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NRI GUIDE 2012                                         (Ver 2.00)       (A Comprehensive Guide for Indians residing outsid...
PREFACEThis Free NRI guide has been compiled with the help of information available in official websiteof various governme...
INDEX  Sl Nos                         Chapters and contents                            Page Nos         Abbreviations     ...
CHAPTER - 5                                                           45-46       NRIs Investments in Immoveable Propertie...
5 Capital Gains on Securities       Deduction of interest paid on more than one loan borrowed for     5 purchase or constr...
CHAPTER - 15                         121-122         Tax on Gifts - the facts need to know                                ...
2     Government of Bihar     3    Government of Gujarat     4    Government of Karnataka     5    Government of Kerala   ...
2 Inheriting Financial Assets and Investments in India     3 Remittance Exchange Control Regulations     4  Inheritance an...
21    Clearance of departing passengers    22    Export of gold jewellery as baggage    23    Export of currency    24    ...
CHAPTER -36                          334-354          Emigration Clearance – Indian and foreign persons          All About...
CHAPTER - 46                        464-472          The Foreign Contribution (Regulation Act, 2010)                      ...
6 Why Health Insurance is important      7 How to choose the right Life Insurance Policy      8 Insurance cover for your b...
Abbreviations AD - Authorized Dealer ADR- American Depository Receipts BPO- Business Process Outsourcing CBDT- Central Boa...
MCA - Ministry of Corporate Affairs MHA - Ministry of Home Affairs MNC - Multinational Company MOIA - Ministry of Overseas...
CHAPTER – 1                          Residential StatusIn terms of the Foreign Exchange Management Act (FEMA), 1999 a pers...
Diaspora is a word of Greek origin that means scattering or sowing of seeds It is used to                                 ...
CHAPTER 2          Various Types of Bank Accounts - NRIs                   are permitted to open18 | P a g e   NRI Guide 2...
1. Types of accounts which can be maintained by an NRI / PIO in India                         If a person is NRI or PIO, s...
•    The limit of USD 1 million per financial year includes sale proceeds of immovable         properties held by NRIs/PIO...
for all Commercial and Scheduled Banks, Foreign Banks and Regional Rural Banks        functioning in India with the licens...
•   Terms and conditions as applicable to NRE accounts in respect of joint accounts,        repatriation of funds, opening...
5.NRE Current Accounts                       Transfer and repatriate funds easily with your NRE Rupee CurrentAccount. Conv...
Documents Required               o   Photocopy of the pages of the passport containing passport details and personal      ...
•   Yes. The principal and interest earned on NRE Current Account are fully repatriable.         g) What taxes am I liable...
6. NRO Current Account               Remit funds easily through Quickremit, IndiaLink, Cheque LockBox, Telegraphic        ...
document required by the bank.    •   Eligibility            o You are eligible if you are a non-resident individual of In...
repatriation of money abroad is provided in the later part of this guide)         g) Can I have joint applicant for my NRO...
7. Resident Foreign Currency Accounts (RFS Accounts)        A scheme known as Resident Foreign Currency Accounts (RFC acco...
option to continue those facilities or avail of RFC account facility (cf. paragraph        12.13). These options can be ex...
Explanation: For the purpose of this Scheme -   A person (not being a citizen of Pakistan or Bangladesh) shall be deemed t...
iii)   Sale proceeds of eligible assets.           (b) Pension or other monetary benefits received from outside India in c...
Debits         (i) The funds in the RFC account may be allowed to be freely utilised by the              account   holder ...
•   The funds in RFC accounts are free from all restrictions regarding utilisation of foreign        currency balances inc...
8.   Foreign Currency Account    •    A person resident in India who has gone abroad for studies or who is on a visit to a...
CHAPTER 3                 Facilities available to NRIs/PIOWhat are the facilities available to NRIs/PIO?1. Investment faci...
3. NRIs are allowed , without limit, purchase on non-repatriation basis :    •   Government dated securities / Treasury bi...
5. Repayment of Housing Loan of NRI / PIOs by close relatives of the borrower in        IndiaHousing Loan in rupees availe...
4. The directions contained in this circular have been issued under Section 10(4) and 11(1) of the ForeignExchange Managem...
CHAPTER 4           Investment Options not permitted for NRIsNRIs are not permitted to invest in small savings or Public P...
convenience for further investments, it is better to use the NRO account. The ex-minor can takeover the operations of the ...
“(2) Non-Resident Indians (NRIs) are not eligible to open an account in a Post Office SavingsBank:Provided that if a resid...
CHAPTER 5        NRI’s Investment in immovable PropertiesInvestment in immovable Property    •   NRI / PIO / Foreign Natio...
7. The sale proceeds of immovable property in India if the property was acquired out of        foreign exchange sources i....
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 ou...
The residential status of a person as refered in Sec. 2(31) of the Act. for each        assessment year under consideratio...
Proposed basic exemption and                  Existing basic exemption and Assessee         Income Slabs (FY 2011-12)     ...
uptoRs.2,50,000/-      Nil                  uptoRs.2,50,000/-   Nil                                            10% of inco...
3. Particulars of Income Tax Incidence for various tax status                                                             ...
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Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
Nri guide 2012 ver 2.00  23 03-2012
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
(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

Published in: Economy & Finance
  • CHENNAI GST ROAD - ON ROAD PROPERTY - WITHSTOOD THE ONSLAUGHT. FOR SALE - MAIN ROAD PROPERTY - IN CHENNAI, TAMIL NADU - ENTRY FROM NH-45. Prime Vacant Land 5.8 Grounds (13940 sq.ft.) in Singaperumal Koil, Chennai, India on Main GST Road with direct entry from GST Road. Mahindra World City is 1.2 Kms. on one side and Ford Motor Co. is 3.2 Kms. on the other side. Plot with direct entrance from Wide National Highway NH-45. Frontage Width is 46 feet, Rear Width is 56 feet and length is 286 feet. Companies like BMW, Nissan-Renault, Daimler, Enfield, Nokia, Siemens, Hyundai, Ford are in close proximity to this place. The Property has a Security Room with 3-Phase Power Supply and has a Compound Wall of about 11 feet on all sides with a 15 feet gate in the front. Since the Land is located amidst various International Companies, it will be ideally suited for Offices, IT/ITES/BPO Companies, Residential Apartments, etc. Very Ideally suited for Investment Purposes, Immediate Construction of Residential Apartments, Show Rooms, Departmental Stores, Hospitals, Logistics, etc. Appreciation Guaranteed on Investment. In case of interest, please contact:- Mr. K.Aravamudan, Mob:- 0 – 94440 12056. e.mail : hiraytech@yahoo.co.in VERY IMPORTANT NOTE:- The above Site is not affected by the heavy Rains and Thunder Storms that lashed Chennai just recently.
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Nri guide 2012 ver 2.00 23 03-2012

  1. 1. 1|Page
  2. 2. 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
  3. 3. 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
  4. 4. 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
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. 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
  10. 10. 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
  11. 11. 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
  12. 12. 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
  13. 13. 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
  14. 14. 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
  15. 15. 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
  16. 16. 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
  17. 17. 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
  18. 18. 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
  19. 19. 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
  20. 20. • 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
  21. 21. 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
  22. 22. • 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
  23. 23. 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
  24. 24. 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
  25. 25. • 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
  26. 26. 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
  27. 27. 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
  28. 28. 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
  29. 29. 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
  30. 30. 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
  31. 31. 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
  32. 32. 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
  33. 33. 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
  34. 34. • 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
  35. 35. 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
  36. 36. 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
  37. 37. 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
  38. 38. 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
  39. 39. 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
  40. 40. 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
  41. 41. 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
  42. 42. “(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
  43. 43. 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
  44. 44. 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
  45. 45. CHAPTER 6 NRI Taxation45 | P a g e NRI Guide 2012 Ver 2.00 www.yourownadviser.com
  46. 46. 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
  47. 47. 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
  48. 48. 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
  49. 49. 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
  50. 50. 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

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