parcels is provided by the Postal Department at its Foreign Post Offices and sub-Foreign Post Offices. Customs facilities for examination, assessment, clearance etc. are available at these Post Offices. Limited facility for export clearances is also available at Export Extension Counters opened by the Postal Department where parcels for export are accepted and cleared by the customs. Legal provisions: Goods imported through post are classified under Chapter Heading 9804 of the Customs Tariff Act, 1975 and rate of duty applicable thereon is charged on all the goods imported by post. Importantly, Heading 9804 specifically applies to goods permitted for import through213 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • post which are exempted from prohibition under Foreign Trade (Development and Regulation) Act, 1992. As per Note 6 to Chapter 98, goods against an import licence or Customs Clearance Permit can also not be imported through post. Further, Note 4 to Chapter 98 states that motor vehicles, alcoholic drinks and goods imported through courier are not covered under Heading 9804. Goods imported or exported by post are governed by Sections 82, 83 and 84 of the Customs Act, 1962 whereas the procedure for clearance of goods through post is prescribed in Rules regarding Postal Parcels and Letter Packets from Foreign Ports In/Out of India of 1953. [Refer Notification No. 53-Cus., dated 17-6-1950] 2.3 In respect of import and exports through post, any label or declaration accompanying the packet or parcel containing details like description, quantity and value of the goods is treated as entry for import or export of the goods and no separate manifest for such goods is required to be filed. 2.4 The relevant date for rate of duty and tariff value, if any, applicable in respect of imports through post is the date on which the postal authorities present to the Proper Officer of Customs the list containing details of the goods for assessment. Thus, presentation of said list is equivalent to filing of Bill of Entry so far as assessment of goods imported by post is concerned. 2.5 If the post parcels come through a vessel and the said list presented by the postal authorities is presented before arrival of the vessel, the rate of duty and tariff value applicable shall be as on the date of arrival of the vessel i.e. Entry Inward of the vessel. 137 In respect of export goods, the relevant date for rate of duty and tariff value, if any, applicable, is the date on which the exporter delivers the goods to postal authorities for exportation. Clearance of Letter Mail Articles: Letter Mail Articles are generally cleared by the Customs at the time of their arrival and sorting unless they appear to contain contraband or dutiable articles. In such cases, the Letter Mail is subjected to further examination at the Foreign Post Offices or sub- oreign Post Offices, as the case may be. Importability of dutiable items through post: Import of dutiable goods by letter, packet or parcel posts is prohibited except where such letter or packet bears a declaration stating the nature, weight and value of the contents on the front side or if such a declaration is attached alongside indicating that the letter/packet may be opened for Customs examination. Dutiable goods may also be not imported by post if Customs is not satisfied that the details of nature, weight and value of the contents in declaration as above are correctly stated. [Refer Notification No.78-Cus., dated 2-4-1938] Items intended for personal use, which are exempt from the prohibitions under the FTP or the Customs Act, 1962, can be imported by postal channel on payment of appropriate duties under Tariff Heading 9804 of the Customs Tariff Act, 1975. 4.3 In case the ustoms duty payable is not more than Rs.100/-, the same is exempt. [Refer Notification No. 21/02-Cus., dated 1-3-2002] Import of gifts through post: Bonafide gifts up to a value limit of Rs.10,000/-, imported by post, are exempt from Basic and214 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Additional Customs duties vide Notification No.171/93-Cus., dated 16-9-1993. further, only those items can be imported as gifts, which are not prohibited for mportation under Foreign Trade (Development and Regulation) Act,1992. The sender of the gift may not necessarily be residing in the country from where the goods have been dispatched and any person abroad can send the gifts to relatives, business associates, friends, companies and acquaintances. The gifts have to be for bonafide personal use. The purpose of this stipulation is that the person receives the gift genuinely free and the payment is not made for it through some other means. The quantity and frequency of the gifts should not give rise to the belief that it is used as a route to transfer money. The gifts can be received by individuals, societies, institutions, like schools and colleges and even corporate bodies. For calculating the value limit of Rs.10,000/- in case of imports of gifts, postalcharges or the airfreight is not taken into consideration. The value of Rs.10,000/- is taken as the value of the goods in the country from where these were dispatched. 5.4 If the value of the gifts received is more than Rs.10,000/-, the receiver has to pay Customs duty on the whole consignment, even if the goods were received free, unsolicited. In addition, at the discretion of the Assistant/ Deputy Commissioner, if the goods are restricted for import, the receiver has a liability for penalty for such import, even if the goods have been sent unsolicited. The restricted goods are also liable to confiscation and receiver has to pay redemption fine in lieu of confiscation in addition to duty and penalty. Certain prohibited goods like narcotic drugs, arms, ammunition, obscene films/printed material etc. are liable to absolute confiscation and the receiver is liable to penal action, even if the goods have been sent unsolicited. Customs duty is chargeable on gifts assessed over Rs.10,000/- by the Customs. In case of post parcel, the customs department assesses the duty payable and the postal department collects the assessed duty from the receiver of the gift and subsequently deposits it with the customs. Import of samples through post: Bonafide commercial samples and prototypes imported by post are exempted from Customs duty, subject to the value limit of Rs.10,000/-, provided that the samples are supplied free of cost. Importers having IEC code number can import commercial samples through post without payment of duty upto a value of Rs.100,000/- or 15 units in number within a period of 12 months. The goods so imported shall be clearly marked as “Samples”. The importer is required to furnish a declaration to the effect that the samples are solely for the purpose of being shown to the exporters for securing or executing export orders. The importer is also required to undertake that if declaration is found to be false, he will pay appropriate duty on the goods imported as commercial samples. [Refer Notification No.154/94-Cus., dated 13-7- 1994] Import of Indian and Foreign Currencies by post: Under the provisions of Foreign Exchange Management Act, 1999, no person may bring or send into India any foreign exchange or Indian currency except with special or general permission of the RBI. Import of Indian currency notes and coins by post is not permitted.215 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • To reduce pendency and to avoid delay in clearance of mail articles, Customs may allow import of both Indian and foreign currencies received by residents by post, provided the value does not exceed Rs.5,000/-, subject to the following conditions Approval is granted by Assistant/ Deputy Commissioner of Customs; (b) A detailed record should be maintained of the exemptions granted; (c) Record of the name and addresses of the remitter and addressee in India should be maintained; and (d) Where a spurt is noticed in the number of covers received over a time, the matter may be reported to the concerned Regional Office of RBI. Parcels/packets containing foreign/Indian currency, etc., in excess of Rs.5,000/- shall be detained and adjudicated on merits and released on the basis of “No Objection Certificate” from the RBI. [Refer Circular No.16/2002-Cus, dated 5-3-2002] There is a general permission given to Authorised Dealers to import currency notes from their overseas branches/correspondents for meeting their normal banking requirements. In view of this, no specific clearance is required from RBI for such imports. [Refer Circular No.60/02-Cus., dated 13-9-2002 read with Annexure V to RBI’s AD (MA Series) Circular No.11, dated 16-5-2000] Procedure in case of postal imports: Rules Regarding Postal Parcels and Letter Packets from Foreign Ports in/out of India prescribe procedure for landing and clearing at notified ports/airports/LCSs of parcels and packets forwarded by foreign mails or passenger vessels or airliners. The procedure broadly is as under: (a) The boxes or bags containing the parcels shall be labeled as “Postal Parcel”, “Parcel Post”, “Parcel Mail”, “Letter Mail” and will be allowed to pass at specified the Foreign Parcel Department of the Foreign Post Offices and Sub Foreign Post Offices. (b) On receipt of the parcel mail, the Postmaster hands over to the Customs the following documents: (i) A memo showing the total number of parcels received from each country of origin; (ii) Parcel Bills in sheet form (in triplicate) and the senders’ declarations (if available) and any other relevant documents that may be required for the examination, assessment etc. by the Customs Department; (iii) The relative Customs Declarations and dispatch notes (if any); and (iv) Any other information required in connection with the preparation of the Parcel Bills which the Post Office is able to furnish. On receipt of the documents, the Customs Appraiser shall scrutinize the particulars given in the Parcel Bill and identify the parcels to be detained for examination either for want of necessary particulars or defective description or suspected misdeclaration or under-valuation of contents. The remaining parcels are to be assessed by showing the rates of duty on the declarations or Parcel Bill, as the case may be. For this purpose, the Appraisers are generally guided by the particulars given in the Parcel Bill or Customs declarations and dispatch notes (if any). When any invoice, document or information is required to ascertain the real value, quantity or description of the contents of a parcel, the addressee may be called upon by way of a notice to produce or furnish such invoice, document and information. (d) Whenever necessary, the values from the declarations are entered into the Parcel Bill and after conversion into Indian Currency at the ruling rates of exchange, the amount of duty is calculated and entered. The216 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • relevant copies of Parcel Bills with the declarations so completed are then returned to the Postmaster. (e) Duty is calculated at the rate and valuation in force on the date that the postal authorities present a list of such goods to the Customs. In case the parcels are brought through a vessel and postal authorities present list of goods before arrival of the vessel, the rate of duty and tariff value shall be the date on which Inward Entry is granted to the vessel. (f) All parcels marked for detention are to be detained by the Postmaster. Rest of the parcels will go forward for delivery to the addressee on payment of the duty marked on each parcel. (g) The detained parcels are submitted together with the Parcel Bill to the Customs. After examining them and filling in details of contents of value in the Parcel Bills, Customs Appraiser notes down the rate and amount of duty against each item. The remark “Examined” is then entered against the entry in the Parcel Bill relating to each parcel examined by the Customs Appraiser and the Postmaster’s copies will be returned by the Customs. (h) In the case of receipt of letter mail bags, the Postmaster gets the bags opened and scrutinized under the supervision of the Customs with a view to identify all packets containing dutiable articles. Such packets are to be detained and presented in due course to the Customs Appraiser with letter mail bill and assessment memos for assessment. After examining them and filling the details of contents of value in the bill, the Customs Appraiser will note the rate and amount of duty against each item. He will likewise fill in these details on the assessment memos to be forwarded along with each packet. (i) All parcels or packets required to be opened for Customs examination are opened, and after examination, closed by the Post Office officials and are then sealed with a distinctive seal. The parcels or packets shall remain throughout in the custody of the Post Office officials. If on examination the contents of any parcel or packet are found misdeclared or the value understated or consisting of prohibited goods, such parcels or packets must be detained. The Postmaster shall not allow such parcels or packets to go forward without the Customs’ orders. Adjudication proceedings shall be initiated in such cases by the competent officer and the parcels released only after payment of fine and penalty, if any, levied by the adjudicator. (k) The duties as assessed by the Customs Appraiser and noted in the Parcel Bill or letter mail bill shall be recovered by the Post Office from the addressees at the time of delivery to them. The credit for the total amount of duty certified by the Customs Appraiser at the end of each bill is given by the Post Office to the Customs Department in accordance with the procedure settled between the two Departments. (l) The Parcel Bills or letter mail bills and other documents on which assessment is made remain in the custody of the Post Office, but the duplicates, where prepared, are kept in the Customs Department for dealing with claims for refunds, etc. Legal provisions and exemptions in case of postal exports: Goods which are not prohibited or restricted for export as per FTP can be exported by post through specified Foreign Post Offices or Sub-Foreign Post Offices or Export Extension Counters. The goods under claim of Drawback can also be exported through post but not217 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • under other export promotion schemes like DEPB, Advance Licence, DFRC, EPCG etc. Commercial samples, prototypes of goods and free gifts may also be exported by the post. The rate of duty and tariff value, if any, applicable to any goods exported by post shall be the rate and valuation in force on the date on which the exporter delivers such goods to the Postal Authorities for exportation. Bonafide commercial samples and prototype of goods supplied free of charge of a value not exceeding Rs.50,000/- which are not subject to any prohibition or restriction for export under FTP and which do not involve transfer of foreign exchange, may be exported through post. Bonafide gifts of articles for personal use of a value not exceeding Rs.25,000/- which are not subject to any prohibition or restriction on their export under FTP and which do not involve transfer of foreign exchange, may be exported through post. 9.5 Export by post of Indian and foreign currency, bank drafts, cheques, National Saving Certificates and such other negotiable instruments is not allowed unless accompanied by a valid permit issued by the RBI, except in cases where such negotiable instruments are issued by an authorised dealer in foreign exchange in India. Indian currency notes of Rs.500/- and Rs.1000/- denominations are prohibited by Government of Nepal. Therefore, the Indian currency notes of Rs.500/- and Rs.1000/- denominations shall not be allowed for export to Nepal. Prohibitions/restrictions under the FTP and the Customs Act, 1962 apply on the export of various articles by post. Some of these articles are viz. arms and ammunitions, explosives, inflammable material, intoxicants, obscene literature, certain crude and dangerous drugs, antiquities, narcotic drugs etc. Export of purchases made by the foreign tourists is allowed through post subject to proof that the payment has been made in foreign exchange. 30) Procedure in case of postal exports: Articles exported by post are required to be covered by a declaration in the prescribed form. All exports by post, where the value exceeds Rs.50/- and payment has to be received, must be declared on the exchange control form viz. P.P. form. When the postal article is overed by a certificate issued by the RBI (with or without limit) or by an authorised dealer in foreign exchange that the export does not involve any transaction in foreign exchange upto Rs. 500/- , the declaration in a P.P. form is not necessary. The letters and parcels are produced by the postal authorities to Customs officer in the Foreign Post Office. After preliminary scrutiny of the letters and declarations the proper officer shall ensure that prohibited goods like narcotic drugs, foreign exchange, currency etc. is not being sent through the parcel. The suspected parcels are detained and other letters/parcels are handed over to the postal authorities for sending to their destination. 10.4 The detained parcels are opened by Customs officer in presence of the postal authorities and if same do not contain any prohibited or restricted goods and there is no mis-declaration of value or drawback, the parcels are re-packed and handed over to postal authorities for export.218 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • If the detained parcels contain restricted or prohibited goods or mis-declared goods with intention to avail inadmissible export benefits, the case is investigated and adjudication proceedings are initiated. 31) Procedure for claiming Drawback on exports through post: The procedure for claiming Drawback through post is prescribed in Rule 11 of Customs and Central Excise Duties Drawback Rules, 1995. The outer packing of the consignment shall be labeled “Drawback Export” and the exporter shall deliver to postal authorities a claim in Annexure I to said Rules in quadruplicate. The date o receipt of aforesaid claim to proper officer of Customs shall be the relevant date for filing of claim for the purpose of Section 75A of the Customs Act, 1962. In case the claim is incomplete, a deficiency memo shall be issued within 15 days and if exporter complies with the deficiencies within 30 days, an acknowledgement shall be issued. The date of issue of acknowledgement shall be taken as date of filing the claim for the purpose of Section 75A of the Customs Act, 1962. Drawback in respect of exports through post is sanctioned in the Foreign Post Office itself. 32) Drawback in respect of goods re-exported through post: The goods imported on payment of duty may also be re-exported through post and applicable rate of Drawback under Section 74 of the Customs Act, 1962 claimed. The Drawback of the duty paid at the time of import is permissible subject to the fulfillment of the conditions of Section 74 of the Customs Act, 1962 and Reexport of Imported Goods (Drawback of Customs Duties) Rules, 1995. The Proper Officer of Customs at Foreign Post Office shall be satisfied about the identity of the goods being re-exported and if the same cannot be established, no Drawback would be payable. The procedure to be followed for claim of Drawback on goods re-exported through post is as follows: (i) Rule 3 of Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 requires the outer packing of the parcel to carry the words “Drawback Export” and exporter shall give a claim as per Annexure I to said Rules in quadruplicate to the Postal authorities. The date of receipt of aforesaid Annexure I by Customs from Postal authorities shall be the date of receipt of the claim for the purposes of Section 74 of the Customs Act, 1962 and exporter shall be informed. (ii) If claim is incomplete, a deficiency memo shall be issued within 15 days and if claim is again filed by exporter after complying with the deficiencies within 30 days, the receipt shall be acknowledged and this date shall be treated as date of filing the claim for the purposes of Section 74 of the Customs Act, 1962. (iii) Drawback under Section 74 of the Customs Act, 1962 is paid by the Customs Officer in Foreign Post Office. 33) Re-export of partial consignment: If the addressee takes delivery of parcels on payment of duty and then wishes to return to the sender, they can do so only under claim for Drawback after observing the prescribed procedure 13.2 Permitting an addressee to open a parcel and take the delivery of part contents on payment of duty and repack the balance of the contents for re-219 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • export without payment of duty thereon is not authorised and is irregular. CHAPTER 30 BAGGAGE RULES AT A GLANCE CLEARANCE OF INCOMING PASSENGERS (GREEN AND Baggage (Baggage (Amendment) Rules, 2006 (Baggage Rule, 1998)- (Baggage Rules, 1998) [ Notification No. 30/98-Cus. (N.T.), dated 2-6-1998 amended vide Notification No. 76/2006 - Customs (N.T.) dated 30/06/2006; Notification No. 30/2005 - Customs (N.T.) dated04/04/2005; Notification No. 05/2004 - Customs (N.T.) dated 08/01/2004; Notification No. 13/2004 - Customs (N.T.) dated 03/02/2004; Notification No. 11/2002 - Customs (N.T.) dated 01/03/2002; Notification No. 50/2000 - Customs (N.T.) dated 09/08/2000; Notification no. 29/1999-Cus (N.T.) dated 11-05-1999) ] RED) CLEARANCE OF INCOMING PASSENGERS (GREEN AND RED CHANNELS) For the purpose of Customs clearance of arriving passengers, a two channel system has been adopted (i) Green Channel for passengers not having any dutiable goods. (ii) Red Channel for passengers having dutiable goods. However, All the passengers shall ensure to file correct declaration of their (i) baggage. Green channel passengers must deposit the customs portion of the (ii) disembarkation card to the custom official at the gate before leaving the terminal. Declaration of foreign exchange/currency has be made before the (iii) custom officers in the following cases : where the value of foreign currency notes exceed US $ 5000 or (a) equivalent where the aggregate value of foreign exchange including currency (b) exceeds US $ 10,000 or equivalent220 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • - Passengers walking through the Green Channel with dutiable / prohibited goods are liable to prosecution/penalty and confiscation of goods. - Trafficking of Narcotics and Psychotropic substances is a serious offence and is punishable with imprisonment. DUTY FREE ALLOWANCES AND ENTITLEMENTS FOR INDIAN RESIDENTS AND FOREIGNERS RESIDING IN INDIA A Resident means a person holding a valid passport issued under the Passports Act, 1967 and normally residing in India I. For passengers coming from countries other than (a) Nepal, Bhutan, Myanmar, Hongkong or China. (b) Pakistan by Land RouteDuty Free allowance for bonafide baggage consisting of For passengers of age 10 years and below 10 above years Used personal effects (excluding jewellery) required for Free Free satisfying daily necessities of life(ii) Other articles carried in person or in accompanied Valued upto Valued upto baggage Rs.25000/- Rs.6,000/- (a) if Stay abroad for more than three days Valued upto Valued upto Rs.12000/- Rs.3000/- (b) if Stay abroad upto three days 221 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Note - Budget proposal 2012 Duty Free baggage allowance has been increased from Rs. 25,000 to 35,000.00. Baggage allowance for Indians travelling abroad was last revised in 2004. This budget it is d proposed to increase the duty-free allowance for eligible passengers of Indian origin from Rs. 25,000 to Rs.35, 000.00 and for children of up to 10 years from Rs. 12,000 to Rs. 15,000.00 ote: 1. The free allowance shall not be pooled with the free allowance of any other passenger. 2. The free allowance is not applicable to the following goods: 1. Fire arms. 2. Cartridges of fire arms exceeding 50. 3. Cigarettes exceeding 200 or cigars exceeding 50 or tobacco exceeding 250 gms. 4. Alcoholic liquor or wines in excess of 2 litres. 5. Gold or silver, in any form, other than ornaments. 3. One laptop computer (notebook computer) over and above the said free allowances mentioned above is also allowed duty free if imported by any passenger of the age of 18 years and above 4. The goods over and above the free allowances shall be chargeable to customs duty @ 35% + an education cess of 3% i.e. to say the effective rate is 36.05%. 5. Alcoholic drinks and tobacco products imported in excess of free allowance are chargeable to custom duty at the rates applicable to their commercial imports as per the Customs tariff Act. 6. Import of Indian currency is prohibited. However, in the case of passengers normally resident of India who are returning from a visit abroad Indian currency upto Rs. 7500 is allowed. 7. Incase the value of one item exceeds the duty free allowance, the duty shall be calculated only on the excess of such amount. II. For passengers coming from222 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • (i) Nepal, Bhutan, Myanmar, Hongkong or China, other than by land route (ii) Pakistan by land routeDuty Free allowance for bonafide baggage consisting of For passengers of age 10 years and below 10 years above Used personal effects (excluding jewellery) required for Free Free satisfying daily necessities of life Other articles carried in person or in accompanied Valued upto Valued upto baggage Rs.6000/- Rs.1500/ (a) Stay abroad for more than three days (b) Stay abroad upto three days Nil Nil Note: 1. The free allowance shall not be allowed to be pooled with the free allowance of any other passenger. 2. The free allowance is not applicable to the following goods: a) Fire arms. b) Cartridges of fire arms exceeding 50. c) Cigarettes exceeding 200 or cigars exceeding 50 or tobacco exceeding 250 gms. d) Alcoholic liquor and wines in excess of 2 litre each. 223 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • e) Gold or silver, in any form, other than ornaments. 3. One laptop computer (notebook computer) over and above the said free allowances mentioned above is also allowed duty free if imported by any passenger of the age of 18 years and above 4. The goods over and above the free allowances shall be chargeable to customs duty @ 35% + an education cess of 3% i.e. to say the effective rate is 36.05%. 5. Alcoholic drinks and tobacco products imported in excess of free allowance are chargeable to custom duty at the rates applicable to their commercial imports. 6. Import of Indian currency is prohibited. However, in the case of passengers normally resident of India who are returning from a visit abroad Indian currency upto Rs. 7500 is allowed. 7. Incase the value of one item exceeds the duty free allowance, the duty shall be calculated only on the excess of such amount. III. For passengers coming from Nepal, Bhutan, Myanmar or China by Land Route Duty Free allowance for bonafide baggage For passengers of age consisting of 10 years and below 10 years above (i) Used personal effects (excluding Free Free jewelry) required for satisfying daily necessities of life Nil Nil (ii) Other articles carried in person or in accompanied baggage SPECIAL ALLOWANCES FOR PROFESSIONALS RETURNING TO INDIA An Indian passenger who was engaged in his profession abroad shall on his return to India be allowed clearance free of duty, in addition to the224 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • aforesaid allowances, articles in his bonafide baggage to the extent as mentioned below:- (a) Indian passenger returning after (i) Used household articles (such as linen, atleast 3 months utensils, tableware, kitchen, appliances and an iron) upto an aggregate value of Rs.12000/- (ii) Professional equipment upto a value of Rs.20,000/- (b) Indian passenger returning after (i) Used household articles (such as linen, at least 6 months utensils, tableware, kitchen, appliances and an iron) an aggregate value of Rs.12000/- (ii) Professional equipment upto a value of Rs.40,000/- (c) Indian passenger returning after Used household articles and personal effects a stay of a minimum of 365 days (which have been in the possession and use during the preceding two years abroad of the passenger or his family for at on termination of his work and least six months) and which are not mentioned who has not availed this in Annex.I , Annex. II & Annex. III upto an concession in the preceding aggregate value of Rs.75,000/- three years. Notes: For the purposes of baggage rules Professional Equipment means: Such portable equipments, instruments, apparatus and appliances as are ordinarily required in the profession in which the returning passenger was engaged. This expression includes items used by carpenters, plumbers, welders, masons and the like. This concession is not available for items of common use such as Cameras, Cassette Recorders, Dictaphones, Typewriters, Personal Computers and similar items. Annexure I225 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 1. Fire arms. 2. Cartridges of fire arms exceeding 50. Cigarettes exceeding 200 or cigars exceeding 50 or 3. tobacco exceeding 250 gms. 4. Alcoholic liquor or wines in excess of 2 litres. 5. Gold or silver, in any form, other than ornaments. Annexure II 1. Colour Television or Monochrome Television. 2. Digital Video Disc Player. 3. Video Home Theatre System. 4. Dish Washer. 5. Music System. 6. Air Conditioner. 7. Domestic refrigerators of capacity above 300 litres or its equivalent. 8. Deep Freezer. 9. Microwave Oven. 10. Video camera or the combination of any such video camera with one or more of the following goods, namely:- (a) Television Receiver; (b) Sound recording or reproducing apparatus; (c) Video reproducing apparatus.226 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 11. Word Processing Machine. 12. Fax Machine. 13. Portable Photocopying Machine. 14. Vessel. 15. Aircraft. 16. Cinematographic films of 35 mm and above. 17. Gold or Silver, in any form, other than ornaments. Annexure III 1. VCR or VCP or VTR or VCDP. 2. Washing Machine 3. Electrical or LPG Cooking Range 4. Personal Computer (Desktop Computer) 5. Lap Top Computer (Notebook Computer) 6. Domestic Refrigerator upto 300 Ltr. Capacity or its equivalent. DUTY FREE ALLOWANCES AND ENTITLEMENTS FOR TOURISTS WHO IS A TOURIST?227 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • A tourist is a passenger a) who is not normally a resident in India; b) who enters India for a stay of not more than six months in the course of any twelve months period for legitimate non-immigrant purposes, such as : touring, recreation, sports, health, family reasons, study, religious pilgrimage, or business; A tourist arriving in India shall be allowed clearance free of duty articles in his bonafide baggage to the extent as mentioned below:- Articles allowed free of duty228 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • I Tourists of Indian origin other (i)Used personal effects and travel souvenirs, if - than those coming from Pakistan by land route (a) These goods are for personal use of the tourist, and (b) These goods, other than those consumed during the stay in India, are re-exported when the tourist leaves India for a foreign destination. (ii) duty free allowances applicable to Indian Residents. II Tourists of foreign origin other (i) Used personal effects and travel souvenirs, than those of Nepalese origin if coming from Nepal or of Bhutanese origin coming from (a) These goods are for personal use of the Bhutan or of Pakistani origin tourist, and coming from Pakistan. (b) These goods, other than those consumed during the stay in India, are re-exported when the tourist leaves India for a foreign destination. (ii) Articles upto a value of Rs-8000/- for making gifts. III Tourists of Nepalese origin No free allowance. coming from Nepal or of Bhutanese origin coming from Bhutan. IV Tourists of Pakistani origin or (i) Used personal effects and travel souvenirs, foreign tourists coming from if Pakistan or tourists of Indian origin coming from Pakistan by (a) These goods are for personal use of the land route tourist, and (b) These goods, other than those consumed during the stay in India, are re-exported when229 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • the tourist leaves India for a foreign destination. (ii) Articles upto a value of Rs-6000 for making gifts. DUTY FREE ALLOWANCES AND ENTITLEMENTS FOR PERSONS TRANSFERRING RESIDENCE I. A person who is transferring his residence to India shall be allowed clearance free of duty, in addition to allowances applicable to Indian residents or foreigners residing in India or to passengers returning from Nepal, Bhutan, Myanmar or China, other than by land route articles in bonafide baggage to the extent and subject to conditions as mentioned below : Articles allowed Free of Duty Conditions Relaxation that may be considered(a) Used personal and household (1) Minimum stay of two (a) For condition (1) Shortfall ofarticles other than those listed at years abroad, upto 2 months in stay abroadAnnex I or Annex II, but including immediately preceding can be condoned by Deputy /(the articles listed at Annexure-III the date of his arrival on Assistant Commissioner ofand) Jewellery upto Rs. 10000 by transfer of residence Customs if the early return isa gentleman passenger or Rs. on account of -20000 for a lady passenger (2) Total stay in India on (i) terminal leave or vacation short visits during the 2 being availed of by the preceding years should passenger, or not exceed 6 months, (ii) any other special and circumstances. (3) Passenger has not availed this concession in (b) For condition (2) the preceding three Commissioner of Customs years. may condone short visits in excess of 6 months in230 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • deserving cases. (c) For condition (3) No relaxation.(b) Jewellery taken out earlier by Satisfaction of the ---------------the passenger or by a member of Assistant Commissionerhis family from India. of Customs regarding the jewellery having been taken out earlier from India. Annexure I 1. Fire arms. 2. Cartridges of fire arms exceeding 50. 3. Cigarettes exceeding 200 or cigars exceeding 50 or tobacco exceeding 250 gms. 4. Alcoholic liquor or wines in excess of 2 litres. 5. Gold or silver, in any form, other than ornaments. Annexure II 1. Colour Television or Monochrome Television. 2. Digital Video Disc Player. 3. Video Home Theatre System. 4. Dish Washer. 5. Music System. 6. Air Conditioner.231 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 7. Domestic refrigerators of capacity above 300 litres or its equivalent . 8. Deep Freezer. 9. Microwave Oven. 10. Video camera or the combination of any such video camera with one or more of the following goods, namely:- (a) Television Receiver; (b) Sound recording or reproducing apparatus; (c) Video reproducing apparatus. 11. Word Processing Machine. 12. Fax Machine. 13. Portable Photocopying Machine. 14. Vessel. 15. Aircraft. 16. Cinematographic films of 35 mm and above. 17. Gold or Silver , in any form , other than ornaments. Annexure III 1. Video Cassette Recorder or Video Cassette Player or Video Television Receiver or Video Cassette Disk Player. 2. Washing Machine. 3. Electrical or Liquefied Petroleum Gas Cooking Range 4. Personal Computer( Desktop Computer) 5. Laptop Computer( Notebook Computer)232 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 6. Domestic Refrigerators of capacity up to 300 litres or its equivalent. II. Rate of duty applicable on transfer of residence :- Concessional rate of duty is applicable to the following categories of persons transferring their residence to India: (a) any person holding a valid passport under the passport act 1967 and returning to India after having stayed abroad for atleast 365 days during the two years immediately preceding the date of arrival in India. (b) any person on bonafide transfer of residence to India Such persons shall be allowed (i) clearance of items listed in Annexure-II, whether old or new, at a concessional rate of duty of 15% ad valorem + 3% educational cess. (ii) clearance of items listed in Annexure-III free of duty Subject to the conditions that In case of (a) above: i) Such person has been working abroad and is returning to India on termination of such work after having stayed abroad for at least 365 days during the two years immediately preceding the date of arrival in India; ii) Such person affirms by a declaration that the goods have been in his possession abroad or, the goods are purchased by such person at the time of his arrival, but before clearance from customs, from the duty free shop located in the arrival hall of the International airports; iii) The goods (other than those purchased from the duty free shops at the time of arrival of such passenger) not accompanying such passenger were shipped or dispatched or arrived within the time limits specified in the Baggage Rules, 1998; and233 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • iv) in respect of such goods not more than one unit shall be permissible to such person and the total aggregate of value of such goods including other goods imported free of duty by him under Rule 5 of the Baggage Rules, 1998, shall not exceed rupees seventy five thousand. In case of (b) above: i) Such person has been residing abroad for a minimum period of two years immediately preceding the transfer of residence and has not availed this concession in the preceding three years; ii) Such persons affirms by a declaration that the goods have been in his possession abroad or, the goods are purchased by such person at the time of his arrival, but before clearance from customs, from the duty free shop located in the arrival hall of the International airport; iii) The goods (other than those purchased from the duty free shops at the time of arrival of such passenger) not accompanying such passenger were shipped or dispatched or arrived within the time limits specified in the Baggage Rules, 1998; iv) Not more than one unit of each item of such goods shall be permissible per family and the person claiming the benefit shall affirm by a declaration that no other member of the family had availed of or would avail of such benefit in respect of that item; and v) The total aggregate value of such goods shall not exceed rupees five lakhs. Note: Transfer of residence entitlements are applicable to returning Indians as well as Foreigners transferring their residence to India subject to the fulfillment of prescribed eligibility conditions IMPORT OF PROFESSIONAL EQUIPMENT AS BAGGAGE Professional Equipment is permitted to be imported to the following persons to the extent indicated below: a. Indian Passengers returning after a stay abroad of atleast 3 months : upto a value of Rs. 20000 b. Indian Passengers returning after a stay of atleast 6 months : upto a value of Rs. 40000234 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • For the purposes of baggage rules Professional Equipment means: Such portable equipment, instruments, apparatus and appliances as are ordinarily required in the profession in which the returning passenger was engaged. This expression includes items used by carpenters, plumbers, welders, masons and the like; This concession is not available for items of common use such as Cameras, Cassette Recorders, Dictaphones, Typewriters, Personal Computers and similar items. IMPORT OF JEWELLERY An Indian passenger who has been residing abroad for over one year is allowed to bring jewellery, free of duty in his bonafide baggage upto an aggregate value of Rs. 10,000/- (in the case of a male passenger) or Rs.20,000/- (in the case of a lady passenger). IMPORT OF ALCOHOLIC DRINKS/ CIGARETTES AS BAGGAGE Following quantities of Alcoholic drinks and Tobacco products may be included for import within the duty free allowances admissible to various categories of incoming passengers : - Alcoholic liquors or Wines upto 2 litres - 200 Cigarettes or 50 Cigars or 250 gms. Tobacco. The rate of duty applicable on these products over and above the above mentioned free allowance is as under : (i) Cigarettes BCD @100%+ educational cess @ 3% .235 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • (ii) Whisky BCD @150% + ACD @ 4% + education cess @3% (iii) Wines and Beer * BCD @100% + ACD NIL+ 3% education cess IMPORT OF GOLD AS BAGGAGE Who can import gold as baggage? Any passenger of Indian Origin or a passenger holding a valid passport, issued under the Passport Act, 1967, who is coming to India after a period of not less than six months of stay abroad; and short visits, if any, made by the passenger during the aforesaid period of six months shall be ignored if the total duration of stay on such visits does not exceed thirty days. Other Conditions (i) The duty shall be paid in convertible foreign currency. (ii) The weight of gold (including ornaments) should not exceed 10 kgs. per passenger. (iii) The passenger should not have brought gold or other ornaments during any of his visits (short visits) in the last six months i.e. he has not availed of the exemption under this scheme, at the time of short visits. (iv) Ornaments studded with stones and pearls are not allowed to be imported. (v) The passenger can either bring the gold himself at the time of arrival or import the same within fifteen days of his arrival in India as unaccompanied baggage. (vi) The passenger can also obtain the permitted quantity of gold from Customs bonded warehouse of State Bank of India and Metals and Minerals Trading Corporation subject to conditions (i) and (ii)above. He is required to file a declaration in the prescribed236 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Form before the Customs Officer at the time of arrival in India stating his intention to obtain the gold from the Customs bonded warehouse and pay the duty before clearance. RATE OF DUTY Sl.No. Description of Goods Rate 1. Gold bars, other than tola bars, bearing Rs. 300 per manufacturers or refiners engraved serial 10 gms. + number and weight expressed in metric units 3% Edu. and gold coins Cess 2. Gold in any form other than at Sl.No. 1 above Rs. 750 per including tola bars and ornaments, but 10 gms. + excluding ornaments studded with stones or 3% Edu. pearls Cess Note:- The Jewellery which is in addition to the jewellery otherwise allowed without payment of duty, only is liable to payment of duty under the above mentioned scheme of import of gold237 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • IMPORT OF SILVER AS BAGGAGE Who can import silver as baggage? (a) Any passenger of Indian origin (even if a foreign national). (b) Any passenger holding a valid passport issued under the Passport Act, 1967. Conditions (i) The weight of silver (including ornaments) should not exceed the quantity of 100 kgs. per passenger. (ii) Such passenger is coming to India after a period of not less than six months of stay abroad. However, short visits during these six months shall be ignored if the total duration of such short visits does not exceed 30 days and the passenger has not availed of the exemption under this scheme, at the time of such short visits. (iii) The duty at the rate of Rs.1500 per kg. + 3% Education Cess is paid by the passenger in convertible foreign currency. (iv) Ornaments studded with stones and pearls will not be allowed to be imported under the scheme. (iv) The passenger can either bring the silver himself at the time of arrival or import the same within fifteen days of his arrival in India. (v) The passenger can also obtain the permitted quantity of silver From Customs bonded warehouse of State Bank of India and Metal and Mineral Trading Corporation subject to conditions (i) and (iii). He is required to file a declaration in the prescribed Form before the Customs Officer at the time of arrival in India stating his intention to obtain the silver from the Customs bonded warehouse and pay the duty before clearance.238 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • IMPORT OF FOREIGN EXCHANGE/CURRENCY Any person can bring into India from a place outside India foreign exchange without any limit. However, declaration of foreign exchange/currency is required to be made in the prescribed Currency Declaration Form in the following cases:- (a) Where the value of foreign currency notes exceeds US$ 5000/- or equivalent (b) Where the aggregate value of foreign exchange (in the form of currency notes, bank notes, traveler cheques etc.) exceeds US$ 10,000/- orits equivalent IMPORT OF INDIAN CURRENCY Import of Indian Currency is prohibited. However, in the case of passengers normally resident in India who are returning from a visit abroad, import of Indian Currency upto Rs. 7500 is allowed. IMPORT OF FIRE ARMS - Import of firearms is strictly prohibited. - Import of Cartridges in excess of 50 is also prohibited. However, in the case of persons transferring their residence (as per conditions specified in the rules) to India for a minimum period of one year, one firearm of permissible bore can be allowed to be imported subject to the conditions that:239 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 1) the same was in possession and use abroad by the passenger for a minimum period of one year and also subject to the condition that such firearm, after clearance, shall not be sold, loaned, transferred or otherwise parted with, for consideration or otherwise, during the lifetime of such person; 2) the passenger has a valid arms licence from the local (Indian) authorities; 3) the customs and other duties as applicable shall be paid. IMPORT OF PET ANIMALS Domestic pets like dogs, cats, birds etc. are permitted to be imported. Import of pets (dog and cat only) upto two numbers per passenger are allowed at one time subject to production of required health certificate from country of origin and examination of the said pets by the concerned quarantine officer. Imports of pets over and above this quantity shall be allowed only against an Import sanitary permit issued by the department of animal husbandry and dairying or against an import licence issued by the DGFT. IMPORT OF BAGGAGE OF DECEASED PERSON Used, bonafide personal and household effects belonging to a deceased person are allowed to be imported free of duty subject to the condition that a Certificate from the concerned Indian mission (Embassy / High Commission) is produced at the time of clearance regarding the ownership of the goods by the deceased person. IMPORT OF UNACCOMPANIED BAGGAGE The passengers can also send their baggage through cargo which is treated as unaccompanied baggage. However, no free allowance is240 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • admissible in case of unaccompanied baggage which is chargeable to Customs duty @ 35% Ad valorem + 3% Education Cess and only used personal effects can be imported free of duty. 1. Provisions of Baggage Rules are also extended to unaccompanied baggage except where they have been specifically excluded. 2. The unaccompanied baggage should be in the possession abroad of the passenger and shall be dispatched within one month of his arrival in India or within such further period as the Deputy / Assistant Commissioner of Customs may allow. 3. The unaccompanied baggage may land in India upto two months before the arrival of the passenger or within such period, not exceeding one year as the Deputy / Assistant Commissioner of Customs may allow, for reasons to be recorded, if he is satisfied that the passenger was prevented from arriving in India within the period of two months due to circumstances beyond his control, such as sudden illness of the passenger or a member of his family, or natural calamities or disturbed conditions or disruption of the transport or travel arrangements in the country or countries concerned on any other reasons, which necessitated a change in the travel schedule of the passenger. 4. All the unaccompanied baggage is chargeable to customs duty @ 35% advalorem + education cess @ 3%. RATE OF DUTY 1. Generally items imported as baggage are subjected to a uniform rate of duty for ease of assessment 2. The general rate of duty for items imported in excess of the permissible free allowance is 35% advalorem + educational cess @ 3% i.e. to say that effective rate of duty is 36.05%. 3. The rate of duty applicable to items in Annexure II imported by passengers transferring their residence or returning to India after a stay of 365 days abroad in the preceding two years is 15% + educational cess @ 3% 4. Alcoholic drinks and Tobacco products imported in excess of the free allowance are charged to duty at the rates applicable to their241 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • commercial imports. These rates for some of the items are as follows:- (i) Cigarettes BCD @100%+ educational cess @ 3% (ii) Whisky BCD @150% + ACD @ 4% + 3% education cess on BCD & ACD (iii) Wines and BCD @100% + ACD NIL+ 3% Beer * education cess on BCD 5. Silver is charged to a duty of Rs. 1500 per Kg.+ 3% Education Cess for passengers importing silver under the prescribed scheme 6. Gold is charged to following rate of duty for passengers importing gold under the prescribed scheme Sl.No. Description of Goods Rate 1. Gold bars, other than tola bars, bearing manufacturer’s or Rs. 300 per 10 refiner’s engraved serial number and weight expressed in gms.+ 3% Edu. metric units and gold coins Cess 2. Gold in any form other than at Sl.No. 1 above including Rs. 750 per 10 tola bars and ornaments, but excluding ornaments gms.+ 3% Edu. studded with stones or pearls Cess242 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Note: Incase the value of one item exceeds the duty free allowance, the duty shall be calculated only on the excess of such amount. DETAINED BAGGAGE A passenger may request the Customs to detain his baggage either for re-export at the time of his departure from India or for clearance subsequently on payment of duty. The detained baggage would be examined and full details will be inventorised. Such baggage are kept in the custody of the customs. MISHANDLED BAGGAGE In case the baggage has been lost or mishandled by the Airlines, a simplified procedure is in place for clearance of such baggage which allows the passenger to have delivery of his baggage at his door step by the Airlines. There is no need to handover the passport or the keys of the baggage. The passenger is merely required to complete the Custom declaration form authorizing the Airline to complete the formalities when the baggage arrives. The passenger is required to obtain a certificate to that effect from the airlines and get it countersigned by Customs indicating specifically the unutilized portion of the free allowance. This would enable the passenger to avail the unutilised portion of the duty free allowance when his baggage is delivered by the airlines. The passenger is required to submit all these documents with the concerned airlines for clearance and delivery of goods on his behalf.243 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • AIRLINE CREW Crewmembers are required to submit the correct declaration before Custom authorities with respect to the currency gold ornaments and electronic goods etc. in their possession on arrival as well as departure. Crew member is allowed to bring items like chocolates, cheese, cosmetics and other petty gift items for their personal or family use upto a value of Rs. 600 only at the returning of the Aircraft from foreign journey. However, a crew member on final pay off or at the termination of his engagement with the Airline shall be eligible for allowances as a common passenger. IMPORT OF PASSENGER CARS Import of passenger Cars / Jeep / Multiutility vehicles: The following rates of Duty are applicable for import of motor cars and other motor vehicles principally designed for the transport of persons including station wagons and racing cars. Since motor vehicles are excluded from the definition of Baggage, duties are to be collected at the Tariff rate taking into consideration Exemption Notifications if any. Value of these vehicles for the purpose of levy of customs duty is CIF value, where C stands for the cost of the goods, I is the insurance and F is the freight. Cost in the case of new vehicle is the transaction value between the seller and the buyer. However, in the case of old and used vehicles, cost is arrived at by taking value of the new vehicle in its year of manufacture and then allowing depreciation at following rates: (i) For every quarter 4% during 1st year - (ii) For every quarter 3% during 2nd year - (iii) For every quarter 2.5% during 3rd year - (iv) For every quarter 2% during 4th year - subject to a and thereafter maximum depreciation of 70%244 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • OUT GOING PASSENGERS All the passengers leaving India by Air are subject to clearance by Custom Authorities. Only bonafide baggage is allowed to be cleared by passengers. There is a procedure prescribed whereby the passengers leaving India can take the export certificate for the various high value items as well as jewellery from the Customs authorities. Such an export certificate comes handy while bringing back the things to India so that no duty is charged on such goods exported by the passenger. OTHER INFORMATION 1. Export of most species of wild life and articles made from wild flora and fauna, such as ivory, musk, reptile skins, furs, shahtoos etc. is prohibited. 2. Trafficking of narcotic drugs and psychotropic substances is prohibited. 3. Export of goods purchased against foreign exchange brought in by foreign passengers are allowed except for prohibited goods. 4. Carrying of Indian currency notes in the denomination of Rs. 500 and Rs. 1000 to Nepal is prohibited. 5. Export of Indian Currency is strictly prohibited. However Indian residents when they go abroad are allowed to take with them Indian currency not exceeding Rs. 7500. 6. Tourists while leaving India are allowed to take with them foreign currency not exceeding an amount brought in by them at the time of their arrival in India. As no declaration is required to be made for bringing in foreign exchange / currency not exceeding equivalent of U.S. $ 10000, generally tourists can take out of India with them at the time of their departure foreign exchange/currency not exceeding the above amount.245 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • EXPORT OF GOLD JEWELLERY There is no value limit on the export of Gold jewellery by a passenger through the medium of baggage so long as it constitutes the bonafide baggage of the passenger. A passenger may request the Customs for issue of an export certificate at the time of his/her departure from India, in respect of jewelry carried by him / her, to facilitate its reimport subsequently. Commercial export of gold jewelry through the courier mode is permitted subject to observance of prescribed procedures. EXPORT OF INDIAN CURRENCY Export of Indian Currency is strictly prohibited. However Indian residents when they go abroad are allowed to take with them Indian currency not exceeding Rs. 7500 . EXPORT OF FOREIGN CURRENCY Tourists while leaving India are allowed to take with them foreign currency not exceeding an amount brought in by them at the time of their arrival in India. As no declaration is required to be made for bringing in foreign exchange / currency not exceeding equivalent of U.S. $ 10000, generally tourists can take out of India with them at the time of their departure foreign exchange/currency not exceeding the above amount. The export of foreign currency is otherwise prohibited. PROHIBITED AND RESTRICTED GOODS Certain goods are prohibited (banned) or restricted (subject to certain conditions) for import and/or export. These are goods of social, health, environment, wild life and security concerns. While it is not possible to list all the goods, more common of these are : PROHIBITED GOODS - Narcotic Drugs and Psychotropic substances. - Pornographic material246 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • - Counterfeit and pirated goods and good infringing any of the legally enforceable intellectual property rights. - Antiquities. RESTRICTED GOODS - Firearms and ammunition. - Live birds and animals including pets. - Plants and their produce e.g. fruits, seeds. - Endangered species of plants and animals, whether live or dead. - Any goods for commercial purpose: for profit , gain or commercial usage. - Radio transmitters not approved for normal usage. - Gold and Silver, other than ornaments (For import only) - Indian and foreign currency in excess of prescribed limits: - foreign currency in excess of US$ 5000 in the form of currency notes or equivalent US$ 10000 or equivalent in the form of currency notes, bank notes or travellers cheque is required to be declared on arrival. - foreign currency in excess of amount legally obtained or in the case of tourists in excess of the amount declared on arrival or in excess of the exempted limit of declaration at the time of departure. - Trafficking in Narcotic Drugs like Heroin, Charas, Cocaine or in Psychotropic substances is a serious offence and is punishable with imprisonment. - Export of most species of wild life and articles made from flora and fauna such as Ivory, Musk, Reptile skins, Furs, Shahtoosh etc. is prohibited. For any clarifications passenger should approach the Regional Deputy Director (Wildlife Preservation) Govt. of India or the Chief Wildlife Wardens of State Governments posted at Calcutta, Delhi, Mumbai and Chennai. - Export or Import in prohibited and restricted goods commonly leads to arrest.247 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • PENAL PROVISIONS The Indian Customs Act empowers imposition of heavy penalties for those passengers who : - attempt to walk through the Green Channel with prohibited, restricted or dutiable goods. - misdeclare their goods at the Red Channel - attempt to export prohibited or restricted goods. - abet the commission of any of the above offences. The Penal Provision may lead to : - absolute confiscation of goods, or - imposition of heavy fine in respect of the concerned goods if these are released; - imposition of penalty on individual or concerned entities upto five times the value of goods or the duty involved. - Arrest and prosecution including invocation of preventive detention in serious cases.248 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • CHAPTER 31 All About Indian Passport The front-end operations of all Regional Passport office have beenoutsourced as part of the Passport Seva Kendra (PSK) project and Tata Consultancy Services(TCS) is all set to handle the front-end operations of all RPO very shortly. Union Ministry ofExternal Affairs has already implemented the PSK project some of the passport offices in India.These centres have been set up on a public-private partnership (PPP) basis with TataConsultancy Services (TCS) as its service provider. The project has been designed as a citizen-centric and paperless service. All one needs to do is upload a passport application onwww.passportindia.gov.in and confirm an appointment online. After which the support staff fromTCS will guide the applicant through the biometric process. Walk-in applicants will be greeted bya floor manager who will help the applicants upload applications through a kiosk at the PSK."The amenities and services at the PSK are in keeping with any modern bank or airport.The implementation of the project has reached its halfway mark and will likely to completed byMarch 2012, The existing passport office will be responsible for liaison with the MEA,dispatching, printing, answering RTIs, and management of the PSKs. First time applicants nolonger need to go the existing passport office.According to the available information, TCS would receive applicants, guide them and handlethe process for submission of applications, conduct the verification of the completeness of theapplication form and the documents attached therein. TCS would be in charge of receivingapplications and guiding applicants, technical support and maintenance of the premises, whilesensitive areas would continue to be handled by the passport office staff. The PSK initiativewould bring in the much-required concept of “one-day visit to the passport office”, as the officialswould tell the applicants the same evening as to whether their passport application forms andthe supporting documents were in order and whether the passport would be issued or not. Thiswould eliminate the anxious wait by the applicants.249 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Under the new system, photographs need not be affixed, image of the applicants face will becaptured at the time of applying online as is done in the driving licence process. In addition, thenew system will involve taking the finger print (bio-metric) of the applicant and incorporating it inthe database. Only if the finger print tallies, the applicant will be able to apply for other servicessuch as spouse entry, address change or renewal of passport.The added feature is that every police district will have access to the passport server fordownloading the personal particular form online and to send the police verification reportsonline. This will obviate postal delay and laborious paper work. This will also ensure speedycompletion of procedures which are time-consuming at present. Even passport issuance will bemodernized with digital signature.The place for these front-end operations has been already finalized for most of locations andstarted functioning. The new system will put in place a first-in and first-out concept, eliminatingthe practice of issuing passports out-of-turn. Under the new system getting passport will nottake more than 72 hours. This turnaround time is from the moment of police verification to theissuance of the passport.Procedures for applying Passports under new system (where ever the new PSK system isimplemented)For filling and submitting your application online, you need to be a registered user on thePassport Seva website. To create your user account for online form submission, Register now.Once you register,follow the steps mentioned here-Step 1: Log into your Passport Seva user account.Step 2:Select the Apply Passport Online menu option in the left navigation menu.Step 3: Fill in the required details in the form and submit the form online.Step 4 (Optional): Upload the required documents using the Upload Document link on theApplicant Home Page. The documents to be uploaded must be self-attested (signed by theapplicant) and must be in pdf format.Step 5: You are required to be present at the Passport Seva Kendra (PSK)/Mini Passport SevaKendra (Mini PSK) along with original documents for completion of the application submissionprocess. Schedule an appointment with the Passport Seva Kendra (PSK)/ Mini Passport SevaKendra (Mini PSK) that comes under the jurisdiction of applicant residence.Online appointmentis mandatory to walk into PSK for further processing.Only emergency/medical cases may go toPSK without appointment - service will be provided at the discretion of PSK in -charge. You willneed to re-submit the application in case the form submission process at PSK is not completedwithin 3 month of submitting the application online.Procedure for online applicant at Passport Seva Kendra (PSK)/Mini Passport Seva Kendra (MiniPSK)Step 1: Collect a token for application from theToken Issuance Counter ; submit the token,acknowledgement receipt for application and prior appointment print out to the Citizen Service250 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Executive (CSE) at the service counter when your token number is displayed.Step 2: Complete activities at this counter, such as signing the paper copy of the applicationform, getting your photograph and fingerprints captured, and making fee payment.Note: Minor applicants below 4 years of age should carry a passport size photograph (on awhite background) while visiting Passport Seva Kendra (PSK).In case you are paying the fee through Credit/ Debit card, only card of self or family memberwhose details have been mentioned in the passport application form are acceptable. OnlyMaster and Visa Credit/ Debit cards are accepted (This service will be available soon).Step 3: Collect the fee acknowledgement receipt from the CSE (after successful data entry)and go to the Verification counter, along with original documents , when token number iscalled, for verification of your application and documents.Step 4: Go to the Granting counter, when called for further processing of your application.Step 5: Collect the print-out of the final status ( acknowledgement letter ) of your application atthe exit gate.After successful application form submission, with final status as "Granted", you can expectyour passport to be dispatched as follows: Type of Type of Police Expected Time of Passport Dispatch Application Verification Police Verification is Within one working day excluding the date of not required submission of application. Tatkaal Police Verification is On third working day excluding the date of required on a Post- submission of application - without waiting for the Passport Issuance Police Verification Report. basis Police Verification is On third working day excluding the date of not required submission of application. Police Verification is On third working day excluding the date of required on a Post- submission of application - without waiting for the Passport Issuance Police Verification Report. Normal basis Police Verification is Within three working days of receipt of a required on Pre- "Recommendatory" Police Verification Report (PVR) Passport Issuance from the Police Department. This does not include basis date of receipt of "Recommendatory" PVR.Note: (i) In complex cases, such as adoption, application on behalf of a minor from single251 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • parent, major change in name, duplicate passport, doubtful documentation, the processing hangetime will be approximately 30 days excluding the date of submission of application. MandatoryPre Police Verification cases such as J&K and Nagaland subjects would also need addition additionalprocessing time.(ii) Issue of passport is subject to data check in the system and finding no adverse entry/report.(iii) In case you have been charged with a penalty, you need to make the penalty payment bycash only.http://www.passportindia.gov.in/AppOnlineProject/online/processFlowPassport Services OverviewQ: What are the various passport services and which form has to be filled in?A: The various passport services are:252 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • 1. Issue of Fresh Passport: You can apply for fresh passport if you have never had a passport. 2. Re-issue of Passport: You can apply for re-issue of passport if you want another passport in lieu of an existing passport for any of the following reasons: o Your passport has either expired or is about to expire. You can apply for a re- issue of passport up to 1 year before the expiry or within 3 years after the expiry of the existing passport without fresh police verification, provided there is clear police report with respect to your previous passport and there is no adverse entry in the system. o Your last passport has expired more than three years ago o You want to change the personal particulars or other details specified in the passport o Q: The pages in my passport booklet have exhausted, but it has a validity of 5 years. What is the procedure to apply for new booklet? A: o Passport booklet is lost o Passport booklet is damaged. The booklet may be damaged beyond recognition or damaged but recognizable (i.e. Passport number is readable, name is legible and photograph is intact) 3. Miscellaneous Service: Issue of Police Clearance Certificate (PCC)For issue of fresh passport and re-issue of passport, you need to fill the application form whichconsists of two forms - Passport Application Form and Supplementary Form. References forcolumns to be filled in the Supplementary Form have been given in the Passport ApplicationForm, which has to be filled only if they are applicable to you, else you must leave them blank.For Police Clearance Certificate (PCC), you need to fill the Police Clearance Certificate (PCC)Application Form.Q: What types of passports are issued in India?A: Following three types of passports are issued in India: 1. Ordinary Passport: An ordinary passport appears with a blue cover, and consists of 36 or 60 pages. It is valid for 10 years from the date of issue and can be renewed for another 10 years. An Indian citizen can use this passport for ordinary vacation or business travel. 2. Diplomatic Passport: Members of the national government, including diplomats, administrative officials, and official public couriers, use a maroon-covered diplomatic passport. 3. Official Passport: Ordinary citizens travelling on official government business carry an official passport, with a white cover.Q: How do I apply for a passport in the new system?A: You need to fill the application form which consists of two forms - Passport Application Formand Supplementary Form. References for columns to be filled in the Supplementary Form havebeen given in the Passport Application Form, which has to be filled only if they are applicable to253 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • you, else leave them blank.You can submit the filled in form at the following locations: • Any Passport Seva Kendra (PSK)/Mini Passport Seva Kendra (Mini PSK) within the jurisdiction of your Passport Office (PO) • District Passport Cell (DPC) of your district • Speed Post Centre (SPC) in your district • Citizen Service Centre (CSC) if any, in your areaWhile Passport Seva Kendras (PSKs) offer all kinds of passport services, only fresh passportapplications are accepted at District Passport Cells (DPCs)/Speed Post Centres (SPCs)/CitizenService Centres (CSCs). You can also locate an application submission centre on our websitewww.passportindia.gov.inYou need to attach the self-attested photocopies of documents along with the application form.To check the complete list of documents to be submitted along with the application form, pleaseClick Here. Original documents must also be produced at the counter, which will be returnedafter verification.You need to pay fee when you submit the application form. To know about fee details, pleaseClick Here.Under the new system it is mandatory for all applicants, including infants, to be physicallypresent while submitting the passport application form whether it is at the Passport Seva Kendra(PSK) or at the District Passport Cell (DPC)/Speed Post Centre (SPC)/Citizen Service Centre(CSC). No. You need not apply in the new system again. Your application will be processed inthe old system.Issue of Fresh Passport (Ordinary)Q: When should I apply for a fresh passport?A: For complete list of documents to be submitted please Click Here. And to know about feedetails, please Click Here.254 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • MinorQ: What is the definition of minor for issue of passport?A: Applicants less than 18 years of age are considered as minor for issuance of passport.Q: I have a one-month old baby? Does the baby require a separate passport or his/her namecan be endorsed in one of the parents passport?A: Endorsement of childs name in parents passports is not allowed anymore. As per theamended law, a minor should have a separate passport.Q: In case of minors passport, whose father is abroad, is it mandatory to obtain fathers consentto apply for the childs passport? If so, what is the procedure?A: If parent(s) of the minor holds a valid passport, then attested photocopy of passport needs tobe submitted along with the application form. Spouse name should be endorsed on the parentspassport. If parent(s) hold a valid passport, but spouse name is not endorsed, then they mustget the spouse name added in their passport. For this, they have to apply for reissue of passportand get the specified change done in personal particulars.Click HereQ: We are planning to apply for passports for our kids (minors). Is it necessary that my nameshould be included in my wifes passport?A: If either parent of a minor holds a valid passport with spouse name endorsed, passport willbe issued to the minor without any police verification. Original passport of parent(s) should bepresented for the verification of particulars. If parent(s) hold a valid passport, but spouse nameis not endorsed, then they must get the spouse name added in their passport. For this, theyhave to apply for reissue of passport and get the specified change done in personal particulars.Thus, it is necessary that spouse name should be endorsed on the parents passport.Q: Is it necessary that both parents should have passport before applying for their childspassport?A: It is not necessary that both parents should have a passport before applying for their childspassport. The advantage of either parent holding a valid passport with spouse name endorsedis that it exempts their child from the Police Verification process.255 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: I wish to apply for a passport for my child who is 12 months old. In the signature column ofthe form, who needs to sign? Should it be the childs thumb impression, or fathers signature?ORQ: On my childs passport application, it asks for my childs signature in the box below the boxfor photograph; my child is a new born, so do I sign in the box?A: In case of minors, the signature/thumb impression box below the box for photograph shouldcontain the minors signature or thumb impression as the case may be. Minors parents shouldnot put their signature or thumb impression in this box.The signature/thumb impression box given at the end of the application form (Column-11, Page-6, self declaration) should contain signature or thumb impression of either parent/guardian asthe case may be.In the given case if the minor cannot sign, the minor should put his/her thumb impression in thebox.Q: I am a minor who is 16 years old. Is it possible for me to obtain a full validity passport of 10years?A: Minors between 15 to 18 years of age can apply either for a 10-year validity passport or theycan apply for a passport, which is valid till they attain the age of 18 years. Fee for a 10-yearvalidity passport is higher than fee for a passport, which is valid till they attain the age of 18years.A 10-year validity passport cannot be issued to applicants without police verification onsubmission of parents passport. If passport is required on an urgent basis, they can applyunder Tatkaal scheme.Q: What would be the validity of a minors passport?A: The validity of a minors passport is restricted to five years or till they attain the age of 18,whichever is earlier. But the minors with age between 15 to 18 years can apply either for a 10-year validity passport or for a passport which is valid till they attain the age of 18 years. Differentfees are applicable depending upon which category they are applying for.To know about the fee details, please Click Here.Q: Who can apply for my minor daughters passport in India as I am on ship at Singapore assecond engineer?A: Either parent/guardian can apply for minors passport. You would however need to getAnnexure-H duly attested by the Consular section of the nearest Indian Mission.To check the complete list of documents to be submitted along with the application form, pleaseClick Here.256 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: I have turned 18 and have a minors passport (valid till the age of 18). Can I still travel on it ordo I need an adult passport?A: The validity of your passport has expired. You need to apply for "Re-issue" of passport andsubmit the filled in application form at your nearest Passport Seva Kendra (PSK)/Mini PassportSeva Kendra (Mini PSK).Q: Is it true that passport applications for minors under 18 require consent of either both parentsor legal guardian?A: It is necessary that either parent/legal guardian should give their consent while applying forminors passport. Following documents have to be submitted in the given cases: S.No. Case Documents to be submitted Passport application of a minor with Annexure "H" 1. consent of both parents 2. Applied by Legal Guardian Annexure "H" Minors with single parent (One parent Annexure "H" 3. deceased) Applied by one parent/guardian when Annexure "G" 4. consent of one or both parents is not possible 5. Parents are separated but not divorced Annexure "C" Single parent of the child born out of Annexure "C" 6. wedlockQ: Does my child really have to come in to see you?A: Under the new system it is mandatory for all applicants, including infants, to be physicallypresent while submitting the passport application form whether it is at the Passport Seva Kendra(PSK) or at the District Passport Cell (DPC)/Speed Post Centre (SPC)/Citizen Service Centre(CSC).257 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: Do my newborns passport photos have to show his/her eyes open?A: There can be some relaxation in case of babies, with regard to the position of the face, eyesand the facial expression. However, a frontal view of full face with clarity is required. The childmust look at the camera with a neutral expression with the mouth closed. Toys or other peoplemust not be visible in the background of the photograph.For example:Q: My spouse is living in another country. How do I get his/her signature for consent whileapplying for my childs passport?A: Consent of the spouse, who is abroad, is required for submitting the application of their child.It should be in the form of a Sworn Affidavit duly attested by the Indian Embassy/Consulateabroad (as per Annexure "H").To check the complete list of documents to be submitted along with the application form, pleaseClick HereQ: I want to apply for my childs passport. Are signatures of both parents mandatory onAnnexure-H to be submitted along with the application? What if my spouse is refusing to signthe form?A: Yes, the signature of both the parents is mandatory on Annexure-H to be submitted alongwith the application as it signifies that both parents are giving consent for the issuance ofpassport to the child. Annexure H is the declaration of applicants parents or guardian for theissuance of passport to the minor. If either of the parents is not giving consent, then the parentapplying for the minors passport needs to submit Annexure G.To see the format of Annexure H and G, please Click HereQ: I wish to apply for a passport for my child who is 12 months old. Can I apply for a 60 pagesbooklet?A: No, you cannot apply for a 60 pages passport booklet for your 12-months old child. Only 36pages passport booklet are issued to minors.258 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: I have applied for my passport and my childs passport. Can passport be issued to my childwithout police verification?A: If either parent of a minor holds a valid passport with spouse name endorsed, passport willbe issued to the minor without any police verification. Original passport of parent(s) should bepresented for the verification of particulars. If parent(s) hold a valid passport, but spouse nameis not endorsed, then they must get the spouse name added in their passport. For this they haveto apply for reissue of passport and get the specified change done in personal particulars.If either parent does not hold a valid passport, passport will be issued to the minor only afterpolice verification or you can apply under Tatkaal scheme to get the passport on post policeverification basis subject to the approval of the Government official at the Passport Seva Kendra(PSK).Q: If parents have passport with adverse Police Verification Report or they have a criminalbackground, can passport be issued to minor on an urgent basis?A: In such cases, minors can be issued passport under Tatkaal scheme subject to the approvalof the government official at a Passport Seva Kendra (PSK).Q: Are minor citizens required to apply for Police Clearance Certificate?A: Police Clearance Certificate (PCC) can be issued to minors.Q: I want to apply for my minor childs passport. I hold a valid passport but spouse name is notendorsed. Can I apply for my childs passport without submitting my passport copy?A: If parent(s) of the minor holds a valid passport, then attested photocopy of passport needs tobe submitted along with the application form. Spouse name should be endorsed on the parentspassport. If parent(s) hold a valid passport, but spouse name is not endorsed, then they mustget the spouse name added in their passport. For this, they have to apply for reissue of passportand get the specified change done in personal particulars.Senior CitizenQ: I am a pensioner or have a seniors card; can I have a seniors passport?A: Separate seniors passport is not issued to a senior citizen. They can apply for an ordinary259 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • passport with a validity of 10 years. Senior Citizens can be issued a passport on post policeverification basis if they submit copy of childs (Age>18) passport, who is staying abroad (withpage having parents name) as an additional document along with their application form.To check the complete list of documents to be submitted, please Click HereQ: What benefits do senior citizens get for issuance of passport?A: Senior Citizens can be issued a passport on post police verification basis if they submit copyof childs (Age>18) passport, who is staying abroad (with page having parents name) as anadditional document along with their application form.To check the complete list of documents to be submitted, please Click HereStudentsQ: I am a student staying away from my parents. Where do I apply for a passport and whatproof of residence do I have to furnish?A: You can apply at any Passport Seva Kendra (PSK) under a Passport Office (PO) in the stateof your current or permanent address.For instance, if you are a student staying in Rohtak (which falls under the jurisdiction ofRegional Passport Office (RPO), Chandigarh) and your parents are staying in Hissar, whichalso falls under the jurisdiction of Regional Passport Office (RPO), Chandigarh, you may applyat any Passport Seva Kendra (PSK) under Regional Passport Office (RPO) Chandigarh. Pleaseindicate your hostel address/the place where you are staying in Rohtak as present address andyour parents address as permanent address.And in case you are studying and staying in Bangalore you may either apply at any of thePassport Seva Kendra (PSK) under Regional Passport Office (RPO) Bangalore or underRegional Passport Office (RPO) Chandigarh. For proof of residence of your hostel/place of stay,you should provide a Bonafide Letter from authorized signatory of college (On official letter headof UGC recognized College).260 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Employees of Government/PSU/Statutory BodyQ: Is Identity Certificate mandatory for Government/Public Sector/Statutory body employees?ORCan a government employee apply as an ordinary citizen without submitting the additionaldocuments?A: For issuance of a fresh passport, Government/Public Sector/Statutory body employees needto submit either Identity Certificate in original as per Annexure "B" or No Objection Certificate(NOC) as per Annexure "M" as an additional document along with the application form. If he/shesubmits Annexure "B", passport will be issued without police verification and if he/she submitsAnnexure "M", passport will be issued on post police verification basis.For reissue of passport, Government/Public Sector/Statutory body employees need to submitNo Objection Certificate (NOC) as per Annexure "M" as an additional document along with theapplication form.Q: What benefits do government employees and retired government employees get forissuance of passport?A: Government Employees:Government/Public Sector/Statutory body employees can be issued passport without policeverification, if they submit Identity Certificate in original as per Annexure "B" as an additionaldocument along with the application form. They can be issued a passport on post policeverification basis, if they submit No Objection Certificate (NOC) (as per Annexure "M") as anadditional document along with the application form.Retired Government Employees:Retired Government employees can be issued a passport on post police verification basis ifthey submit Pension Payment Order as an additional document along with the application form.Q: If a Government employee wants to apply for major change in name in passport, is he/sherequired to submit a leading newspaper cutting?A: If a Government/Public Sector/Statutory body employee wants to make a major change inname, then he/she has to submit the following additional documents: 1. Gazette Notification changing name in applicants department 2. Fresh ID Certificate in changed name 3. Deed poll/sworn affidavit as per Annexure "E"Hence, a leading newspaper cutting is not required to be submitted.261 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Owner, Partners and Directors of Companies which are members of CII, FICCI & ASSOCHAMQ: I am a Director of a company which is a member of CII, FICCI & ASSOCHAM? Whatadditional documents do I have to submit?A: Click Here to view Document AdvisorRetired Government OfficialsQ: What benefits do government employees and retired government employees get forissuance of passport?A: Government Employees:Government/Public Sector/Statutory body employees can be issued passport without policeverification, if they submit Identity Certificate in original as per Annexure "B" as an additionaldocument along with the application form. They can be issued a passport on post policeverification basis, if they submit No Objection Certificate (NOC) (as per Annexure "M") as anadditional document along with the application form.Residents of J&KQ: I was born in Delhi and my present address is in Delhi. My permanent address is in Jammuand Kashmir. I have not visited my permanent address since last 20 years. Can I apply forpassport under the Tatkaal scheme?A: To get the passport on Tatkaal basis, you need to visit Assistant Passport Officer (APO) atyour nearest Passport Seva Kendra (PSK).262 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Residents of NagalandQ: I am a resident of Nagaland and want to get a passport on an urgent basis. What should Ido?A: To get the passport on urgent basis, you need to visit Assistant Passport Officer (APO) atyour nearest Passport Seva Kendra (PSK).Citizenship of India (Other than by Birth)Q: Explain citizenship of India by birth, descent, registration, naturalization.A: Citizen of India by birth: You are Citizen of India by birth if you are born in India.Citizen of India by descent: You are Citizen of India by descent if you are born outside India andeither of your parents is a citizen of India at the time of your birth.Citizen of India by registration/naturalization:You are Citizen of India byRegistration/Naturalization if you have been granted Indian Citizenship by Ministry of HomeAffairs (MHA).Q: What are the additional documents required in case the applicant is a citizen of India bydescent or registration/naturalization?A: Click Here to view Document AdvisorQ: Can an Indian passport be issued to applicants born outside India?A: Indian passport can be issued to the "Citizen of India by Descent" i.e. person born to Indianparent(s) outside India.263 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Applicants having Diplomatic/Official passport and applying for ordinary passport while inserviceQ: Are there any additional documents required if a person applying for Ordinary passport is aDiplomatic/Official passport holder or a dependent family member of Diplomatic/Official passportholder?A: Click Here to view Document AdvisorDependent Family Members of Government/PSU/Statutory body employeesQ: Can dependents of Government/Public Sector/Statutory body employees apply for apassport in the normal process without submitting any affidavits?A: Dependent family members of Government/Public Sector/Statutory body employees can beissued passport without police verification, if they submit the following additional documentsalong with their application form:1. "Identity Certificate" in original as per Annexure "B" (of dependent)2. Standard Affidavit as per Annexure "I"Otherwise, passport would be issued to them on pre police verification basis, or post policeverification basis - if they apply under Tatkaal scheme.Dependent Family Members of Diplomatic/Official passport holders who are not governmentservantsQ: Are there any additional documents required if a person applying for an ordinary passport isa Diplomatic/Official passport holder or a dependent family member of Diplomatic/Officialpassport holder?264 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • A: Click Here to view Document AdvisorApplicants who have changed their names in pastQ: I recently got married/divorced. How do I change my name on my passport?A: To change the name in the passport, you have to apply for a "Re-issue" of passport and getthe specified change done in the personal particulars. To check the complete list of documentsto be submitted along with the application form, please Click Here to view Document AdvisorQ: I am a married lady and want to apply for a fresh passport. I am unable to provide theprescribed marriage certificate or joint affidavit due to marital discord or separation. What shouldI do?A: Such applicants have to submit an Affidavit sworn before First Class Judicial Magistrate onNon-Judicial stamp paper as per specimen provided in Annexure K: Section G of the passportinstruction booklet.Applicants who are convicted or court case is pending against themQ: What do I do if I have a Court Case against me?A: If a criminal case is pending against you in any court, you can be issued a passport subject tothe condition that you enclose a written permission granted by the court allowing you to travelabroad. Normally a short validity passport valid for one year is issued, subject to conditions ifany, mentioned in the Court order as per GSR 570 (E) dated 25 August, 1993.265 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Applicants who have been repatriated/deportedQ: Are there any additional documents required for applicants repatriated from abroad ordeported to India?A: Click Here to view Document AdvisorQ: The applicant has repatriated from abroad at Government cost and wants to apply for a freshpassport. However he/she does not have a proof of refund of repatriation cost to Ministry ofExternal Affairs. What should he/she do?A: He/she should Please meet the Assistant Passport Officer (APO) at your nearest PassportSeva Kendra (PSK).Re-issue of Fresh Passport(Ordinary)Q: When can I apply for reissue of passport?A: Passports are issued for 10 year validity (Only for Children, passports are issued with fiveyear validity or upto the age of 18, exception being minors between 15 and 18 years of age whocan also apply for 10 year validity passport).You can apply for reissue of passport in following cases: • Your passport has either expired or is about to expire. You can apply for reissue of passport up to one year before the expiry or within three years after the expiry of the existing passport without fresh police verification, provided there is clear police report with respect to your previous passport and there is no adverse entry in the system. • Your last passport expired more than three years ago. • You want to change the personal particulars or other details specified in your current passport and get a booklet with changed details. • Pages in the existing passport booklet are exhausted. • Passport is lost. • Passport is lost.Further, most of the embassies who issue visas insist on the passport validity being at least ofsix months to one year before they consider issuing visas. Accordingly, apply for reissue wellbefore time and save the last minute rush.266 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: Will I get back my old passport with my new one?A: Yes. The old passport will be returned to you at the Verification Counter with a cancellationstamp on it.Q: What would be the validity of the reissued passport?A: In case of adults, 10-year validity passport would be issued. In case of minors, the validity ofpassport is restricted to 5 years or till they attain the age of 18, whichever is earlier. But minorsbetween 15 to 18 years of age can apply either for a 10 year validity passport or for a passportwhich is valid till they attain the age of 18 years. Different fees are applicable depending uponwhich category they are applying for. To know the fee details, please Click HereQ: What are your responsibilities when applying for a passport, if your old passport is lost ordamaged?A: Loss of passport should be immediately reported to the nearest Police Station and to thePassport Office (PO) or Indian Mission, if abroad. You can apply for "Re-issue" of passport atyour nearest Passport Seva Kendra (PSK) and submit the required documents along with yourpassport application form. To check the list of documents, pleaseClick HereQ: What would be the validity of a passport if a minor applicant applies for reissue of passport?A: In case of "Re-issue" of passport, the validity of the minors passport is restricted to five yearsor till he/she attain the age of 18, whichever is earlier. But the minors between 15 to 18 years ofage can apply either for a 10-year validity passport or for re-issue of passport which is valid tillthey attain the age of 18 years. Different fees are applicable depending upon the category theyare applying for.Validity ExpiredQ: My passport expired 4 years ago. Can it be reissued? What is the procedure to reissue it?A: You have to fill up the Passport Application Form and apply for "Re-issue of Passport". Youcan submit the filled in application form at a Passport Seva Kendra (PSK)/Mini Passport Seva267 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Kendra (Mini PSK), within the jurisdiction of your Passport Office (PO). You must carry originaland self attested photocopy of your expired passport and proof of your address. Fresh policeverification is initiated if the passport has expired more than three years ago. Hence, freshpolice verification will be required in your case.Q: The validity of my passport has expired, but the pages in the booklet have not exhausted.What is the procedure to extend the validity?A: You need to apply for "Re-issue" of passport and submit the filled in application form at yournearest Passport Seva Kendra (PSK)/Mini Passport Seva Kendra (Mini PSK). A new passportbooklet would be issued to you.Q: What are the additional requirements if passport has expired more than three years ago?A: Fresh police verification would take place if you apply for reissue of passport after expiry ofold passport more than three years ago.Q: Im 25 now, but my last passport was issued when I was 15. What should I do?A: You need to apply for "Re-issue" of passport and submit the filled in application form at yournearest Passport Seva Kendra (PSK)/Mini Passport Seva Kendra (Mini PSK).Damaged PassportQ: What is the definition of damaged passport?A: Damaged passport is classified further based on the extent of damage, i.e.:1. Damaged Passport - Passport number is readable, name is legible and Photo is intact2. Damaged beyond recognitionQ: What is the procedure to apply for duplicate passport in case of lost or damaged passport?A: To apply for duplicate passport in case of lost or damaged passport, you have to fill thePassport Application form and apply for "Re-issue" of passport. For complete list of documents268 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • to be submitted please Click HereQ: My passport booklet is damaged. I want to go abroad on urgent basis. What should I do?A: If your passport is damaged but recognizable, i.e. passport number is readable, name islegible and photo is intact, then you can apply for "re-issue" of passport under the Tatkaalscheme. But, if passport is damaged beyond recognition, then you cannot apply under theTatkaal scheme. In that case, you need to visit Assistant Passport Officer (APO) at your nearestPassport Seva Kendra (PSK) to get the passport on urgent basis.Q: My passport has been destroyed by fire. What is the further process to get another passport?A: You have to fill the Passport Application form and apply for "Re-issue" of passport. Forcomplete list of documents to be submitted please Click HereLost/Stolen PassportQ: What do I do if I lose my passport?A: Loss of passport should be immediately reported to the nearest Police Station and to thePassport Office (PO) or Indian Mission, if abroad. You can apply for "Re-issue" of passport atyour nearest Passport Seva Kendra (PSK) and submit the required documents along with yourpassport application form. For complete list of documents to be submitted, please Click HereQ: I lost my passport recently. Ive applied for a duplicate passport. I want to know if the newpassport will have the same number as my old passport, or a new number?A: The new passport will have a new passport number, with a fresh validity of 10 years.Q: I recently lost my valid passport, but do not have the details. Will it be possible for thePassport Office (PO) to trace the details from your system and give them to me for filling myapplication form for a duplicate/new passport?A: You need to visit Assistant Passport Officer (APO) at your nearest Passport Seva Kendra(PSK).269 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: What can I do if I have lost my passport and have to travel to India urgently due to anemergency like serious illness or death in the family?A: If you have lost your passport during travelling, then you can come to India on the basis of"Emergency Certificate". For the issuance of "Emergency Certificate", you need to contact therespective mission/post of that country.Q: What is the procedure to apply for duplicate passport in case of lost or damaged passport?A: To apply for a duplicate passport in case of lost or damaged passport, you have to apply for a"Re-issue" of passport. To check the complete list of documents to be submitted along with theapplication form, please Click HereQ: I am an Indian living in Germany. I lost my Indian passport but I dont have photocopy of thesame. What should I do?A: Photocopy of the old passport is not a mandatory document to be submitted in case oflost/damaged/stolen passport. It should be produced, if it is available. But you will have toproduce, the previous passport details like Passport number, Date of issue, Date of expiry andPlace of issue, while filling the passport application form. If you do not have that information,then contact the respective mission/post of that country.Q: In case of lost/damaged passport we cannot apply under the Tatkaal scheme, but accordingto the fee list, in the Tatkaal scheme for such cases, additional Tatkaal fee of Rs.1500 is beingcharged Please clarify.A: Tatkaal can be granted only after Assistant Passport Officers (APOs)/Regional PassportOfficer (RPOs) approval.Q: I have lost my passport and want to apply for re-issue of passport. I dont remember mypassport number. What should I do?A: Please meet the Assistant Passport Officer (APO) at your nearest Passport Seva Kendra(PSK).270 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Exhaustion of PagesQ: The pages in my passport booklet have exhausted, but it has a validity of 5 years. What isthe procedure to apply for new booklet?A: You need to (Mini PSK). A new passport booklet would be issued to you with a fresh validityof 10 years.apply for "Re-issue" of passport and submit the filled in application form at your nearestPassport Seva Kendra (PSK)/Mini Passport Seva KendraQ: When is an additional booklet/additional pages issued?ORQ: My passport is nearly full but is valid for another 4 years, is it possible to add extra pages?A: Additional pages are not added to a passport booklet. If the pages in the passport booklethave exhausted, you need to apply for "Re-issue" of passport and submit the filled in applicationform at your nearest Passport Seva Kendra (PSK)/Mini Passport Seva Kendra (Mini PSK). Anew passport booklet would be issued to you. To check the complete list of documents to besubmitted along with the application form, please Click HereValidity Due to ExpireQ: My passport will expire in 2 years. What should I do?A: You can apply for a re-issue of passport up to 1 year before the expiry or within three yearsafter the expiry of the existing passport without fresh police verification, provided there is clearpolice report with respect to your previous passport and there is no adverse entry in the system.You can also apply for reissue of passport if your last passport has expired more than threeyears ago, but fresh police verification would take placeQ: How long is a passport valid?A: In case of adults, 10-year validity passport would be issued. In case of minors, the validity ofpassport is restricted to 5 years or till they attain the age of 18, whichever is earlier. But theminors between 15 to 18 years of age can apply either for a 10-year validity passport or for apassport which is valid till they attain the age of 18 years. Different fees are applicable271 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • depending upon the category they are applying for. To know the fee details, please Click Here.Further, most of the embassies who issue visas insist on the passport validity being at least ofsix months to one year before they consider issuing visas. Accordingly, apply for reissue wellbefore time and save the last minute rush.Q: My passport is about to expire, but I have lost my birth certificate. What are my options?A: If your passport is due to expire, you need to apply for "Re-issue" of passport. In case of "Re-issue" of passport, you need to submit a date of birth proof, if either your old passport has beenlost/damaged or you want to change date of birth details in the passport.To check the complete list of documents which can be submitted as date of birth proof, pleaseClick HereRenewal of Short Validity Passport (SVP): When is a Short Validity Passport (SVP) issued?A: Short Validity passport (SVP) is issued in following cases:1. In case of urgency, students can be issued a SVP on production of admission letters if theyare to appear in examinations, such as TOEFL, SAT etc. Such applications can also beprocessed under the Tatkaal Scheme, if they are accompanied by verification certificates asprescribed, and proof of urgency is furnished to the Passport Office (PO).2. There are instances of non-delivery of passports to the applicants due to loss in transit in thepost offices. In case of urgency, a short validity passport may be issued to the applicant, thevalidity to be extended to full term on completion of the formalities.3. Indians residing abroad and visiting India for a short period: A SVP can be issuedimmediately, valid for one year, on production of return ticket to the country from which theapplicant came and/or a document of identity such as driving license, Green Card, employmentpermit, social security card, health card, labour card etc. indicating the applicants identity andnationality. If the application is for issue of duplicate passport in lieu of damaged passport, thedamaged passport itself may be accepted as proof of identity provided the personal particularsare clear and legible.4. If a criminal case is pending against you in any court, passport can be issued subject to thecondition that a written permission granted by the court allowing the applicant to travel abroad isenclosed. Normally a SVP valid for one year is issued, subject to conditions if any, mentioned inthe Court Order as per GSR 570 (E) dated 25 August, 1993.For complete list of documents to be submitted please Click Here.272 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: What will be the validity of passport if I apply for renewal of a Short Validity Passport (SVP)?A: If you apply for renewal of a Short Validity Passport (SVP), then the validity of passport wouldbe decided by Assistant Passport Officer (APO).Change of AppearanceQ: My appearance has changed. What should I do?ORWhat is the procedure to change photograph of a child in the passport?A: To change the photograph in the passport, you have to apply for a "Re-issue" of passportand get the specified change done in the personal particulars. To check the complete list ofdocuments to be submitted along with the application form, please Click HereChange of SignatureQ: What documents have to be submitted in case of change of address and signature in thepassport?A: To check the complete list of documents to be submitted along with the application form,please Click HereChange of NameQ: My name has changed. Can I travel in my previous name? Otherwise how do I change thename on my passport?273 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • A: You can travel in your previous name, but it is recommended in this case that your tickets areissued in the same name.To change your name in the passport, you have to apply for a "Re-issue" of passport and getthe specified change done in personal particulars. To check the list of documents to besubmitted, please Click HereQ: What documents are required when there is a change in name on account of divorce?A: Following additional documents have to be submitted:-(i) Court certified copy of Divorce Decree or self attested copy of Divorce certificate.(ii) Deed Poll or Sworn Affidavit as per Annexure "E" given in the Passport Instruction booklet.For complete list of documents to be submitted along with the application form, please ClickHereQ: I recently got married/divorced. How do I change my name on my passport?ORWhat is the procedure to change the name in the passport?ORWhat are the requirements/documents to be submitted if change of name is NOT consequentupon marriage (new passport issued with new name)?A: To change the name in the passport, you have to apply for a "Re-issue" of passport and getthe specified change done in the personal particulars. To check the complete list of documentsto be submitted along with the application form, please Click HereQ: There is a mistake in the spelling of my name in the passport. What can I do?A: If you find any mistake/error in the particulars printed in the passport booklet as per theapplication form submitted, please return the passport for necessary rectification. Any additionalfees required to be paid would depend solely on Assistant Passport Officer (APO)/PassportIssuing Authority (PIA) decision. If there is a misrepresentation of facts, then penalty could alsobe imposed.However, applicants are requested to apply online which will ensure that the passports aredelivered without any typographical errors since applicants have themselves fed the data.Q: The Surname field is blank on my passport. And my full name is written in the Given Namefield. Could anybody tell the process to add the surname to my passport?A: If you find any mistake/error in the particulars printed in the passport booklet as per the274 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • application form submitted, please return the passport for necessary rectification. Any additionalfees required to be paid would depend solely on Assistant Passport Officers (APOs)/RegionalPassport Officers (RPOs) decision. If there is a misrepresentation of facts, then penalty couldalso be imposed.However, applicants are requested to apply online which will ensure that the passports aredelivered without any typographical errors since applicants have themselves fed the data.If you have done a mistake while filling your passport application form i.e. you have filled yourfull name in the "Given Name" field, then you will have to apply for re-issue of passport forchange in personal particulars.Q: Explain major and minor change in name?A: Minor change in name - change in name because of spelling discrepancy between passportand documents which phonetically do not result in total change in name.Major change in name - Cases other than minor change in name.Q: If the applicant changes his/her name from: 1. Sandeep Sharma to Sandeep Kumar Sharma 2. Sandeep Kumar to Sandeep Sharma 3. Ritu to Ritu ThakurThe above change would be considered a major change or a minor change in name?A: Minor change in name - change in name because of spelling discrepancy between passportand documents which phonetically do not result in total change in name.Major change in name - Cases other than minor change in name.In Case 1 and Case 2, it is a major change in name. In Case 3, if change in name is due tomarriage then it falls in the category "Change in name due to marriage". If change in name isnot due to marriage, it is a major change in name.Q: Is No Police Verification (PV) possible in case of change in name of Govt./PSU/StatutoryBody employees? If yes, what documents are required?A: The documents required are: • Issue of fresh passport: In case of change in name of Govt./PSU/statutory body employees, pre Police Verification (PV) will be done. Post Police Verification (PV) will be done on submission of Tatkaal documents. • Reissue of passport: In case of change in name of Govt./PSU/statutory body employees, if the old passport has clear or exempted PV Report and required documents are submitted No Police Verification (PV) will be done.275 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • For complete list of documents to be submitted pleaseClick Here.Change of Date of BirthQ: What is the process to change the date/place of birth in the passport?A: To change the date/place of birth in the passport, you have to apply for a "Re-issue" ofpassport and get the specified change done in the personal particulars. To check the completelist of documents to be submitted along with the application form, please Click HereQ: What are the requirements/documents needed for getting the date of birth changed in thepassport?A: To change the date of birth in the passport, you have to apply for a "Re-issue" of passportand get the specified change done in the personal particulars. To check the complete list ofdocuments to be submitted along with the application form, please Click HereQ: I want to get the DOB changed in the passport since there is a typing error. What should Ido?A: If you find any mistake/error in the particulars printed in the passport booklet as per theapplication form you submitted, please return the passport for necessary rectification. Anyadditional fees required to be paid would depend solely on Assistant Passport Officers(APOs)/Regional Passport Officers (RPOs) decision. If there is a misrepresentation of facts,then penalty could also be imposed.However, applicants are requested to apply online as that will ensure that the passports aredelivered without any typographical errors since applicants have themselves fed the data.Change of Spouses NameQ: What is the process to endorse spouses name on my passport?A: To endorse the spouses name on your passport, you have to apply for a "Re-issue" ofpassport and get the specified change done in personal particulars. To check the list ofdocuments to be submitted along with the application form, please Click Here276 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: I got my passport 2 years ago. I got married recently. Should I include my spouses name inmy passport? If so, what is the procedure?A: It is better to include your spouses name in your passport. For this purpose, you need to fill aPassport Application form for "Re-issue of Passport" and submit it at the Passport Seva Kendra(PSK)/Mini Passport Seva Kendra (PSK), within the jurisdiction of your Passport Office (PO).Tocheck the list of documents to be submitted along with the application form, please Click HereQ: What documents are required for deletion of spouses name on account of divorce?A: Following additional documents have to be submitted:-(i) Court certified copy of Divorce decree or self attested copy of Divorce certificate.(ii) Deed Poll or Sworn Affidavit as per Annexure "E" given in the Passport Instruction booklet.For complete list of documents to be submitted along with the application form, please ClickHereChange of AddressQ: How do I change the address on my passport?A: To change the address in the passport, you have to apply for a "Re-issue" of passport andget the specified change done in the personal particulars. To check the complete list ofdocuments to be submitted along with the application form, please Click HereQ: While applying for a fresh passport, the applicant mentions his paying guest address aspresent address in the application form. If the applicant shifts to another address before policeverification, what should he/she do?A: He/She should intimate the Department Incharge of Police Station.Deletion of ECRQ: My passport was issued at Passport Office, Hyderabad. Presently, I am working atChandigarh for the last one year. Can I apply for Non-ECR status at Chandigarh and what arethe documents required?A: You can apply for deletion of ECR at your nearest PSK/Mini PSK within the jurisdiction ofPassport Office (PO), Chandigarh. For this purpose, you need to submit Passport Application277 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • form along with the following documents:1. Original and self attested photocopy of your passport.2. Documentary proof for any one of the Non-ECR (previously ECNR) categories - if you areeligible for Non-ECR.3. Proof of present address.To know the list of documents which can be submitted as Address Proof, please Click HereQ: My child has ECR status printed on his passport? What should I do?A: To change the ECR status printed on your childs passport, you have to apply for a "Re-issue" of passport and get the specified change done in personal particulars.Change of Place of BirthQ: What is the process to change the date/place of birth in the passport? What are therequirements/documents needed for getting the date of birth changed in the passport?A: If you want to change the date/place of birth in the passport, you need to apply for "Re-issue"of passport and submit the filled in application form at your nearest Passport Seva Kendra(PSK)/Mini Passport Seva Kendra (Mini PSK). A new passport booklet would be issued to you.To check the list of documents to be attached with the application form, please Click HereChange of GenderQ: Can I apply for change in my gender or change in fathers/mothers name in the passport?What additional documents do I have to submit?A: To change your gender or your fathers/mothers name, you have to apply for a "Re-issue" ofpassport and get the specified change done in personal particulars.To check the list of documents to be submitted, please Click HereChange of Fathers/Mothers Name278 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: Can I apply for change in my gender or change in fathers/mothers name in the passport?What additional documents do I have to submit?A: To change your gender or your fathers/mothers name, you have to apply for a "Re-issue" ofpassport and get the specified change done in personal particulars.To check the list of documents to be submitted, please Click HereIssue of Police Clearance Certificate (PCC)Q: How do I apply for a Police clearance Certificate (PCC)?A: You can submit the filled in Police Clearance Certificate (PCC) Application Form at PassportSeva Kendra (PSK)/Mini Passport Seva Kendra (Mini PSK), within the jurisdiction of yourPassport Office (PO). You need to attach the self-attested photocopies of following documentsalong with the Police Clearance Certificate (PCC) Application Form:1. Passport in original with self-attested photocopy of its first two and last two pages, includingECR/Non-ECR page (previously ECNR) and the page of observation (if any), made by PassportIssuing Authority and validity extension page, if any, in respect of short validity passport.2. Proof of Present Address (if address is different from the one mentioned on passport).Q: In how much time will Police Clearance Certificate (PCC) be issued?A: Please refer the table below to determine the time required for issuing Police ClearanceCertificate (PCC) in various cases: Police Verification Report (PVR)/ S.No. Service Levels Observation in System Police Verification Report in respect of the existing passport is clear and there Police Clearance Certificate 1. is no subsequent adverse entry in the (PCC) will be issued on the same system day at PSK/ Mini PSK. a) Police Verification was not required when the passport was issued as the applicant was then a minor and has now become an adult 2. b) Police Verification was not required when the passport was issued as the applicant was a dependent of a Police Clearance Certificate Government employee279 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • c) Police Verification process could not (PCC) will be issued only after be completed at the time of issuance of completion of police verification passport due to various reasons process. After PVR is received, Passport Office (PO) will inform d) Applicants present address is the applicant through e-mail/ different from that mentioned in the letter. Applicant needs to come to passport the Passport Office (PO) with his/her passport to collect Police Clearance Certificate (PCC). Country for which Police e) Any other such cases where passport Clearance Certificate (PCC) is was issued without police verification being issued will be stamped on the passport.Q: What is the procedure to apply for Police Clearance Certificate (PCC) if passport was issuedfrom another Passport office/Indian Mission?A: If you are in India, you can submit the filled in Police Clearance Certificate (PCC) ApplicationForm at Passport Seva Kendra (PSK)/Mini Passport Seva Kendra (Mini PSK), within thejurisdiction of your Passport Office. If you are abroad, you need to contact the respective Indianmission/post of that country. You need to attach the self-attested photocopies of the followingdocuments along with the Police Clearance Certificate (PCC) Application Form:1. Passport in original with self-attested photocopy of its first two and last two pages, includingECR/Non-ECR page (previously ECNR), the page of observation (if any) made by PassportIssuing Authority, and validity extension page, if any, in respect of short validity passport2. Proof of Present Address (if address is different from the one mentioned on passport).Q: What is the validity of Police Clearance Certificate (PCC)?A: There is no validity specified for Police Clearance Certificate (PCC). However, if the particularcountry asks for a specific validity, then you need to meet Assistant Passport Officer (APO) atyour nearest Passport Seva Kendra (PSK) for the same.Q: Can Police Clearance Certificate (PCC) be issued for more than one country through oneapplication form?A:Police Clearance Certificate (PCC) can only be issued for one country through one applicationform.Q: What is the age limit for getting the Police Clearance Certificate (PCC)?280 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • A: There is no age limit specified for getting the Police Clearance Certificate.Q: Are minor citizens required to apply for Police Clearance Certificate?A: Police Clearance Certificate (PCC) can be issued to minors, if a country asks for the same.Issue/ Re-issue of Diplomatic/Official PassportQ: I am preparing for official travel. How do I obtain my diplomatic, official or regular no-feepassport?A: You need to fill the Diplomatic/Official Passport Application form. Normally applications fordiplomatic and official passports are entertained only at the Consular, Passport and Visa (CPV)Division, Patiala House, New Delhi. However you can also choose to apply at any PassportOffice if you reside outside the National Capital Region. Please submit the following documentsalong with the application form:1. Original safe custody certificate of valid ordinary passport (if held) from your office.2. If Diplomatic/Official passport previously held by the applicant were kept in the safe custodyof the Ministry of External Affairs, the original certificate should be enclosed.3. Diplomatic/Official/Ordinary passport which is around 10 years old or more (from the date ofissue) must be submitted with the application for cancellation.4. Official retiring in less than six months from the date of application, is required to give anundertaking from his/herTatkaal RelatedQ: I am travelling very soon. How can I get a passport urgently?ORI have to travel to the UK next week on a company assignment. I dont have a passport. Can Iget a new passport under the Tatkaal Scheme?A: You can apply under the Tatkaal scheme, if you are eligible and have to pay the additionalTatkaal fee of Rs.1, 500. You must submit a Verification Certificate (as per Annexure "F") orthree out of 15 documents along with Standard Affidavit (as per Annexure "I").To check the eligibility under the Tatkaal scheme, please refer Section D: Table 2 "List ofApplicant Categories and Documents to be submitted" of the instruction booklet. To check the281 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • complete list of documents to be submitted along with the application form, please Click HereQ: Can I apply for a passport under the Tatkaal scheme?A: The final authority of the issuance of passport under the Tatkaal scheme lies with thePassport Office. But, there are list of applicants who cannot apply for passport under the Tatkaalscheme.To check the list of applicants who cannot apply under the Tatkaal scheme, please referinstruction booklet.Click Here to download Instruction Booklet.Q: Can I apply for a passport under the Tatkaal scheme at District Passport Cell (DPC)/SpeedPost Centre (SPC)/Citizen Service Centre (CSC)?A: Tatkaal applications are accepted only at Passport Seva Kendra (PSK)/Mini Passport SevaKendra (Mini PSK). They are not accepted at District Passport Cell (DPC)/Speed Post Centre(SPC)/Citizen Service Centre (CSC).Q: I have submitted my passport under the normal procedure, but now I need my passporturgently. Can I convert my application to a Tatkaal application?A: You need to visit Assistant Passport Officer (APO) at your nearest Passport Seva Kendra(PSK).Q: Is Tatkaal Passport Process is same as Normal Passport Process?A: Under the Tatkaal scheme, an applicant needs to submit additional documents and additionalfees along with his/her application form. Also, police verification will be done after the issuanceof passport.To check the list of additional documents, please Click Here and to check the fee structure,please Click HereQ: I am a resident of Nagaland and want to get a passport on urgent basis. What should I do?A: To get the passport on urgent basis, you need to visit Assistant Passport Officer (APO) atyour nearest Passport Seva Kendra (PSK).Q: I was born in Delhi and my present address is in Delhi. My permanent address is in Jammu282 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • and Kashmir. I have not visited my permanent address for last 20 years. Can I apply for apassport under the Tatkaal scheme?A: To get a passport under the Tatkaal scheme, you need to visit Assistant Passport Officer(APO) at your nearest Passport Seva Kendra (PSK).Q: My passport booklet is damaged. I want to go abroad on urgent basis. What should I do?A: In case your passport is damaged but recognizable, i.e. Passport Number is readable, nameis legible and photo is intact, then you can apply for "re-issue" of passport under Tatkaalscheme. But, if your passport has been damaged beyond recognition, then you cannot applyunder the Tatkaal scheme. In that case, you need to visit Assistant Passport Officer (APO) atyour nearest Passport Seva Kendra (PSK) to get the passport on urgent basis.Q: If parents have passport with adverse Police Verification Report or they have a criminalbackground, can passport be issued to a minor on urgent basis?A: In such cases, minors can be issued passport under the Tatkaal scheme subject to AssistantPassport Officer (APOs) approval.Q: I am a Nagaland senior citizen and want to obtain a passport under the Tatkaal scheme. CanI do so?A: To get a passport under the Tatkaal scheme, you need to visit Assistant Passport Officer(APO) at your nearest Passport Seva Kendra (PSK).Emigration Check Required (ECR) RelatedQ: I have a passport with ECR status printed on it. What does this mean?A: Emigration clearance is required for employment in the following countries (18 in total):United Arab Emirates (UAE), Kingdom of Saudi Arabia (KSA), Qatar, Oman, Kuwait, Bahrain,Malaysia, Libya, Jordan, Yemen, Sudan, Brunei, Afghanistan, Indonesia, Syria, Lebanon,Thailand, and Iraq.ECR passport holders taking up employment in the above mentioned list of 18 countries requireemigration clearance from the office of the Protector of Emigrants (POE) before leaving India;otherwise, they will be stopped from travelling at the port of exit. Please Click Here to downloadthe instruction booklet.ECR passport holders travelling abroad for a purpose other than employment, to any of the list283 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • of 18 countries, will be allowed to leave the country on production of valid passport, valid visaand return ticket at the immigration counters of an international airport in India.Q: What are the categories eligible for Non-ECR status and what documents do they have tosubmit?A: To view the complete list of Non-ECR categories and the documents to be submitted, pleaseClick HereQ: My passport was issued at Passport Office, Hyderabad. Presently I am working inChandigarh for the last one year. Can I apply for Non-ECR status at Chandigarh and what arethe documents required?A: You can apply for deletion of ECR at your nearest Passport Seva Kendra (PSK)/MiniPassport Seva Kendra (Mini PSK) within the jurisdiction of Passport Office, Chandigarh. For thispurpose, you need to submit Passport Application form along with the following documents:1. Original and self attested photocopy of your passport.2. Documentary proof of any one of the Non-ECR (previously ECNR) categories - if you areeligible for Non-ECR.Proof of present address.To view the list of documents that can be submitted as address proof, please Click HereQ: I dont have Non-ECR status in my passport. Can I get it on the basis of my provisionalmatriculation or above certificate issued by the University/Board concerned?A: You need to apply for Re-issue of passport for deletion of ECR. A new passport booklet(without having the "ECR" status printed on its last page) will be dispatched to you.You are entitled to Non-ECR status if you possess qualification of Matriculation or above. Youcan get Non-ECR status on the basis of provisional matriculation certificate if the mark sheets ofall semesters of your course are available with you.To check the complete list of Non-ECR categories, please Click HereQ: I am a salaried person and income tax is deducted from salary. What are the documents Ineed to submit for Non-ECR status?A: Following documents have to be submitted for Non-ECR (previously ECNR) status: • Proof of assessment of income tax and actual payment of income tax for last one year; or • Income Tax return statement (with income tax being paid by the applicant) for last one year that is stamped by income tax authorities and a copy of the PAN card.284 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • For complete list of documents to be submitted along with the application form, please ClickHereQ: I have a passport with ECR status. Is emigration clearance required if I want to visit a countryother than the list of 18 countries mentioned in the instruction booklet?A: No, emigration clearance is not required, if you want to visit a country other than the list of 18countries mentioned in the instruction booklet. ECR passport holders travelling abroad forpurpose other than employment, to any of the list of 18 countries, will be allowed to leave thecountry on production of valid passport, valid visa and return ticket at the immigration countersof an international airport in India.ECR passport holders taking up employment in the list of 18 countries require emigrationclearance from the office of the Protector of Emigrants (POE) before leaving India; otherwise,they will be stopped from travelling at the port of exit.Q: I have a passport with ECR status and have an employment visa on it. Do I requireemigration clearance?A: ECR passport holders taking up employment in the list of 18 countries mentioned in theinstructions of passport application form require emigration clearance from the office of theProtector of Emigrants (POE) before leaving India; otherwise, they will be stopped fromtravelling at the port of exit.A passport holder having employment visa in passport does not require clearance from POEwhen they go back after a short visit to India, else emigration clearance is required.Q: My child has ECR status printed on his passport? What should I do?A: To change the ECR status printed on your childs passport, you have to apply for a "Re-issue" of passport and get the specified change done in personal particulars.Q: I have ECR status printed on my passport. I want to go to Malaysia urgently. What is theprocedure I need to follow?A: At present Emigration control is exercised by the Ministry of Overseas Indian Affairs, throughProtector of Emigrants (POE) under the Emigration Act, 1982. Emigration clearance is requiredfor employment in the following countries (18 in total):United Arab Emirates (UAE), Kingdom of Saudi Arabia (KSA), Qatar, Oman, Kuwait, Bahrain,Malaysia, Libya, Jordan, Yemen, Sudan, Brunei, Afghanistan, Indonesia, Syria, Lebanon,Thailand, and Iraq.If you are going to Malaysia for purpose other than employment, you will be allowed to leave the285 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • country on production of valid passport, valid visa and return ticket at the immigration countersof an international airport in India.If you are taking up employment in Malaysia, you require emigration clearance from the office ofthe Protector of Emigrants (POE) before leaving India; otherwise, they will be stopped fromtravelling at the port of exit. For further clarification refer website www.moia.gov.inOther Service Related QueriesQ: Can I apply for services at a Passport Office other than the Passport Office where myprevious passport was issued?A: You can apply at any Passport Seva Kendra (PSK)/Mini Passport Seva Kendra (Mini PSK),within the jurisdiction of your Passport Office. If you are a student studying elsewhere, you canalso apply at a Passport Seva Kendra (PSK) of the state of your permanent address.Q: I shifted to Delhi 7 months back from Bangalore. I want to apply for a passport. Can I applyfor a passport at Passport Office, Delhi? If so, please let me know the procedure.A: Yes, you can apply at any Passport Seva Kendra (PSK)/Mini Passport Seva Kendra (MiniPSK) within the jurisdiction of Passport Office (PO), Delhi. For this purpose, you have to fillPassport Application form and submit the required documents. Since, you have stayed at yourpresent address for less than one year, please mention your previous address in Column 3 ofthe Supplementary form.To check the complete list of documents to be submitted, please Click HereQ: Can I obtain a new passport if I am in USA on a visitors visa?A: Visitors from India on B1 /B2 visa who are not normally resident in USA are advised to holdpassports which are valid for the period of their visit. In such cases, where it becomesnecessary due to unavoidable reasons, passport would be reissued after clearance from theoriginal Passport Issuing Authority.Q: Can I get a passport on Post police verification under the Normal scheme?A: The issuance of passport on Post police verification under the Normal scheme depends oncase to case basis. The applicant needs to submit additional documents for the same. Pleaserefer the Document Advisor for such cases and list of documents to be submitted.286 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: I had applied for a passport last year but the same was not issued. I want to again apply for apassport. Should I put a cross against "Fresh Passport" or "Reissue of Passport" in Column 1.1of the Passport Application form?A: You have to apply for "Fresh Passport", if you were not issued passport last time. You needto provide the previous application details like file number, month & year of applying and nameof the Passport Office (PO) where applied, in Column 7.2 of the Passport Application form.Q: Can an Indian passport be issued to applicants born outside India?A: Indian passport can be issued to the "Citizen of India by Descent" i.e. person born to Indianparent(s) outside India.Q: An applicant is staying in Bangalore for last two years and his/her permanent address is inKerala. Can he/she endorse his/her permanent address instead of present address in thepassport?A: Only the present address will be endorsed on the passport, not the permanent address.Application Channels OverviewQ: I applied last week for a passport at the Passport Office (PO) or I applied last week through atravel agent at the Passport Office (PO). Should I now apply in the new system again?A:No. You need not apply in the new system again. Your application will be processed in the oldsystem.Q: What are the various locations where I can submit my application for obtaining a passport?A:You can submit the filled in Passport Application Form at the following locations: • Any Passport Seva Kendra (PSK)/Mini Passport Seva Kendra (Mini PSK) within the jurisdiction of your Passport Office (PO) • District Passport Cell (DPC) of your district • Speed Post Centre (SPC) in your district • Citizen Service Centre (CSC) if any, in your area287 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • You can also fill the form online before coming to Passport Seva Kendra (PSK) . While PassportSeva Kendras (PSKs) offer all kinds of passport services, only fresh passport applications areaccepted at District Passport Cells (DPCs), Speed Post Centres (SPCs) and Citizen ServiceCentres (CSCs). You can also locate the application submission centre on ourwebsite www.passportindia.gov.inQ: What are the various channels through which I can apply for reissue of my passport?ORQ: My passport booklet is exhausted. Where can I apply for reissue of my passport?A:No. You can submit the filled in Passport Application Form at any Passport Seva Kendra(PSK)/Mini Passport Seva Kendra (Mini PSK) within the jurisdiction of your Passport Office(PO). You can also fill the form online before coming to Passport Seva Kendra (PSK). Forsubmitting your application online, you need to register yourself as a user on ourwebsite www.passportindia.gov.in .To create your user account for online form submission, Register now.Q: What are the various channels through which I can apply for Police Clearance Certificate(PCC)?A:You can apply for PCC at Passport Seva Kendra (PSK)/Mini Passport Seva Kendra (MiniPSK), within the jurisdiction of your Passport Office. You can also fill the form online beforecoming toPassport Seva Kendra (PSK). For submitting yourPolice Clearance Certificate (PCC)application online, you need to register yourself as a user on ourwebsite www.passportindia.gov.in .To create your user account for online form submission, Register now.Q: Where can I submit the diplomatic /official passport application form?<A:Normally applications for diplomatic and official passports are entertained only at theConsular, Passport and Visa (CPV) Division, Patiala House, New Delhi. However, you can alsochoose to apply at any Passport Office if you reside outside the National Capital Region.Q: Can anyone else submit my passport application on my behalf?A:Under the new system, it is mandatory for all applicants to be physically present whilesubmitting the passport application form whether it is at the Passport Seva Kendra (PSK) or atthe District Passport Cell (DPC)/Speed Post Centre (SPC)/Citizen Service Centre (CSC).288 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: I want to add my spouse name on my passport. Where can I apply for the same?ORQ: I want to change my existing personal particulars in the passport. Where can I apply for thesame?A:If you want to add spouse name in your passport, you need to apply for reissue ofpassport. You can submit the filled in Passport Application Form at any Passport Seva Kendra(PSK)/Mini Passport Seva Kendra (Mini PSK) within the jurisdiction of your Passport Office. Youcan also fill the form online before coming to Passport Seva Kendra (PSK). For filling theapplication online, you need to register yourself as a user on ourwebsite www.passportindia.gov.inTo create your user account for online form submission, Register nowQ: I am an Indian Citizen by origin and have been repatriated from Sri Lanka. I want to apply fora passport. Where can I apply for the same?A:You can submit the filled in Passport Application Form at any Passport Seva Kendra(PSK)/Mini Passport Seva Kendra (Mini PSK) within the jurisdiction of your Passport Office.Q: What are the various DOs and DONTs for applicants applying at District Passport Cell(DPC)/Speed Post Centre (SPC)/Citizen Service Centre (CSC)?A:The various DOs and DONTs for applicants applying at District Passport Cell (DPC)/SpeedPost Centre (SPC)/Citizen Service Centre (CSC) are: Paste colour photograph having white/light background, No signature/ stamp on the pasted photograph, Size- 4.5 cm x 3.5 Photograph cm, photograph on the application form should be of the applicant only. Should be issued by a Scheduled bank, Validity 60 days or more Demand Draft from date of submission, Draft should be of exact amount of fee, as applicable and not be torn/soiled. Self-attested photocopies of the supporting documents that need to be submitted along with the form (In case of submission at Citizen Service Centre (CSC), particularly at Bangalore-1, applicants are requested to attach attested photocopies (either gazetted official or notary) of all documents with the application Documents form.)CLEARphotocopies, One documentary proof is sufficient for each document category, Documents should be correctly mentioned in the "ENCLOSURES" section and properly attached, Personal Details mentioned in the application form should match the details in the enclosed documents e.g. address, employment type, gender, Parents/Spouse name, citizenship, Date of Birth.289 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Only passport application forms in NEW FORMAT will be accepted, form should not be torn/soiled, form should be complete/correct in all respects e.g. valid 10 digit mobile number, Education Qualifications & Emergency Contact Details should be Application form mentioned clearly, Present/Permanent Address with correct Pin code is filled, Residing since and both references should be provided, ECNR category to be appropriately mentioned. In "Place of Birth" column, only "Village", "District" and "State" needs to be mentioned; "Post" and "Taluk" not required. Applicant should sign/ provide thumb impression STRICTLY Signature within the designated box below the photograph and also at the self declaration in the last page.Q: What are the key changes with respect to passport application submission at DistrictPassport Cells/Speed Post Centres (SPCs)/Citizen Service Centres (CSCs)?A:Only fresh passport applications will now be accepted at District Passport Cells/Speed PostCentres (SPCs)/Citizen Service Centres (CSCs). Therefore, following cases will NOT behandled at District Passport Cells/Speed Post Centres (SPCs)/Citizen Service Centres (CSCs): • Reissue Case • Tatkaal Case • Complex CaseClick here to view list of complex cases • Miscellaneous services (e.g. Police Clearance Certificate (PCC))Applicants requiring the above passport services should visit nearest Passport Seva Kendra(PSK)/ Mini Passport Seva Kendra (Mini-PSK). To know the location of the Kendra nearest toyou, visit the Website (www.passportindia.gov.in) or call Toll Free (1800-258-1800) .OnlineQ: Who can apply online?A:Only Indian citizen living in India can avail the online service. This service is not available toIndian citizens living outside India. Applicants can apply online for ordinary passport - issue offresh passport, re-issue of passport and issue of police clearance certificate (PCC).Q: Can online registered application be submitted at District Passport Cell (DPC)/Speed PostCentre (SPC)/Citizen Service Centre (CSC)?290 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • A:Online registered applications have to be submitted at Passport Seva Kendra (PSK)/MiniPassport Seva Kendra (Mini PSK). They are not accepted at District Passport Cell (DPC)/SpeedPost Centre (SPC)/Citizen Service Centre (CSC).Q: I have downloaded the passport application form from your website. Can I fill and submit it?A:Yes, downloaded form which is duly filled in is acceptable. But make sure that the form isprinted in good quality paper (90 GSM or above), using a good quality printer. The form shouldnot be folded or soiled when it is presented at a Passport Seva Kendra (PSK). Passport SevaKendra (PSK) staff can reject your form in case it is not being properly scanned at the PassportSeva Kendra (PSK) due to reasons mentioned above.Q: I have printed my online form and have found a mistake. How can I correct it?A:At the Passport Seva Kendra (PSK)/Mini Passport Seva Kendra (Mini PSK), please ask theCitizen Service Executive (CSE) to make the required changes in the application form.Q: Can I apply online for reissue of passport?A:Yes, if you are an Indian citizen living in India, you can apply online for re-issue of passport.For submitting your passport application online, you need to register yourself as a user on ourwebsite www.passportindia.gov.in To create your user account for online formsubmission, Register now.Q: I am an Indian citizen but currently I am residing in France. My passport has expired. Can Iapply online for reissue of passport?A:Q: Can I apply for Police Clearance Certificate (PCC) application online?A:Yes, you can apply for Police Clearance Certificate (PCC) application online. For submittingyour Police Clearance Certificate (PCC) application online, you need to register yourself as auser on our website www.passportindia.gov.in .To apply for Police Clearance Certificate (PCC) application online, please Click Here .Q:How can I apply for a passport online?OR291 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: What are the things I need to take care of while applying for a passport online? (Checklist)A:To apply online, you need to be a registered user. When you apply online, you also have anoption to download an e-Form that you can fill offline and upload later on. For downloading theform you need not be a registered user, but for uploading the form you need to register yourself.To apply for a passport online, please Click Here .You can also upload the documents required for applying the passport. You should have thescanned copy of the documents.Passport Seva Kendra (PSK)/Mini Passport Seva Kendra (Mini-PSK)Q: What is a Passport Seva Kendra (PSK)?A:Passport Seva Kendra (PSK) will facilitate front-end activities of passport issuance. Hence, itwill facilitate the issuing of passport to applicants. These centres will cover functionalities fromtoken issuance to final granting of application for passport issue/re-issue and other services.Q: What all necessary documents, I need to carry while applying for a passport at a PassportSeva Kendra (PSK)/Passport Seva Kendra (Mini PSK) ? (Checklist)A:To view the list of documents to be submitted along with the application form, please ClickHere .Passport Office (PO)Q: What is a Passport Office (PO)?A:Passport Office (PO) would handle all back-end activities required for processing all passportapplications. The POs would be responsible for (i) printing (ii) lamination (iii) dispatch ofPassports, and (iv) granting of applications received through District Passport Cell (DPC),Speed Post Centre (SPC) and Citizen Service Centres (CSCs) besides attending to (I)establishment matters, (ii) legal cases and (iii) financial matters.292 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: What kinds of applications are handled at a Passport Office?A:Following types of applications are processed at a Passport Office (PO): 1. Special purpose passports for visiting countries like Israel/Taiwan 2. Diplomatic Official Passports 3. Further processing of District Passport Cell (DPC)/Speed Post Centre (SPC)/Citizen Service Centre (CSC) cases be sent by respective Passport Seva Kendra (PSK). 4. Further processing of Complex Cases escalated by Assistant Passport Officer (APO) at Passport Seva Kendra (PSK) to Regional Passport Officer (RPO) at Passport Office (PO)Q: I want to apply for a fresh passport. Can I apply for the passport at a Passport Back Office asit is near to my place?A:No, you cannot apply for a passport at a Passport Back Office. You need to visit PassportSeva Kendra (PSK)/Passport Seva Kendra (Mini PSK)/District Passport Cell (DPC)/Speed PostCentre (SPC)/Citizen Service Centre (CSC) in your area to submit your passport application.District Passport Cell (DPC) of your districtQ: What is a District Passport Cell (DPC)?A:District Passport Cell (DPC) is a collection centre where application forms pertaining to issueof fresh passports can be submitted. All the forms that are collected are then sent to thedesignated Passport Seva Kendra (PSK) for further processingQ: Can I apply for a passport under the Tatkaal scheme at District Passport Cell (DPC)/SpeedPost Centre (SPC)/Citizen Service Centre (CSC)?A: Tatkaal applications are accepted only at Passport Seva Kendra (PSK)/Mini Passport SevaKendra (Mini PSK). They are not accepted at District Passport Cell (DPC)/Speed Post Centre(SPC)/Citizen Service Centre (CSC)Q: Can online registered application be submitted at District Passport Cell (DPC)/Speed PostCentre (SPC)/Citizen Service Centre (CSC)?A: Online registered applications have to be submitted at Passport Seva Kendra (PSK)/MiniPassport Seva Kendra (Mini PSK). They are not accepted at District Passport Cell (DPC)/SpeedPost Centre (SPC)/Citizen Service Centre (CSC).Q: The validity of my passport is expiring in six months. Can I apply for reissue of passport293 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • through District Passport Cell (DPC) available in my district?A: No, you cannot apply for reissue of passport through District Passport Cell (DPC)/Speed PostCentre (SPC)/Citizen Service Centre (CSC) available in your district. Only application formpertaining to issue of fresh passport can be submitted at District Passport Cell (DPC)/SpeedPost Centre (SPC)/Citizen Service Centre (CSC).Q: What documents I need to carry while applying for a passport in District Passport Cell(DPC)/Speed Post Centre (SPC)/Citizen Service Centre (CSC)? (Checklist)A: When you go to a District Passport Cell (DPC)/Speed Post Centre (SPC) or Citizen ServiceCentre (CSC) for submitting your application form, please carry: • Self-attested photocopies of the supporting documents that need to be submitted along with the form (In case of submission at Citizen Service Centre (CSC), particularly at Bangalore-1, applicants are requested to attach attested photocopies (either gazetted official or notary) of all documents with the application form.) • Originals of the supporting documents • Your recent passport size photograph (4.5 cm length x 3.5 cm width) in colour • Filled application form • Demand Draft (DD) drawn in favor of "PAO-MEA" payable at the city where the Regional Passport Office (RPO) is located, if you are paying fee by DD.If you are not carrying passport form, you may buy the same from District Passport Cell(DPC)/Speed Post Centre (SPC)/Citizen Service Centre (CSC) and fill it there itself. For the listof documents to be submitted along with the application form, please Click Here .Q: I submitted my application at District Passport Cell (DPC)/Speed Post Centre (SPC)/CitizenService Centre (CSC) and forgot to attach one document. Where should I submit the same?A: You need to visit the Passport Office for submitting the missing documents.Speed Post Centre (SPC) in your districtQ: What is a Speed Post Centre (SPC)?A:Speed Post Centre (SPC) is a collection centre where application forms pertaining to issue offresh passports can be submitted. All the forms that are collected are then sent to thedesignated Passport Seva Kendra (PSK) for further processing.294 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q: Can I apply for a passport under the Tatkaal scheme at District Passport Cell (DPC)/SpeedPost Centre (SPC)/Citizen Service Centre (CSC)?A: Tatkaal applications are accepted only at Passport Seva Kendra (PSK)/Mini Passport SevaKendra (Mini PSK). They are not accepted at District Passport Cell (DPC)/Speed Post Centre(SPC)/Citizen Service Centre (CSC).Q: Can online registered application be submitted at District Passport Cell (DPC)/Speed PostCentre (SPC)/Citizen Service Centre (CSC)?A: Online registered applications have to be submitted at Passport Seva Kendra (PSK)/MiniPassport Seva Kendra (Mini PSK). They are not accepted at District Passport Cell (DPC)/SpeedPost Centre (SPC)/Citizen Service Centre (CSC).Q: What documents I need to carry while applying for a passport in District Passport Cell(DPC)/Speed Post Centre (SPC)/Citizen Service Centre (CSC)? (Checklist)A: When you go to a District Passport Cell (DPC)/Speed Post Centre (SPC) or Citizen ServiceCentre (CSC) for submitting your application form, please carry - • Self-attested photocopies of the supporting documents that need to be submitted along with the form (In case of submission at Citizen Service Centre (CSC), particularly at Bangalore-1, applicants are requested to attach attested photocopies (either gazetted official or notary) of all documents with the application form.) • Originals of the supporting documents • Your recent passport size photograph (4.5 cm length x 3.5 cm width) in colour • Filled application form • Demand Draft (DD) drawn in favor of "PAO-MEA" payable at the city where the Regional Passport Office (RPO) is located, if you are paying fee by DD.If you are not carrying passport form, you may buy the same from District Passport Cell(DPC)/Speed Post Centre (SPC)/Citizen Service Centre (CSC) and fill it there itself. For the listof documents to be submitted along with the application form, please Click Here .Q: I submitted my application at District Passport Cell (DPC)/Speed Post Centre (SPC)/CitizenService Centre (CSC) and forgot to attach one document. Where should I submit the same?A: You need to visit the Passport Office for submitting the missing documents.295 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Citizen Service Centre (CSC) if any, in your areaQ: What is a Citizen Service Centre (CSC)?A: Citizen Service Centre (CSC) is a collection centre where application forms pertaining toissue of fresh passports can be submitted. All the forms that are collected are then sent to thedesignated Passport Seva Kendra (PSK) for further processing.Q: Can I apply for a passport under the Tatkaal scheme at District Passport Cell (DPC)/SpeedPost Centre (SPC)/Citizen Service Centre (CSC)?A: Tatkaal applications are accepted only at Passport Seva Kendra (PSK)/Mini Passport SevaKendra (Mini PSK). They are not accepted at District Passport Cell (DPC)/Speed Post Centre(SPC)/Citizen Service Centre (CSC).Q:Can online registered application be submitted at District Passport Cell (DPC)/Speed PostCentre (SPC)/Citizen Service Centre (CSC)?A: Online registered applications have to be submitted at Passport Seva Kendra (PSK)/MiniPassport Seva Kendra (Mini PSK). They are not accepted at District Passport Cell (DPC)/SpeedPost Centre (SPC)/Citizen Service Centre (CSC).Q: What documents I need to carry while applying for a passport in District Passport Cell(DPC)/Speed Post Centre (SPC)/Citizen Service Centre (CSC)? (Checklist)A: When you go to a District Passport Cell (DPC)/Speed Post Centre (SPC) or Citizen ServiceCentre (CSC) for submitting your application form, please carry: • Self-attested photocopies of the supporting documents that need to be submitted along with the form (In case of submission at Citizen Service Centre (CSC), particularly at Bangalore-1, applicants are requested to attach attested photocopies (either gazetted official or notary) of all documents with the application form.) • Originals of the supporting documents • Your recent passport size photograph (4.5 cm length x 3.5 cm width) in colour • Filled application form • Demand Draft (DD) drawn in favor of "PAO-MEA" payable at the city where the Regional Passport Office (RPO) is located, if you are paying fee by DD.If you are not carrying passport form, you may buy the same from District Passport Cell(DPC)/Speed Post Centre (SPC)/Citizen Service Centre (CSC) and fill it there itself. For list ofdocuments to be submitted along with the application form, please Click Here .296 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
    • Q:I submitted my application at District Passport Cell (DPC)/Speed Post Centre (SPC)/CitizenService Centre (CSC) and forgot to attach one document. Where should I submit the same?A: You need to visit the Passport Office for submitting the missing documents.Bangalore OneQ: What is Bangalore One/E seva/E-sampark?A: Bangalore One/E-seva/E-sampark are Citizen Service Centres (CSC) where an applicant cansubmit the filled in Passport Application Form pertaining to issue of fresh passport.e-SevaWhat is Bangalore One/E seva/E-sampark?A: Bangalore One/E-seva/E-sampark are Citizen Service Centres (CSC) where an applicant cansubmit the filled in Passport Application Form pertaining to issue of fresh passport.e-Sa