More than 10% of the population of Goa are living abroad for various reasons- job opportunities, career prospects, education, lure of western world, dream of making money, work challenges etc, etc. However, most of them are intimately attached to their homeland and wish to return some day. They are either Indian passport holders (NRIs) or Foreign country passport holders (OCI/POI).
Definition of Non-resident under Income Tax act and Foreign Exchange Management Act (FEMA) is different. Under Income Tax Act residential status is determined based on number of days stay in India and under FEMA residential status is based primarily on the intention of the person to stay abroad for any purpose. Thus, a Non Resident under FEMA can be Resident in India under income tax laws if his stay in India exceeds 90/180 days.
Under Income Tax Act, a tax payer in India is classified as ‘Resident’ or a ‘Non Resident’. A ‘Resident’ is further classified either as ‘Resident and Ordinarily Resident” (ROR) or ‘Resident but Not Ordinarily Resident’ (RNOR). This classification depends upon number of days of stay in India in a financial year. He will be considered as resident if any one of the following two basic conditions of stay are fulfilled.
1. If he was in India for a single period or multiple periods amounting to 182 days or more
OR
2. If he was in India for single period or multiple periods amounting to 60 days or more and he had been in India for a single period or multiple periods amounting in all to 365 days or more for the four years preceding that year. This rule has following exceptions.
The period of 60 days mentioned above becomes 182 days in case Citizen of India who
n Who leaves India in the previous year as the member of the crew of the Indian ship; Or
n Leaves for employment outside India; Or
n Is a citizen of India or a person of Indian origin, and being outside India, comes on a visit to India in any previous year.
If he does not satisfy any of the conditions ,he will qualify as a Non Resident Indian (NRI).
To be “Ordinarily Resident” in India a tax payer has to further meet both the following conditions during the previous financial years.
a. He should have been a Resident in India (as defined above) in 2 out of 10 years preceding that year and
b. He should have been in India for a single period or multiple periods amounting in all to 730 days or more during 7 years preceding that year.
“Resident and Ordinarily Resident” (ROR) is taxed on entire world income, “Resident but Not Ordinarily Resident” (RNOR) and “Non Resident” (NR) are taxed only on income earned or received in India.
The most preferred mode of investment by NRIs is either NRE or FCNR fixed deposits in Indian banks where they get tax free interest at higher rates than the country of their stay. These deposits can be made only by NRIs, OCIs & PIOs. Foreign Citizens are not eligible to open these accounts. These accounts can be jointly held only with NREs but account can be operated through power of attorney. Nominations are permitted.
There was a time when NRIs were given VIP red carpet treatment by bankers with exclusive lounge facilities with NRI Cell and interest offered was as high as 18%. Special dinner meets were arranged for them during December month when they usually came on holidays. All this has disappeared now with India bulging with foreign exchange reserves.
With interest rates drastically falling on NRE & FCNR deposits, NRIs should now look forward for other investment opportunities in equity stocks, mutual funds, tax-free Bonds, real estate with proper study and guidance from experts. NRIs, now, cannot make investments in any postal saving schemes like national saving certificate, postal Deposits, Public Provident Fund etc. However, NRIs can freely buy without Reserve Bank of India’s permission, immovable properties other than agriculture, plantations, farm house and can also invest in business without repatriation facilities. In case of long term capital gains on sale of properties, he is eligible for benefit of exemption under sections 54, 54F, and 54C of the Income Tax Act.
A NRI holding PAN need not file income tax return if his income is below taxable limit which at present is Rs 2.5 lakh. However, to claim income tax refund filing of tax return is necessary.
Under FEMA, a NRI cannot maintain Resident saving bank account or fixed deposit in India. He should designate his existing bank accounts as “Non-Resident Ordinary” (NRO).Interest on this account is taxable and TDS is 30% irrespective of the interest amount. Any Indian income can be deposited in this account. Revenue receipts like interests, rent, dividends can be repatriated to foreign bank accounts or transferred to NRE accounts after paying due taxes. Any capital receipts like sale proceeds from properties after payment of taxes upto to US $ 1 million per calendar year can also be repatriated or transferred to NRE bank account after complying with required formalities.
A returning NRI can continue to hold overseas assets like foreign bank accounts, foreign securities, foreign immovable property or any other asset. . He is required to re-designate all his bank accounts as “Resident “ by informing bankers. Wherever he holds stocks, mutual funds etc notice should be given to the company about change in his status.
A returning NRE would generally be assessed as RNOR on his return to India for 2 assessment years from financial year 2003-04 onwards. Prior to this, 9 years were permissible. In this RNOR status, any income earned abroad such as interest, dividend, royalty etc. is tax free. Interest on NRE deposit is tax free till the date he returns to India for permanent settlement. But interest on FCNR is tax free as long as his status is RNOR. For this, he should properly plan his timing of returning to India.
Returning Goans should avoid temptation of investing their hard earned life savings in industrial ventures lured by Government Schemes as by nature they are not cut out for ventures which requires hard business acumen. After making safe, secured investments to have adequate returns to support their life-style and standard of living , the surplus may be invested in POP & MOM stores to keep them occupied in retirement to lead happy life.
