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Income Tax Act 1961 change plan on Modi govt’s agenda; Here’s how you may benefit

After implementing path breaking Goods and Services Tax (GST), changing the cumbersome and archaic Income Tax Act is the next big agenda of Prime Minister…

Passport Seva Project: The Government of India is streamlining services for Indian citizens living in the U.S.

India’s Minister of State for External Affairs Gen. V.K. Singh launched the ‘Passport Seva Service’, a new initiative to streamline passport delivery services to Indian…

India defers controversial ECNR registration for NRIs

The Indian government on Wednesday deferred a controversial decision to make online registration mandatory for ECNR (emigration clearance not required) passport holders flying to 18…

NRIs don’t need to reveal details of foreign bank accounts, assets to Indian tax dept: I-T Tribunal

The Income-Tax Appellate Tribunal (ITAT) has said NRIs do not need to reveal details of their foreign bank accounts and assets to Indian authorities. The…

Things to know about Dematerialisation of share certificates

Dematerialisation offers you flexibility along with security and convenience. Nowadays, holding share certificates in physical format carries risks like certificate forgeries, loss of important share…

Options for creating liquidity for NRIs having Real estate in India

If You are a NRI and have got Real estate property in India then you have got some options for creating liquidity. Option 1: Loan…

5 Common Mistakes every NRI makes in Complying with Indian Tax & FEMA Laws

NRIs are in general very tax compliant in their host countries but due to lack of knowledge or sheer inertia at times they tend to…

SEBI panel may suggest single regime for FPI, NRI fund outflows

New Delhi, Oct 9 (PTI) A SEBI panel may soon suggest merger of foreign portfolio investment and NRI/OCI routes to bring in a single regime…

Ideal checklist when you travel back to India

An NRI vacation is not always like a day at the beach. As you plan a trip to India, there are many tasks that keep…

News

Income Tax Act 1961 change plan on Modi govt’s agenda; Here’s how you may benefit

After implementing path breaking Goods and Services Tax (GST), changing the cumbersome and archaic Income Tax Act is the next big agenda of Prime Minister…

Passport Seva Project: The Government of India is streamlining services for Indian citizens living in the U.S.

India’s Minister of State for External Affairs Gen. V.K. Singh launched the ‘Passport Seva Service’, a new initiative to streamline passport delivery services to Indian…

India defers controversial ECNR registration for NRIs

The Indian government on Wednesday deferred a controversial decision to make online registration mandatory for ECNR (emigration clearance not required) passport holders flying to 18…

NRIs don’t need to reveal details of foreign bank accounts, assets to Indian tax dept: I-T Tribunal

The Income-Tax Appellate Tribunal (ITAT) has said NRIs do not need to reveal details of their foreign bank accounts and assets to Indian authorities. The…

SEBI panel may suggest single regime for FPI, NRI fund outflows

New Delhi, Oct 9 (PTI) A SEBI panel may soon suggest merger of foreign portfolio investment and NRI/OCI routes to bring in a single regime…

NRI’s brother tries to usurp property, booked

Yogesh sood, A NRI living in the US filed a fraud case against his brother who attempted to claim his parental property by preparing a forged…

NRI taxation: Residential status needs to be fixed afresh every FY

Residential status is dynamic and needs fresh determination for each financial year. Residential status in India is determined based on physical presence in India in…

Income Tax: Rental income taxed in hands of that co-owner who paid for property

In case of joint ownership of a property, the rental income earned on the same is required to be split between the co-owners in the…

Interest payable on rupee bonds issued abroad by Indian companies exempt from income tax

The government Monday exempted from income tax the interest payable on rupee-denominated bonds issued outside India by a company or a trust to a non-resident…

FAQs

Q1. Who is a Non-resident Indian NRI?

Generally An NRI is a person resident outside India who is a citizen of India or is a person of Indian origin. However there are different definitions of NRI under FEMA and Income Tax Act.

Definition of NRI under FEMA:
Under the Foreign Exchange Management Act (FEMA), generally, a person is resident outside India if he is in India for less than 182 days during the course of the preceding financial year and also includes any person who stays abroad:

  • For the purposes of carrying out employment or any business or vocation;
  • Under circumstances indicating an intention to stay outside India for an uncertain duration;
  • Any Indian citizen deputed outside India for a temporary period in connection with employment for education
Q2. How do I know if I qualify as a Non-Resident Indian?

If you have gone out of India for any of the following purposes, you qualify to open a Non-Resident Account

  • Taking up employment
  • Business or vacation
  • Any other purpose, in such circumstances as would indicate your intention to stay outside India for an uncertain period
  • Indian citizens working abroad on assignments with foreign Governments/Non-Government organisation
  • Indians settled abroad permanently
  • Indians gone abroad on immigration
  • Crew-members of Indian nationality or Indian origin employed by foreign airlines / shipping companies, if they are based at foreign ports and reside abroad

Non-Resident Indians become Indian residents only when they come back to India for employment or for carrying-on any business in India or vocation or for any other purpose indicating an indefinite period of stay in India. They are not regarded as Resident Indians during their short visits to India on holiday, leave etc.

Q3. Who is a Person of Indian Origin PIO?

You are a Person of Indian origin [PIO] if you are a citizen of a foreign country (other than a citizen of Bangladesh or Pakistan) and:

  • You have at any time held an Indian passport OR
– You or either of your parents or any of your grandparents were citizens of India by virtue of the Constitution of India or the Citizenship Act, 1955 OR
  • You are the spouse of an Indian citizen or of a person of Indian origin (other than of Pakistan or Bangladesh )
Q4. Who is resident per Income Tax Act definition?

The Income Tax Act of 1961 defines a resident as follows..

  • A person is a resident who has stayed equal to more than 182 days of current financial year in India OR
  • if he stayed in India for 60 days or more in previous financial year and 365 days or more in four years before that financial year under consideration.

Exceptions to the above:
The 60-day period mentioned above will be substituted for 182 days in case of the following persons:-

  • A citizen of India who leaves the country as a crew member of an Indian ship or for the purposes of employment outside India.

If you satisfy either of above definition, then you’re an Ordinary resident of India for that financial year and must pay taxes in India. As per Section 6 of the Income Tax Act, If you don’t satisfy above conditions for a resident, then you’re an NRI- Non Resident Indian.

Q5. What are the types of bank accounts available to NRIs?

Non-Resident External [NRE] Rupee savings account 
Your funds in NRE savings accounts are held in convertible rupees – principle and interest are fully repatriable. Interest income is fully exempt from tax in India. The savings account can be opened jointly with a Non-Resident individual. 
Non-Resident External [NRE] Rupee fixed deposit 
Fixed deposit in Indian rupees where the principle and interest are fully repatriable. All interest earned is fully exempt from tax in India. The account can also be opened jointly with a non-resident. 
Non-Resident Ordinary [NRO] Rupee savings account 
Your funds in Non Resident Ordinary (NRO) savings account are held in India, in Indian rupees. The NRO account can be funded through NRI income in India. Only the interest in an NRO account is repatriable. Interest income on this account is liable for Indian Income Taxes. Non-Resident Ordinary [NRO] Rupee fixed account. Fixed deposit in Indian rupees where the earnings in India can be deposited. The interest is repatriable [after payment of tax]. 
Foreign current Non-residents [FCNR] deposit 
The FCNR Deposit is a fully repatriable foreign currency deposit available in major currencies: US Dollars, Pound Sterling, Euros, Australian dollars and Canadian dollars. Your funds in FCNR Deposits are maintained in foreign currency and are fully repatriable, including the interest you earn. All interest earned is fully exempt from tax in India.

Q6. Can I open these accounts in any convertible currency?

Yes, you can remit funds for opening the account in any convertible currency. 
The NRO / NRE accounts are maintained in rupees and the funds remitted will thus be converted into India rupees at the spot exchange rate. 
Deposits can be maintained in the currency of your choice i.e. USD, GBP, EUR, AUD and CAD etc.

Q7.Can an NRI invest in Mutual Funds?

Yes, an NRI can invest in Mutual Funds without any prior permission from RBI. The offer document should clearly state the NRIs could invest in the scheme. Please contact us and we will be glad to assist you.

Q8. How do I invest in Mutual Funds?

You can invest by issuing a cheque against your NRO/NRE Accounts. If you invest from funds in your NRE/FCNR Accounts then you will be able to repatriate income on Mutual Fund earnings abroad.

Q.9 Who can purchase immovable property in India?

Under the general permission available, the following categories can purchase immovable property in India:

  • Non-Resident Indian (NRI)
  • Person of Indian Origin (PIO)

The general permission, however, covers only purchase of residential and commercial property and is not available for purchase of agricultural land / plantation property / farm house in India.

Q.10 Can NRI/PIO acquire agricultural land/ plantation property / farm house in India?

No NRI/PIO cannot purchase a agricultural land in India. However, they are allowed to inherit a agricultural land which has to be sold as they cannot pass it to their next of kin.

Q.11 Are any documents required to be filed with the Reserve Bank after the purchase?

No. An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents/reports with the Reserve Bank.

Q.12 How many residential / commercial properties can NRI / PIO purchase under the general permission?

There are no restrictions on the number of residential / commercial properties that can be purchased.

Q.13 Can a NRI/PIO acquire immovable property in India by way of gift? Cana foreign national acquire immovable property in India by way of gift?
  • Yes, NRIs and PIOs can freely acquire immovable property by way of gift either from
    • a person resident in India; or
    • an NRI; or
    • a PIO

    However, the property can only be commercial or residential in nature. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift.

  • A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of gift.
Q.14 Can a non-resident inherit immovable property in India?

Yes, a person resident outside India i.e. i) an NRI ii) a PIO and iii) a foreign national of non-Indian origin can inherit and hold immovable property in India from a person who was resident in India.

Q.15 From whom can a non-resident person inherit immovable property?

A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from

  • a person resident in India
  • a person resident outside India

However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange law in force or FEMA regulations, applicable at the time of acquisition of the property.

Q.16 Can an NRI/ PIO/foreign national sell his residential / commercial property?
  • NRI can sell property in India to
    • a person resident in India; or
    • an NRI; or
    • a PIO
  • PIO can sell property in India to
    • a person resident in India; or
    • an NRI; or
    • a PIO – with the prior approval of the Reserve Bank
  • Foreign national of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan can sell property in India with prior approval of the Reserve Bank to
    • a person resident in India; or
    • an NRI; or
    • a PIO
Q.17 Can a non-resident owning / holding an agricultural land / a plantation property / a farm house in India sell the said property?
  • NRI / PIO may sell agricultural land /plantation property/farm house to a person resident in India who is a citizen of India.
  • Foreign national of non-Indian origin resident outside India would need prior approval of the Reserve Bank to sell agricultural land/plantation property/ farm house in India.
Q.18 Can a non-resident gift his residential / commercial property?

Yes.

  • NRI / PIO may gift residential / commercial property to –
    • person resident in India or
    • an NRI or
    • PIO
  • A foreign national of non-Indian origin requires the prior approval of the Reserve Bank for gifting the residential / commercial property.
Q.19 Can an NRI / PIO / foreign national holding an agricultural land / a plantation property / a farm house in India, gift the same?
  • NRI / PIO can gift an agricultural land / a plantation property / a farm house in India only to a person resident in India who is a citizen of India.
  • A foreign national of non-Indian origin would require the prior approval of the Reserve Bank to gift an agricultural land / a plantation property / a farm house in India.
Q.20 How can an NRI / PIO make payment for purchase of residential / commercial property in India?

Payment can be made by NRI / PIO out of:

  • funds remitted to India through normal banking channels or
  • funds held in NRE / FCNR (B) / NRO account maintained in India
  • Loan from a Financial Institution in India
  • No payment can be made either by traveller’s cheque or by foreign currency notes or by other mode except those specifically mentioned above.
Q.21 Can NRI / PIO repatriate outside India the sale proceeds of immovable property held in India?
  • In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by a NRI / PIO, the Authorised Dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely:
    • the immovable property was acquired by the seller 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;
      • the amount to be repatriated does not exceed:
      • the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels, or
      • the amount paid out of funds held in Foreign Currency Non-Resident Account, or
      • the foreign currency equivalent (as on the date of payment) of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property; and
    • in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

    For this purpose, repatriation outside India means the buying or drawing of foreign exchange from an authorised dealer in India and remitting it outside India through normal banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorised dealer from which it can be converted in foreign currency.

  • In case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India (as defined in Section 6 of the Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account. 
    NRI/PIO are also allowed by the Authorised Dealers to repatriate an amount up to USD 1 million per financial year out of the balance in the NRO account / sale proceeds of assets by way of purchase / the assets in India acquired by him by way of inheritance / legacy. This is subject to production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and a tax clearance / no objection certificate from the Income Tax Authority for the remittance. Remittances exceeding US $1,000,000 (US Dollar One million only) in any financial year requires prior permission of the Reserve Bank.
  • A person referred to in sub-section (5) of Section 6 of the Foreign Exchange Management Act 3[3][3] or his successor shall not, except with the prior permission of the Reserve Bank, repatriate outside India the sale proceeds of any immovable property referred to in that sub-section.
Q.22 Can an NRI/PIO repatriate the proceeds in case the sale proceeds were deposited in the NRO account?

NRI/PIO may repatriate up to USD one million per financial year (April-March) from their NRO account which would also include the sale proceeds of immovable property. There is no lock in period for sale of immovable property and repatriation of sale proceeds outside India.

Q.23. If the immovable property was acquired by way of gift by the NRI/PIO, can he repatriate abroad the funds from sale of such property?

The sale proceeds of immovable property acquired by way of gift should be credited to NRO account only. From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes

Q.24. Can NRI / PIO rent out the residential / commercial property purchased out of foreign exchange / rupee funds?

Yes, NRI/PIO can rent out the property without the approval of the Reserve Bank. The rent received can be credited to NRO / NRE account or remitted abroad. Powers have been delegated to the Authorised Dealers to allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs/PIO who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.

Q.25 Can a person who had bought immovable property, when he was a resident, continue to hold such property even after becoming an NRI/PIO? In which account can the sale proceeds of such immovable property be credited?

Yes, A person who had bought the residential / commercial property / agricultural land/ plantation property / farm house in India when he was a resident, continue to hold the immovable property without the approval of the Reserve Bank even after becoming an NRI/PIO. The sale proceeds may be credited to NRO account of the NRI /PIO.

Q.26 Can the sale proceeds of the immovable property be remitted abroad?

Yes, From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.

Q.27 Is an NRI/PIO is liable to pay taxes and file its Income Tax Return on Sale of Immovable property in India?

Yes, There exist a liability to file Income Tax Return and pay due taxes, if any, arising out of Sale of Immovable property in India. Further, other Income like Interest, rent, dividend, if any, arising in India will also be included in filing Income Tax Return and will be taxed according to Income Tax Act, 1961.