Connecting Businesses with Opportunities in India

NRIs

Submitted by CA Shashi Mohan on Mon, 01/06/2020 - 7:57pm.

At some point of time in life a Non Resident Indian (NRI), who is a citizen of India living abroad, or a foreign citizen of Indian origin may want to repatriate the sale proceeds of self-acquired or inherited immovable property (house), maturity amount of an Insurance Policy, any gifted amount, his income deposits in India or any other fund accumulated in India to his country of residence like US, Canada, England, Australia, etc.

In order to repatriate or bring money from India, knowing the exact nature of the funds available, in which account they are available, related documentation and compliance become essential for an NRI to save time and not to run into issues with tax and regulatory authorities.

Repatriation is basically a term used in FEMA (Foreign Exchange Management Act) for transfer or remittance of Indian rupee (INR) from Non-Resident Ordinary (NRO) A/c to an overseas bank account.

So, the first thing you, as an NRI, must know is that you need a Non-Resident External (NRE) or a Non-Resident Ordinary (NRO) or a Foreign Currency Non-Resident (FCNR) bank account for repatriation of funds.

Based on FEMA Guidelines, your bank will require appropriate documents depending on:

  1. The type of bank account you are holding your money in
  2. Nature of transaction from which the money was deposited in that account, and
  3. The amount of money you want to repatriate.

Since the prime source of deposit in an NRE account is from abroad, the funds available therein are freely repatriable i.e. you can transfer the money back to your country of residence without any approval or any specific documentation. Interest or Dividends earned on investments made through foreign funds is also allowed to be deposited in an NRE Account. The amount available in an NRE Account can also be freely transferred to an NRO Account or an FCNR A/c or even in a resident savings account.

NRO account works as a saving account in India wherein NRIs can deposit income earned locally e.g. pension, dividend, rental income, sales proceeds of property or any other financial assets.  Any transfer from an NRO to NRE account requires the same documents which are required to repatriate the amount from an NRO account to a foreign bank account.

Income earned in India is likely to be taxed in India and the net amount is what you will repatriate. The following lists the items in which money earned in India can be easily repatriated after paying taxes and submitting a few sets of documents:  

  • Local earnings in India like pension, rental income, interest, profit from the business, dividends, tax refunds, etc.
  • Interest earned in your NRO Account

Documents required

  1. Application Form for Repatriation:  Bank provides
  2. Declaration under FEMA in Form A2: Bank provides
  3. Tax Certificates in Form 15CA/ 15 CB: Local CA will help
    • Certificate from a Chartered Accountant (CA) certifies that the applicable taxes have been paid. Most CAs do such certifications and you can contact a CA anywhere in India. In case Taxes applicable to your remittance, CAs will also help in generating tax challans under the appropriate section of Tax Laws and also assist in depositing the tax with Indian Treasurer, before issuing the Form 15CA/15CB.
  4. Copy of PAN Card

Now in the case when the funds are ‘not’ freely repatriable, or there are conditions imposed by Reserve Bank of India on the transfer frequencies of overall limits, they are called Conditional Repatriable Funds. Listed below are the items under not-freely repatriable and the additional documentation to be arranged to justify the exact transaction:

1) Funds in NRO Account (Other than local earnings shown above)

Documentation required:

  • Adequate proof of “Source of Funds’ available in NRO Account. For example
    • Transfer of funds from overseas or NRE or FCNR Account
    • Sale proceeds of a property/Other Financial Assets or accumulated funds from past

2) Funds from the Sale of Financials Assets like Mutual Funds, Shares and Insurance policy

Documentation required:

  • Mutual Funds:
    • ‘Fund House Statement’ which shows the amount credited in NRO Account
      • Note: Earnings from mutual fund investment through an NRO A/c are not repatriable
  • Shares (Private Placement):
    • Unique Identification Number (UIN), Proof of submission of FC-GPR with RBI.
    • Unique Identification Number (UIN), Proof of submission of FC-GPR with RBI.
    • Proof that the FCTRS documents have been filed by the buyer of Shares at RBI.
  • Shares (Stock Market- IPO/Secondary Market):
    • DEMAT Statement, Contract Note to match with the amount to be repatriated
    • Banks may ask for ‘No Objection Certificate- NOC’ from other Bank who holds the Portfolio Investment Scheme Account.
  • Shares Inherited:
    • Probated Will, Letter of Administration or Succession Certificate
    • Death Certificate (Notarized ) of the person from whom the shares were inherited.
    • DEMAT Statement, Contract Note should match with the amount to be repatriated
  • Insurance Policy (Surrendered/Matured):
    • Insurance Policy Documents
    • Proof of maturity amount or surrender value as credited in NRO Account.

3) Funds from the Sale of Property (Ancestral, Gifted or Acquired while being an NRI)

Documentation required:

  • Copy of Registered Sale Deed of the Property
  • Proof of receipt of sale proceeds into the NRO Account
  • Copy of Income Tax Return or Tax Payment Challan or Tax Form issued by the buyer
  • Declarations to confirm the nature of sale and adherence of permitted limits.
  • Copy of Probated Will, Letter of Administration or Succession Certificate in case of inherited property
  • Copy of Registered Gift Deed in case property was acquired as a gift

Note: Amount up to ‘Original Purchase Value’ of a property can be repatriated if the property was purchased using funds from NRE Account. In case the property was purchased from the funds in NRO account, or by a Gift or Inheritance, the repatriation can be done for a max of USD 1 Million per Financial Year. In the case of Residential Property, sale proceeds of max 2 such properties can be repatriated.

4) Amount received as Gift

Documentation required:

  • Gift Deed (Stamp Duty paid) from Resident as per the local state laws
  • Proof of transfer from Resident Indian's Bank Account to NRO Account
  • Declaration by Resident that the ‘Cash Gift’ doesn’t exceed the prescribed limits

Note: Repatriation of Cash Gifts from a Resident is limited to USD 250K per financial year.

 

Glossary

  • Authorized Dealers (AD): Respective Banks
  • CA: Chartered Accountant in practice
  • DEMAT: Dematerialized Account (Listed Shares)
  • FEMA: Foreign Exchange Management Act 1999
  • FCNR (B) A/c: Foreign Currency Non-Resident (Bank) Account is a type of Fixed Deposit Account with money earned overseas.
  • Form 15 CA/CB: Form prescribed by Indian Income Tax Dept. to be certified by resident CAs
  • INR: Indian Rupees
  • NRO A/c: Non-Resident Ordinary Account to manage the income earned in India
  • NRE A/c: Non-Resident External Account where Foreign Exchange can be transferred from outside India

Disclaimer: Views expresses herein are for the purpose of general understanding and in no manner, it construes to a professional or legal opinion on the subject. Viewers are advised to take professional advice to place a reliance or execute any transaction based on their own facts.

About the Author: Shashi Mohan/FCA has over 20 years of experience in Cross Border Business Strategies and Entry India Services. He has been responsible for Consulting, Legalization and Operational Management of hundreds of overseas brands in India. You can reach Shashi Mohan at shashi.m@excelorindia.com.

Submitted by CA Shashi Mohan on Sat, 06/22/2019 - 10:19am.


 

First check if you have earned any income in India/from India: e.g.

  • Sales of Property located in India
  • Interest on Fixed Deposit, Saving Bank/NRO Account
  • Sale of Shares, Mutual Funds, Bonds
  • Amount received against any Services provided in India
  • Rental Income on Property/Assets located in India

Next for you is to verify if Indian Payer (Your Customer, Tenant, Buyer of Property/Shares/Mutual Funds etc.) have deducted any Tax? There may not have any deduction of tax in India, but your income in India is in excess of INR 250,000, then what will you do? You may like to know the required compliances in Indian and also how to get refund of your taxes as deducted in India.

We have summarized here all such frequently asked questions- FAQ

 

1)    Do I need to have a Permanent Account Number (PAN) in India?
•    In case your income is more than INR 250,000 in India, you must have a PAN and also you must file an Annual Tax Return in India
•    There can be several other need to have a PAN in India e.g. Investment in Property, Shares, Other Assets.
•    Please click the clink for more detailed information on this topic (https://entryindia.com/articles/how-nris-and-foreign-organizations-can-get-pan-card-india)

2)    Do I need to file Income Tax Return in India?
•    In case you don’t have any income or the income is below INR 250,000, you don’t need to file your Income Tax Return in India.
•    In case your income in India e.g. interest on Savings Account/Fixed Deposits, Rental Income etc. exceeds Rs.2,50,000, then you it’s must for you to file a tax return in India.

3)    Can I get a refund of TDS in India?
•    Unless you file your Tax Return in India, you cannot get refund of any taxes deducted (even on income below INR 250,000)
•    You must file your tax return to get refund of any Taxes that are deducted in India.

4)    Can I check my 26AS (Application of Income Tax in India) to know if any Tax is Deducted at my PAN)?
•    In case you have a PAN and your registered it at Income Tax (www.incometaxindiaefiling.gov.in), you can view/download Form 26AS, which will show the Income Earned and Taxes Deducted, if any
•    All Indian Banks also offer to view/download 26AS, once you are logged in in your Bank Account.
•    Details at 26AS is updated by the deductors of Tax on a Quarterly basis (Apr-June, July-Sep, Oct-Dec, Jan-Mar) and the updation is visible there within 1 month subsequent to the last quarter. As we are in June, the 26AS will be fully updated for the whole Financial year i.e. 2018-19 by now.

5)    I/My Firm overseas have an income from India, wherein Tax @20% or even higher rate got deducted. Can I avoid it?
•    In case of NRI/OCI overseas or a Firm outside India, the Indian Payer will deduct TDS (Tax Withholding) even if the amount does nto exceed INR 250,000.
•    In case you/Your Organisation overseas is not having Indian PAN, please check your India customer must have deducted Tax @20% or even at a higher rate.
•    Unfortunately such tax deducted in India can also not utilized as a Credit in your Home Country, even if there is a ‘Double Taxation Avoidence Agreement- DTAA” with India and your country overseas.
•    In case you are writing any service invoice to a customer in India, you must have Indian PAN in order to avoid Tax Deduction at 20% of higher rates. Getting PAN is One Time exercise.

6)    I/My Firm overseas have earned an income from India, wherein Tax has been Deducted there based on DTAA. Do I need to file a Tax Return in India?
•    You must need to file a Tax Return in India, in case you earned any income from here and specially when any taxes got deducted.
•    In such a case, even if you/Your business is not registered in India, you must need to file your Tax Return in India
•    Indian Tax Authorities send ‘Notices’ at your overseas address asking reason of not filing the Income Tax Return abd may impose penalties as well.

7)    As a NRI/OCI can I take benefits of Section 80C?
•    Investment in permitted instruments under section 80C of Indian Income Tax help in reducing the Taxes and its permitted for NRI/OCI
•    A foreign national or an overseas Firm/Business however cannot avail any benefit under section 80C

8)    Can I get my refund in my overseas Bank Account? What is the timeline to get Refund?
•    Refund on valid income tax returns can be claimed in an overseas bank
•    Generally it takes 6 months to get the refunds. In some cases it ma take little longer time.

9)    Can I file my Indian Income Tax Return my own or Do I need to hire a local tax consultant?
•    Its fully online and anyone with requisite information can file it easily
•    Hiring a local tax consultant will be very helpful in ‘Selection of appropriate Tax Forms, claiming all the eligible benefits, filing it correctly to avoid any future repercussion.

10)    What is the due date? What is I am not able to file on/before Due Date?
In case of Individuals (NRIs/OCIs/Foreign Nationals) Income Tax Return for the Financial Year (April 01, 2018 till March 31, 2019) is required to be filed by July 31, 2019.
•    INR 5,000 Penalty if filed after July 31, 2019 but before December 31, 2019
•    INR 10,000 Penalty if filed after December 31, 2019 but before March 31, 2020
•    No permission to file after March 31, 2020

 

About the Author
With over 15 years of experience, Shashi Mohan has been instrumental in formulating strategy for Entry India, Business Set-up and Operational Management of over 150 overseas brands from USA, Europe, GCC and South East Asian countries in India. He is a member of our ‘Expert Panel’ at Entry India. Shashi can be reached at shashi.m@excelorindia.com or +91 9818 700 482   

Submitted by CA Shashi Mohan on Sat, 09/22/2018 - 6:33am.

1. Naming India Business

  • Get ready with minimum 2 options of Business Name
  • Name must be unique and defining the ‘main objective clearly’
  • Get ready with ‘No Objection’ if intend to use the name of Holding Company or any Trade Mark 

2. Business Objective

  • Clear defined in appx. two Paragraphs (10-15 lines)
  • General & Multi Objective covering different business areas not allowed  

3. Number of Shareholders/Owners

  • Minimum 2 shareholders for a Private Limited
  • Can be Foreigners, NRIs, OCIs or a Foreign Company (ies)

4. Foreign Ownership

  • 100% Foreign Direct Investment, allowed in majority business segments
  • Do check if your business required prior approval from reserve bank of India

5. Initial Share Capital

  • No minimum requirement
  • Do plan for initial capital based on initial expenses, until the business reaches at Break Even Point (BEP)

6. Physical presence of Foreign owners

  • Not required for incorporation purpose
  • Will be required once in a year to present in AGM

7. Local representative

  • Not required for incorporation purpose
  • May be a business need to appoint an appropriate person

8. Resident Director

  • At least 1 Resident Director is a must
  • Any person who have stayed in India for 180 days in previous calendar year

9. Registered Office

  • An address in India (not necessarily a commercial place) required
  • Option will be there to arrange within 30 days of incorporation

10. Business Plan

  • Not required from legal side
  • Must prepare a business plan for minimum 3-5 years span (Break Even Point)
  • Local Human Resource and Working Capital must be planned well

11. Sales Staff

  • Core team must be hired based on Business Needs
  • Assistance of local HR Consultants would be helpful to find out right person

12. Administration Staff

  • Not required in beginning
  • Can be hired as a connect between Sales Team and Local Consultants

13. Local Consultant

  • Must be hired for undertaking all Non-Core/Operational Stuff
  • Attention to be given toward existing experience of similar nature assignments

14. Annual Compliance

  • Audit Report, Financial Statement etc need to be signed in paper before filing
  • All compliances required be done online / Local consultants help will be immense

15. Individual Owners Abroad

  • Personal appearance required in Annual General Meetings (AGM)
  • Failure would result in an invalid AGM, resulting into heavy penalties

 

Submitted by CA Shashi Mohan on Tue, 11/17/2015 - 10:02pm.

Background

PAN Card or Permanent Account Number is a MUST for both a Non-Resident Indian (NRI) and a Non-Resident organization in case they receive income and need to file income tax return in India. Indian Income Tax Authority keeps a track and consolidates financial transactions through PAN and it is regarded as a Tax Registration Number in India. Legislation has accordingly mandated to quote PAN at several financial transactions. As a practice, requirement of PAN is also considered mandatory in non-financial activities such as opening a Bank Account or becoming a “Director” (getting Director Identification Number) in a company registered in India.

Now days, it works as an Identity card in India. Similar to an EIN or Social Security Number in USA, a PAN in India is a 10 digit alphanumeric number issued by Income Tax Department.  It’s a unique number issued for lifetime. In certain cases, it can also be surrendered or cancelled under a valid reason. Having more than one PAN is not permitted and one can be penalized for having more than 1 PAN.

What makes PAN card a Mandatory requirement?

There are specific transactions which cannot be carried out unless valid Pan is presented. Relevant authorities simply deny such transactions in absence of a PAN. Below are a few examples:

  • Opening a Bank Account, getting a Credit Card, apply for a Loan
  • Getting a Digital Signature of obtaining a Director Identification Number (for being appointed as a Director in Indian Companies).
  • Insurance Payment, Other Financial transactions > INR 50,000
  • Transaction in Property, Vehicles >INR 500,000
  • Investment in Shares, Mutual  Fund
  • Utility connections (Telephone, Electricity, Gas etc)
  • Domestic registrations such as Service Tax, Value Added Tax, Import Export Code

NRIs and Foreign Companies that are doing business in India also need a PAN

Every recipient of income from India needs to furnish PAN. It is also required that in the absence of PAN, the tax withholding rate will be higher (20%) even if a lower rate is prescribed in Double Taxation Avoidance Agreement (DTAA) with that particular country. The following are the sample cases in which PAN is required by NRIs and foreign companies doing business in India.

  • Carry out financial or investment related transactions
  • Employment or rendering of professional services
  • Trading in Shares through a Depository or even a Broker
  • Invest in Mutual Funds
  • Purchase Land (not Trading) or some property in India
  • Being appointed as a Director in Indian Companies
  • Being appointed as a “Authorised Representative” in a Liaison Office, Branch Office, Project Office