Resource on NRI TAXES & Indian Income Tax Rules for PIOs & OCIs -

Investment Options for NRIs in India

May 4th, 2012 | Posted by indiatax in Investment India - (0 Comments)

NRIs can invest in fixed deposit by way of bank accounts. For this purpose, NRIs are required to open FCNR (Foreign Currency Non Resident) accounts. The minimum and maximum duration for maintaining this account are one and three years respectively.

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NRI deposit interest rates

The base rates for NRI deposits less than one crore rupees are around 7-8%. For an amount between one to five crores it is around 9-10%. NRIs are requested to check with the banks to understand which bank is offering the highest deposit rate.

Other investment options available to NRIs

Apart from bank deposits, the following are the other investment options available to NRIs.

Portfolio investment in equity shares/convertible debentures.
Investment in new shares, convertible debentures and/or non convertible debentures.
Mutual funds. Amounts to the mutual fund to be invested by way of NRE/FCNR/NRO account.
Bonds. Amounts to the bonds to be invested by way of NRE/FCNR/NRO account.
Setting up a partnership with an Indian company. Setting up a wholly owned subsidiary.
Investing in immovable property. NRIs are not encouraged to invest in purchase of agricultural land.

Considering the sea of opportunities that India has, NRIs are seeing more opportunities in their homeland.

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India’s Bond Market – Tax Free Bonds for NRIs & FIIs

March 28th, 2012 | Posted by indiatax in India Bonds | Investment India - (1 Comments)

Tax free bonds such as NHAI (National Highway Authority of India) and PFC (Power Finance Corporation of India) are available for NRIs (Non-resident Indians). There are other tax free bonds floated by HUDCO & Railway Finance Corporation. An NRI includes a person of Indian origin (POI). Such people are free to invest in tax free bonds.

What is a tax free bond and why should you invest in them?

A tax free bond is an important activity issued by the government to develop a country’s infrastructure. The bonds issued by the NHAI and PFC carry a coupon of 8.2% per annum. The bonds have a 15 year maturity period.

Stock exchanges list these bonds. They are rated as AAA by rating agencies. You can trade the bonds. The interest you earn on the bonds is exempt from tax. But you have to pay capital gains on it.

How much is the cost of tax?

For a ten year bond, the yield is pegged at 8.4%. And you earn 8.6% for a 15 year bond. If the credit quality recedes, you are free to effect a rating downgrade on the bond. You have to factor in a lot of considerations before investing in a tax free bond. There could be instances when the PFC is investing in loss making electricity boards, and you may face the brunt of a loss.

What is the benefit of investing in tax free bonds?

Effective yield is a relative value. You should weigh the pros and cons of investing in an AAA rated bank versus investing in a 10-year maturity tax free bond. While the ten-year fixed deposit at the AAA rated bank yields you 8.2%, the tax-free bond might yield you the same.

But one consideration is that the interest earned from the bank is taxable. While on tax-free bonds, your post-tax returns are without tax.

If you want to park your funds somewhere and expect to get an absolute rate year on year, tax free bonds are suitable to you. If the yield is 8.3% for a 15 year maturity period, you get this amount every year, and your funds are locked until this maturity period.

If you are looking for capital gains from selling these bonds, then this type of investment is not right for you. Taxable bonds are traded, but tax-free bonds are traded less. You will not discover a correct price, if you resort to this practice. When trading tax free bonds, you may lose more than 2.5%. This is the amount incurred in paying bid-ask spreads.

Even if you decide to trade the bonds, then you can list them on the BSE and NSE.

Who can invest?

Anyone can invest in the bonds. Individuals, NRIs, corporate, FIIs, and insurance companies to name a few; and many more of such entities can invest in tax free bonds. You are redeemed the bond only at maturity time. You have no buy back options but you need not hold the bond for any minimum tenure to get the tax benefit.

The tenure of the bonds is for 10 and 15 years. Even though the bonds can be allotted in Demat or Physical form, you trade the bonds in the exchange rate in Demat mode.

Other details

The bonds are not subject to TDS.
You can do multiple applications.
You need PANcard for opening the bonds.
Your interest earnings are paid annually by a credit to your account
You cannot use the amount invested for tax-relief benefits under section 80C, 80CCF or 54EC.
If you sell the bonds within a year of buying it, short term capital gains tax apply.

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Top and Best Investment Options in India.

March 13th, 2012 | Posted by indiatax in Investment India - (0 Comments)

Everyone is rushing to invest in India these days. Wondering why that is so? Well, simply put, the economy of the country has never been better and this is attracting investors like bees to honey. So if you are looking to make a good profit, then it is a pretty great idea to invest in India.

As soon as the Congress party came to power – with a landslide victory no less- the Bombay Stock Exchange rose to a whopping twenty five percent! And yes, it has continued its rise ever since. And you my friend, could also continue to rise financially with it!

Please be advised that in order to make investments in India you would need a Indian pan card.

Companies

The best way to invest is by investing in Indian Companies. There are several large companies in India which are listed on stock exchanges in the US. So you can buy shares of these companies from there and choose to invest. One such company is Infosys Technologies or INFY as it is known. It is one of the most popular companies in India and is largely traded.

There are several other companies too which you can consider investing in. For example, there is HDFC bank which has eleven million customers and seven hundred and sixty branches worldwide. TATA Motors which manufactures both passenger and cargo vehicles is also largely traded. In fact, they have recently acquired Jaguar.

Dr. Reddy’s Laboratories is another company which is worth investing in. they manufacture bulk drugs and have been successfully conducting research in areas such as cancer. They are also working in collaboration with the National Cancer Institute in the United States.

Reliance Industries Ltd. Is India’s largest private enterprise and is in fact a Fortune 500 company. Their businesses extend to pretty much all sectors from oil and gas to FMCG to clothing to pretty much everything. Forty percent of Indian Investors own shares in this company and that itself speaks volumes! You can even get shares of Reliance at the Luxembourg exchange.

ETFs

ETFs offer another way to invest in India. They offer a low risk way of investing in the economy and also help you capture the profit that is being generated because of the flourishing Indian economy. ETFs are nothing but exchange traded funds in case you were wondering what they are. You can also choose to go in for ETNs or exchange traded notes. Some ways to invest in ETFs are through:

WisdonTree India Earnings (EPI)

iPath MSCI India Index (IIP)

Powershares India ETF (PIN)

Closed End Funds

You can also choose to buy mutual funds which are close ended. This is basically another way of investing in the large companies in India. Take India Fund Inc (IFN) basically lets you invest in stocks of a wide array of Indian companies and across every strata of the Industry as well. Another popular close ended mutual fund is Morgan Stanley India Investment Fund (IIF). In fact there are many times where they even invest in currency and other options.

If you want to purchase shares of specific large companies which are not included in the mix of shares in these funds, then you need to purchase them directly off the market from the Bombay Stock Exchange. But keep in mind that in order to do this, you need to consider the differences in foreign currency. It is recommended that you invest through mutual funds to avoid losses.

There are many ways to invest in India if you are willing to. Just keep your eyes and ears open. I have it on good authority that India will definitely live up to your expectations!

Interested to start investing in India?
Send your questions to: info@nriinvestindia.com

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Invest in Indian Railway Tax Free Bonds – Download Application Form Now.!!

January 19th, 2012 | Posted by indiatax in India Bonds - (1 Comments)

Indian Railway Finance corporation Ltd. (IRFC) is a dedicated financing arm of the Ministry of Railways. Its sole objective is to raise money from the market to part finance the plan outlay of Indian Railways. The money so made available is used for acquisition of rolling stock assets and for meeting other developmental needs of the Indian Railways.

The borrowing programme of IRFC is guided by the requirements projected by Ministry of Railways. IRFC is notified as a Public Financial Institution under Section 4A of Companies Act, 1956. It is registered as a NBFC-ND-IFC (Infrastructure finance company) with reserve Bank of India.

>>> Highlights of Tax Benefits:

1. The Income by way of Interest from these bonds is fully exempt from income tax and shall not form part of the

total Income as per provisions under section 10(15)(iv)(h) of IT Act.

2. There will be no deduction of tax at source from the interest, which accrues to the bondholders on these bonds

irrespective of the amount of the interest or the status of the investors.

3. Wealth Tax is not levied on investment in Bonds under section 2(ea) of the Wealth-tax Act, 1957.

>>> DOWNLOAD Application form of Indian Railway Finance corporation Bond – IRFC Bonds: || CLICK HERE ||

>>> Sailent Features of Proposed Tax free Bonds:

1. The Company shall issue Bonds upto an aggregate amount of Rs 6,300 crores in one or more tranche(s), on or

prior to March 31, 2012 pursuant to CBDT’s Notification dated September 23, 2011 which authorised the Company

to raise tax free bonds aggregating up to Rs 10,000 crores in the financial year 2011-12.

2. Credit Ratings of “CRISIL AAA/Stable” by CRISIL, “CARE AAA” by CARE and “ICRA AAA by ICRA indicating Highest

Degree of Safety in terms of timely servicing of financial obligations.

3. Bonds to be allotted on first-cum-first serve basis up to the limit reserved for each category of investors.

4. Bonds can be held in physical or in dematerialized form, at the option of bondholders.

5. Bonds are proposed to be listed on the BSE and the NSE.

>>> Who can apply for these bonds?

1. Resident/ Non Resident Individual, HUF’s.

2. Partnership Firm/ LLP’s.

3. Companies/ societies registered under applicable laws and Authorize to invest in bonds.

4. Registered trust authorized to invest in bonds.

5. Public financial Institution as defined in section 4A of companies Act.

6. National Investment funds/ Mutual funds/ Foreign Institutional Investors (FII’s).

7. Insurance companies registered with IRDA.

>>> Who cannot apply for these bonds?

1. Foreign Nationals.

2. Minors without a guardian name.

3. Overseas Corporate bodies.

>>> Indian Railway Bond Application form – >> DOWNLOAD HERE <<

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NRI Real Estate & Immovable Property Rules and Regulations in India.

October 1st, 2011 | Posted by indiatax in Investment India | Real Estate India - (2 Comments)

>> A NRI/PIO is permitted to acquire by way of purchase immovable property in India other than agricultural property/plantation/farm house.

>> A NRI/PIO can pay the purchase price out of funds received in India through normal banking channels by inward remittance, or by way of funds held in Non Residents account.

>> A NRI/PIO can transfer such immovable property (other than agricultural property or plantation or farm house) to a person resident in India or a non-resident Indian citizens or a PIO.

>> A NRI/PIO can transfer agricultural or plantation property or farm house only to Indian citizen resident in India.

>> A PIO may acquire/transfer immovable property (other than agricultural property or plantation or farm house) by way of gift from/to a person resident in India or an Indian citizen resident outside India or a PIO.

>> A Foreign Embassies/Diplomats/Consulate General in India are permitted to purchase or transfer property in India, if they had obtained clearance from Ministry of External affairs.

>> The consideration for acquisition of immovable property shall be paid out of funds remitted from abroad through banking channels.

>> A NRI who has any place of business in India for carrying on his business activities is permitted to acquire an immovable property which is necessary for or incidental to carrying on such activity in India.

>> A Foreign national resident outside India are not permitted to acquire any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in India.

>> A Foreign national is not permitted to transfer such property without prior approval of RBI.

>> Persons of Indian origin residing in Pakistan, Bangladesh, China, Afghanistan, Iraq, Nepal, Sri Lanka and Bhutan are not permitted to own or acquire any property in India.

>> A NRI/PIO is not permitted to make payment by traveller’s cheque or by foreign currency notes.

Repatriation of Sale proceeds

Where a NRI or PIO sells his immovable property in India (other than agricultural property or plantation or farm house), the Authorised dealer is permitted to allow repatriation of sale proceeds outside India:

If the property was acquired by the seller in accordance with the provisions of foreign exchange law in force at the time of acquisition by him:

>> 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.

2. In case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India, 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.

3. 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.

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Tax Implications & Rules on NRE – Non Resident (External) Rupee Account

September 15th, 2011 | Posted by indiatax in NRI Accounts | NRI Taxation - (1 Comments)

Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can open and maintain NRE accounts with authorized dealers and banks authorized by the Reserve Bank of India. NRE accounts can be opened by account holder himself and not by the Power of Attorney holder in India.

NRE accounts can be opened as current, savings, recurring or fixed deposit accounts. These accounts can be opened jointly by two or more non resident Individual. NRE accounts cannot be opened jointly with a resident. These account holders should be person of Indian nationality or Origin. NRI may on his temporary visit to India, open NRE account against foreign currency travellers’ cheque, notes and coins, provided Individual has not ceased to be a Non Resident.

Following are the permissible credits to the NRE accounts:

Remittances from outside India in any permitted currency.
Deposits of cheques, bank drafts by the account holder in person during his temporary visit to India.
Transfers from NRE/FCNR accounts.
Interest on Government securities and dividends on units of mutual funds.
Maturity proceeds of Government securities and sale proceeds of mutual funds units.
Refund of shares/Debentures subscriptions to new issues of Indian companies.
Refund of application/earnest money/purchase consideration made by seller on account of non allotment of flat/plot.
Interest accruing on funds held in NRE account.

Following are the permissible debits to the NRO accounts:

All local payments in rupees.
Remittances outside India.
Investment for purchase of immovable property in India.
Investment in shares/securities/commercial papers of an Indian company.

>> Loans for personal purposes or for carrying on business activities can be granted against the security of funds held in the NRE account.

>> Upon returning to India for an uncertain period, NRE accounts can be re-designated as Resident account or funds may be transferred to RFC account on the option of the account holder.

>> Funds lying in NRE account of the deceased account holder can be remitted by his non resident nominee.
>> Funds held in NRE savings accounts can be overdrawn upto a limit of Rs.50000 subject to condition that overdrawings together with Interest on it are paid within a period of 2 weeks.
>> Interest accruing on NRE accounts are not taxable in India, whereas balance held in NRE account are exempt from wealth tax.
>> Overseas Corporate Bodies cannot open and maintain NRE accounts.

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Tax Implications & Rules on NRO – Non Resident Ordinary Rupee Account

September 14th, 2011 | Posted by indiatax in NRI Accounts | NRI Taxation - (1 Comments)

When an Indian national or person of Indian origin (PIO) residing in India leaves India for a foreign country (other than Nepal and Bhutan) for taking up employment, business or vocation outside India, or for any other purpose, indicating his intention to stay outside India permanently or for an indefinite period, is entitled to open a NRO account with the authorized dealer or authorized bank for transactions conducted in Indian rupees.

Individuals or entities of Bangladesh and Pakistan nationality require prior approval from RBI for opening NRO account.

Such accounts can also be opened with funds remitted from abroad. As funds in this type of account are non repatriable, they cannot be remitted abroad to the account holders or transferred to their NRE Accounts without the Reserve Bank’s prior permission. Interests earned on these deposits are taxable in India as per Income tax Act.

NRO accounts can be opened as current, savings, recurring or fixed deposit accounts. The accounts can also be opened jointly by non residents with any residents in India operations thereon by the resident account holder can be made freely. Foreign nationals of Non Indian origin can also open NRO account on their visit to India provided the account has been maintained for a period not exceeding six month and has not been credited with any local funds, other than Interest accrued thereon.

Following are the permissible credits to the NRO accounts:

Remittances received from outside India through normal banking channels.
Any permitted currency deposited into the account during the account holder’s visit in India.
Proceeds from sale of any assets including immovable property or any current Income like Rent, dividend, pension, interest etc.

Following are the permissible debits to the NRO accounts:

All local payments in rupees.
Payments outside India of current Income like Rent, dividend, pension, interest etc.
In case of NRI/PIO, remittance up to USD one million, per financial year, for all bonafide purposes to the satisfaction of the authorized dealer.
Payments arising from use of International credit cards issued to NRI’s/PIO’s.

>> The remittances will net of applicable taxes and will be allowed to be made by Authorised dealer only on production of undertaking by the remitter and a certificate from Chartered Accountant.

>> Funds held in NRO accounts are not eligible to be remitted outside India without prior approval of RBI.

>> Loans are permitted to be granted by the authorized dealers and banks against the security of NRO fixed deposits.

>> NRO accounts may be re-designated as resident rupee accounts on the return of account holder to India for an uncertain period.

>> NRO accounts should continue on temporary visit of account holder to India.

>> Overseas Corporate Bodies cannot open and maintain NRO(Savings)accounts.

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Comparison between PIO vs OCI Card – which is better?

September 13th, 2011 | Posted by indiatax in PIO vs OCI Card - (0 Comments)

1. PIO(Person of Indian Origin) card

Person of Indian Origin can apply for PIO card. Following persons can apply for PIO card:

a) Anyone who ever held an Indian passport.

b) Anyone whose parents or grandparents was born in Undivided India and did not migrated to Pakistan or Bangladesh.

c) Anyone whose spouse is citizen of India or person of Indian origin

Nationals of Pakistan, Bangladesh, Sri lanka, Afghanistan, Bhutan, Nepal and China do not qualify for PIO card.

Benefits of PIO Card:

a) Freedom to enter or leave India without Visa.

b) Acquire non agricultural and plantation property in India.

c) Privilege of separate counters for immigration at international airports in India.

d) Admit children to all educational institutes in India under NRI quota.

e) Apply for various housing schemes of LIC, state government and other government agencies.

2. OCI (Overseas Citizens of India) Card

All overseas Indians who migrated after 26^th January, 1950 can apply for OCI status. Indians settled in Pakistan and Bangladesh cannot apply for OCI status.

Person of Indian Origin of certain categories who migrated from India and acquire citizenship of foreign country, other than Pakistan and Bangladesh are eligible to be granted as OCI.

Benefits of OCI Card:

a) Lifelong Visa to India for any number of visits, and for any purpose.

b) Enjoy the same benefit as NRIs in economic, financial and educational fields except in purchase of agricultural property.

3. PIO’s V/s OCI’s

a) OCI is entitled to lifelong Visa free travel to India but for PIO’s it is limited to 15 years.

b) OCI is exempted from any registration with Indian police for any length of stay in India whereas PIO cardholders are required to register at foreigners Registration office at District headquarters if their stay exceeds 180 days in India in single stretch.

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Things to be Remembered for filing TAX in India.

August 23rd, 2011 | Posted by indiatax in NRI Taxation - (3 Comments)

Previous year :- Previous year means the financial year for which Income is chargeable. Tax is always charged in respect of Income of the previous year i.e. the period beginning on 1^st April and ending on 31^st March.
Assessment year :- Assessment year is the year in which you file your returns for the Income earned for the previous year, which had just ended. For Ex- Return for Income earned in previous year 2010-11 will be filed in Assessment year 2011-12 i.e. the period beginning on 1^st April 2011 and ending on 31^st March 2012.
Previous year is always a period of 12 months.
Tax is charged in respect of Income of Previous year in the relevant assessment year.
NON RESIDENT is liable to pay taxes on-
1. Income received or deemed to be received in India during relevant financial year.
2. Income accruing or arising or deemed to accrue or arise in India during the relevant financial year.
3. Income accruing or arising or deemed to accrue or arise outside India, but first receipt is in India during relevant financial year.
Permanent Account number (PAN) is necessary for filing Income tax return in India.
An Individual should leave India before 29^th September in the 1^st year of leaving from India for employment outside India, otherwise Income will be taxable in India as resident of India.
An Individual should ensure to come back on or after 1^st February on transfer of his residence to India, so that his total stay in India does not exceed 59 days. However, a person whose stay in India in preceding four previous year does not exceed 365 days, then he/She may return after 30^th September of relevant year and save NRI satus.
Dates Stamped on the passport are normally considered as proof of dates of departure from and arrival in India. Always ensure that date stamped on passport is legible.
It is always advisable to make chart for the number of days of stay in India for atleast 7 previous years.

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How can NRIs determine Residential Status for income tax filing?

August 19th, 2011 | Posted by indiatax in NRI Taxation - (2 Comments)

An Individual is treated as Resident in India, if any of the following condition is satisfied:

Individual’s stay in India is 182 days or more in any tax year, OR
Individual’s stay in India is 60 days or more in the relevant tax year and 365 days or more in aggregate in last 4 tax years immediately preceeding tax year for which residential status is determined.

If none of the above condition is satisfied then Individual is treated as NON RESIDENT. Continuous stay in India or at the same place is not essential but aggregate stay in India in any tax years is important. It is determined by the physical presence of an individual in India. The day Individual enters into India and the day he leaves India is relevant in determining the Residential Status.

An Individual is treated as Resident but not ordinarily resident in India if any one of the following condition is satisfied:

Individual is Non Resident in India in at least 9 out of 10 tax years preceeding the tax year for which Residential status is determined.
Individual stays for 729 days or less during 7 tax years preceeding the tax year for which residential status is determined.

Residential status determines the scope of income taxable in the hands of the assessee in India during the relevant previous year. Residential status may be different for different previous years. The taxability in India, for a PERSON depends upon his RESIDENTIAL STATUS and NOT upon his nationality or citizenship.

A HUF is Non Resident in India if control and management of its affairs is situated wholly outside India. Residential status of HUF is determined by the control and management of its KARTA. If Karta stays outside India throughout the tax year, then HUF will be considered as NON RESIDENT but if Karta stays in India for even a SINGLE DAY during tax year, then HUF shall be Residential.

A firm, AOP, etc. is said to be NON RESIDENT in India in any tax year where during that year the control and management of its affairs is situated wholly outside India.

A Company is said to be NON RESIDENT if:

1. It is not an INDIAN Company.

2. The control and management of its affairs is situated wholly or partially outside India.

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