NRI (non-resident indian)

Tax saving options for NRIs:-

When it comes to NRIs they do not have as much tax saving options open to them as the Resident Indians do. Here we show you the list of tax saving options available for NRIs and how NRIs can make maximum profit from them:

  

1. Section 80C - From the various tax saving avenues available to Indian tax savers –

  

(i) ELSS (Tax saving Equity Mutual Fund schemes) – ELSS are equity-oriented mutual fund schemes that invest in a diversified portfolio of Indian stocks. ELSS schemes can be purchased online and come with a lock-in period of 3 years. They are ideal for long-term tax-free savings.

(ii) House property – Buying a house property in India is a good investment if you plan to come back in the future. The principal and interest payments made every year for a home loan availed in India are allowed 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) - in case of let-out property.

             

(iii) Life Insurance and Pension Plans – There are many life insurance and retirement/pension plans of Insurers that can be bought by an NRI. You can buy retirement plan with or without life cover and also choose between a traditional plan (endowment, money-back) and a unit-linked plan depending upon your risk appetite. Point to note is that the policies are issued in Indian Rupees only. There is also a facility available with few insurers like LIC for NRIs to obtain insurance cover from their present country of residence where all formalities are completed in their present country of residence, subject to fulfilment of certain rules and restrictions on sum insured amounts and add-on riders.

           

2. Section 80D - [Health insurance premium payment] -

NRIs can purchase health insurance policy in India for themselves, their family and also dependant parents and claim deduction for the premium paid up to Rs 35,000 per annum [Rs 15,000 in case of non-senior citizens and Rs 20,000 for senior citizens];

          

3. Other Deductions u/s 80 –

(i) Deduction under 80G - for specified donations;

(ii) Deduction under 80E – for interest payment towards Educational loan taken from any bank/approved financial institution for higher studies (comprising full time as well as vocational studies pursued after passing senior secondary examinations studies) for self or any of immediate family members (children, spouse)

           

Investments not available for NRIs – PPF (Public Provident Fund), NSC (National Savings Certificate), SCSS (Senior citizens savings account), tax saving infrastructure bonds under section 80CCF and POTD (Post office time deposits) are not available for NRIs. However, if you had already opened any of these accounts when you were a Resident Indian, you can continue to service the account(s) till maturity.

The overall limit on section 80C, 80CCC is Rs 1 lakh per annum.

            

NRIs, PIOs need not report property deals in India

Non-resident Indians (NRIs) and Persons of Indian Origin (PIOs) will not be required to report to the Central Bank on the details oftransactions while purchasing immovable property in India, theReserve Bank of India (RBI) confirmed on Wednesday.
Unlike foreigners, who have to file a declaration with the Reserve Bank within 90 days from the date of purchase of properties, NRIs and PIOs are not expected to comply with any such procedures.
"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 RBI said.
According to the RBI, foreigners make the declaration in IPI form, which has now been amended for greater clarity. RBI’s announcement could spur investment in India from the country’s diaspora, the report added.

Govt tries to allay NRI fears

The government on Tuesday tried to allay fears of NRIs being harassed by the income tax department due to the new Budget provision of compulsory declaration of foreign assets.“We will bother only those non- resident Indians (NRIs) who have unexplained funds. If any money is found to be of some person and then it comes to our knowledge and is legitimately explained, he doesn’t have to bother. But if it is unexplained, then we will have to bother and we will bother,” CBDT chairman Laxman Das said at an interactive session with members of the Federation of Indian Chambers of Commerce and Industry (FICCI).

Finance secretary R. S. Gujral said that there is no intention that NRIs should not return or should not bring back their assets to the country. “I do not think there is any doubt,” he remarked. “Obviously, if they have earned money and they are not required to file a return in India and they have assets abroad, they are not undisclosed assets,” he explained. However, Gujral said, “ If a person is employed as a clerk abroad and comes back after two years with $ 1 billion in his pocket, the person would have to explain the amount. But generally, it is very clear that India wants to attract NRI investment, NRI remittances and we welcome the NRIs even coming back.”Regarding reassessment of income in relation to any asset located outside India, the Budget has proposed reopening of assessments of up to 16 years compared with six years at present. Besides, it would be mandatory to reporting assets held abroad.

The time limit of six 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, the Budget Memorandum states.
The 16- year thing is an enabling provision where it is found that the person, whether NRI or anybody else, is not able to explain as to how he acquired the money and whether tax has been paid on it, whether in India or abroad. It is never the government’s purpose to trouble people who are explaining money held abroad, Das added.

Experts said that such a move could create unnecessary reporting requirements and harassment for NRIs who have returned to India after staying abroad for long.

NRIs staying beyond 60 days to pay tax

Come April 2012 and a new taxation law will make things slightly more difficult for those Non-Resident Indians (NRIs) who spend more than 60 days a year in India. They will need to make a disclosure of their global income if their stay exceeds the 60-day limit. NRI associations are up in arms against the decision and say the move will estrange the community from their motherland, apart from weaning away investments made in India in the form of bank deposits by many such persons settled abroad.

The government, on its part, wants to bring exclusively rich NRIs who spend months in India doing business and then evade paying taxes. At present, NRIs can spend up to 182 days in a year in India without being taxed. If they exceed the 182-day limit, they are considered ordinary citizens for levy of taxes.

Influential NRI associations in countries like the United States and Canada, however, are not willing to give in so easily and are lobbying to get the 60-day limit waived. A delegation comprising members from associations representing different communities residing in the United States are due to visit India in January 2011 to meet senior ministers and convey their problems over the changing taxation laws and possible relaxations.

II. Benefits/Relief from Taxation

1.STT:

It isproposed to reduce the Securities Transaction Tax (STT) from 0.125 percent to 0.1 percen to fthe value of the securities transactions.

2.Deductions:

Deduction in respect ofintereston Savings Bank Account to theextent of Rs.10,000/­.

Deduction in respect ofany payment made by an assessee on account of preventive health check‐up of self, spouse, dependent children orparent upto a limitofRs.5000/­withinthe existing limits prescribed in the section80D.

3.Capital Gains Exemption:

The capital gains tax on sale of aresidentialproperty is exempted ifthesale consideration isused for subscribing inequity shares of amanufacturing SME company which in turn shall utilize the funds for purchase of new plant and machinery.

4.Baggage Allowance: Baggage allowance for Indians travellingabroad has increasedthe duty‐free allowance for eligible passengersof Indian originfrom Rs.25,000 to Rs.35,000 and for children of up to 10 years from Rs.12,000 to Rs.15,000

Direct Tax Code---Residential status in India – Restriction of 60 days stay F.Y 2012-13

Direct Tax Code---Residential status in India – Restriction of 60 days stay

Does it really apply to all NRIs  ?????

Or

Is it exceptional for few?

IT IS EXCEPTIONAL ONLY FOR FEW

The major change introduced by the DTC is in the criteria of determining the residential

status of NRIs who, are working abroad, and come on visit to India. Currently, such

NRIs who are citizen of India or Person of Indian Origin (PIO) are regarded as resident, only

if, they stay in India for 182 days or more in the financial year. However, under the

proposed DTC, any inbound individual  (including NRIs/PIO) will become resident, if

they are present in India for 60  days  or  more  in  the  financial  year  and  365  days  or  more

over a period of four years prior to the financial year.

However in general it is not correct to opine that under the proposed provisions of the

Direct Tax Code, in relation to the ‘Residential Status’, the NRI shall be resident in India if

he stays for more than 60 days in India in a financial year (1st April to 31

st

 March) and

attract Indian tax liability in respect of his income earned outside India.

In  nutshell,  we  advise  that  NRI  may  stay  in  India for more than 60 days in a financial year

and yet he shall continue to special status of “Resident but Not Ordinarily Resident” under

the Income-tax Act, 1961 for tax purposes and even under proposed DTC and shall not be

liable to tax in India in respect of his income earned outside India. To a large extent, the

majority of the NRI’s may not be adversely affected by the proposed changes.

It is important for NRI to know that if he has stayed in India for less than 364 days in past 4

years or less than 728 days in past 7 years than his tax liability shall be restricted to income

earned in India only even if his stay in India is more than 60 days in a year. 

He  can  stay  in  India  up  to  90  to  120  days  or may be little more depending upon his past

stay in India and yet not covered by the proposed DTC PROVISION.

We can assist the NRI’s to know his Income tax  status under the proposed DTC and no of

days he can stay in India ( even beyond 60 days) for the financial year1st April 2010 – 31

st

March 2011 and subsequent one to three  years