All those Indians who leave India for employment or setting up their own business outside India are obligated to follow certain set rules under various Indian laws and re align their financial matters. These are discussed here with an objective of providing an overview of the roadmap that you could follow while relocating outside India.
While an immigrant is busy with last minute packing, socializing etc, it is always advisable to plan all financial matters well in advance to avoid any loss. One has to recognize that once you leave the country, it is difficult to manage these financial matters.
Few golden Rules:
– Consolidate all the holdings to a level that they are manageable.
– Appoint an attorney who will operate accounts in your absence (if possible).
– Intimate your bankers about your plans to move and connect your relationship manager with the local person in charge. You can also appoint your CA / lawyer to represent your interest and manage the financial compliances.
– For all important financial instruments, do advise change of address in case the residence is going to be locked/ rented. You can use address of your CA / Lawyer subject to their consent.
Continuance of holding of assets in India:
Under the existing rulebook, an Indian resident immigrating to a foreign country can continue to hold all assets in India if such asset was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India. So there are no restrictions on immigrant to continue to hold these assets in India.
Acquisition of New Assets in India:
An Indian resident immigrating to a foreign country cannot make investments in following categories of assets –
- Agricultural property
- A farm house
- FDI Investment in
- Gambling and Betting including casinos etc.
- Lottery business (including government/ private lottery, online lotteries etc)
- chit fund
- Nidhi company
- Trading in transferable development rights (TDRs)
- Real estate business or construction of farm houses
- Manufacturing of cigars, cheroots , cigarallos and cigarettes, of tobacco or of tobacco substitutes
- Activities /sectors not open to private sector investment eg, atomic energy and railway operations
- Investment in a proprietary or partnership firm engaged in print media, agricultural /plantation activity or real estate business i.e. dealing in land and immovable property with a view to earning profit or earning income there from.
Items requiring specific attention :
- They need to re-designate their saving bank accounts to Non-Resident Ordinary Rupee Account popularly known as NRO Account. The same can be continued to be jointly held by NRI’s resident close relatives.
- They need to inform the companies and /or depositories, brokers in which shares/bonds/NCD’s are held by them to re-designate their status from resident to Non –resident.
- They also need to inform the Asset Management Companies in which mutual funds are held by the individuals to re-designate their status.
- They can continue to be invested in India as a proprietor in a sole proprietary concern or being a partner in Indian business except for any agricultural/plantation activity or real estate business or print media.
- They can continue to receive rent from the tenants from the immovable property situated in India, however, the tenant needs to be informed that they have now become a non –resident and TDS if any shall be deducted by the tenants.
Filing Return of income in India:
Recent Immigrants should carefully evaluate their residential status as per tax law in consultation with their Chartered Accountants. Immigrating resident will have a change of status as far as their tax residence is concerned. Subject to his number of days spent in India, he would be classified as “NRI”
Non –Residents are liable to tax only on income earned in India whereas Residents are taxed on their global income.
Recent Immigrants who qualify as Non –residents as are liable to file return of income in India if they have earned taxable income in India or are holding assets in India, subject to conditions. Further, they are mandated to file tax return in case they have earned short term from equity shares / equity oriented fund or long term capital gains.
Immigrating residents who are on their way to become NRI, are they expected to file their tax returns even if they have no taxable income? Technically, they are not required to file their tax returns in India if they don’t have any taxable income / do not qualify under other clauses. However, in view of the author, it is advisable to file tax return and establish the residential status.
Repatriation of funds:
They can remit their bank balance held in NRO Account subject to ceiling of USD 1 million to their overseas bank account. However, current income such as rent, dividend etc. earned in India is freely repatriable without any limit subject to payment of taxes.
Content Source – Sanjeev Kamdar – KDP Accountants (NRI advising), www.kdpaccountants.com