Returning Indian – Impact on Assets

Returning Indians (RI) are those Indians who are likely to return to India for good from the country where they are resident.
 
RI should know and understand various aspects of Foreign Exchange Management Act, 1999 (FEMA), Income-tax Act, 1961 and Banking Regulations in order to rearrange his/her financial affairs on return to India.Accordingly, implications under FEMA on his/her assets/liabilities held in India as well outside India and reporting requirement when they return to India are outlined below:
 
While our last content covered Tax implications to be considered by RI, the following points should be considered by RI considering FEMA regulations in order to reorganise his/her financial affairs on return to India.
 
FOREIGN EXCHANGE MANAGEMENT ACT, 1999 

  1. IMPACT ON ASSETS HELD:
     
    The assets held in India and overseaswill have impact under FEMA as under:
     

    1. Overseas Assets:
       
      A RI may continue to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such assets were acquired, held or owned by him/her when he/she was a non-resident or were inherited from a non-resident person.
       
    2. Indian Assets:
       

      1. Non-Resident Bank accounts:
          
        A RI, upon his/her return to India for good, have to inform Authorised Dealer (AD) Bank with whom he/she holds banking accounts, about the change in residential status and have to deal with suchbank accounts in the following manner: 

        1. Non-Resident Ordinary Bank Account (NRO Account):To be re-designated to Resident rupee account.
        2.  

        3. Non-Resident External Bank Account (NRE Account): To be re-designatedto Resident rupee account or transfer the balance to Resident Foreign Currency Account (RFC Accoun).
        4.  

        5. Foreign Currency Non-Resident Account (FCNR Accoun): Permissible to hold upto maturity and then to be converted into Resident rupee account or Resident Foreign Currency (RFC)Accoun.
        6.  

      2. Shares and Securities etc.
      3.  
        RI is required to inform all companies, funds, Depository Participant etc. as to change of residential status from non-resident to resident. 

  2.  

  3. IMPACT ON LIABILITIES : 
    RI will continue to be liable for any liability including loantaken from overseas bank or person resident outside India. Repayment of liability and interest payable on such liabilities may be made out of funds held outside India. 
    From our practical experience, we are of the view that repayment of overseas liability can be made from funds held in India by obtaining Reserve Bank of India (RBI) approval.
  4.  

  5. RFC Account : 

    1. RIs, on becoming residents can open RFC Accoun, which is denominated in forex.
    2.  

    3. Realisation proceeds received on sale ofoverseas assets can be credited to such account.
    4.  

    5. The funds held in RFC a/c are fully repatriable and can be remitted outside India for any bonafide purpose of the account holder or his/her dependents.
    6.  

    7. Funds in RFC A/c can be withdrawn freely for local payments in rupees.
    8.  

    9. Interest on RFC A/c will be exempt from tax till his/her residential status under Income Tax Act, 1961 is ‘Non-Resident’ or ‘Resident but not and Ordinarily Resident’.
  6.  

  7. REPORTING REQUIREMENT TO RBI : 

    1. RI is not required to report about change in residential status to RBI.
    2.  

    3. RI is neither required to take any permission from RBI for retaining his/her overseas assets after return to India nor he/sheis required to report such overseas assets to RBI.

Content Partner- For any assistance / information on Tax, FEMA or related matters, you may write to our empaneled professional at nrihelp@gpkapadia.com

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