NRI FAQs
Taxation
Whether dividend income earned by a non – resident individual or foreign company from an Indian Company is taxable?
The dividend income earned by a non – resident individual or foreign company from an Indian Company is exempt from tax in India as the company distributing the dividend is liable to pay dividend distribution tax in India.
If an individual of Indian origin staying abroad has to remit some money to his parents in India, will such repatriation of money to India affect the taxability of the parents?
Repatriation of money to parents of an individual will not be liable to be taxed in India in the hands of the parents. This is because gifts made to relatives are not taxable as per the Income‐tax Act.
How is the taxable income determined in case of non-residents?
In the case of a non‐resident individual and a foreign company, the income which is received or is deemed to be received in India or income which accrues or arises or is deemed to accrue or arise in India, shall be liable to be taxed in India.
What is the eligibility criteria for an individual and a company to be treated as a non‐resident for the purpose of Indian Income Tax?
An individual shall be considered to be a resident in India in any particular year if he stays in India:
- (1) For a period or periods amounting in all to 182 days or more; or
- (2) For 60 days or more during the relevant year and also for 365 days or more during 4 years preceding the relevant previous year.
The stay of 182 days or 60 days need not be a continuous stay.
Accordingly, if any of the above condition is satisfied an individual shall be a resident for tax purposes in India. If none of the two conditions as mentioned above are satisfied, then the individual shall be considered as a non‐resident for the relevant year for tax purposes.
Further, in case of a citizen of India, who being outside India, comes on a visit to India in any previous year, or has left India for taking up employment/ business/ profession outside India or has left India as a member of the crew of the Indian ship, in point 2, as stated above, the words 60 shall be read as 182 days.
A company is said to be a resident in India in any previous year, if it is an Indian company or its place of effective management, in that year, is in India. Here, the term ‘place of effective management’ means a place where key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are, in substance made.
Is interest earned on NRE and NRO Deposit accounts taxable?
The interest earned on deposits in an NRE account is exempt from tax in the hands of the NRI while the interest earned on deposit in the NRO account is taxable in India.
If a non resident is willing to invest in the Equity Shares or debentures of an Indian Company by utilizing its foreign currency as a medium of purchase, then are there any specific provisions relating to the taxability of such shares?
In case of a non‐resident, capital gains arising from the sale of shares, or debentures of, an Indian company shall be computed by converting the cost of purchase, and the sale consideration received as a result of sale of such shares and debentures, into the same foreign currency as was initially utilized in the purchase of the shares or debentures, and the capital gains so computed in such foreign currency shall be reconverted into Indian currency.
Foreign Exchange Management Act
What is the difference between Non-Resident Ordinary Rupee Account (NRO) and Non-Resident (External) Rupee Account (NRE Account)?
Opening of A/c:
NRO A/c can be opened by any person resident outside India however, NRE A/c can be opened only by NRIs and PIOs.
Repatriation of Funds:
The funds held in NRE A/c are freely repatriable, and in case of NRO A/c all current income in India, net of applicable taxes are freely repatriable. However, in case of NRI/ PIO apart from the current income they can remit up to USD 1 million per financial year from their NRO A/c.
Permissible Credits :
NRO A/c: Permissible credits to NRO account are proceeds of remittances received in any permitted currency from outside India through banking channels; any permitted currency tendered by the account-holder during his temporary visit to India; Legitimate dues in India of the account holder; transfers from other NRO accounts, etc.
NRE A/c: Permissible credits to NRE account are proceeds of remittances to India in any permitted currency; proceeds of personal cheques drawn by the account holder on his foreign currency account and of travellers cheques, bank drafts payable in any permitted currency including instruments expressed in Indian rupees for which reimbursement will be received in foreign currency, deposited by the account holder in person during his temporary visit to India; proceeds of foreign currency/ bank notes tendered by account holder during his temporary visit to India, transfers from other NRE/ FCNR (B) accounts; interest accruing on the funds held in the account; Current income like rent, dividend, pension, interest etc. in India due to the account holder, subject to payment of applicable taxes in India; Maturity or sale proceeds of any permissible investment in India which was originally made by debit to the account holder’s NRE/ FCNR (B) account or out of remittances received from outside India through banking channels; certain types of refunds, etc.
Permissible Debits :
NRO A/c : Permissible debits from NRO account are all local payments in rupees including payments for permissible investments; remittance abroad of current income in India, net of applicable taxes; transfers to other NRO accounts, etc.
NRE A/c: Permissible debits from NRE account are local disbursements; remittances outside India; transfer to other NRE/ FCNR (B) accounts; investment in shares/ securities/ commercial paper of an Indian company; for purchase of immovable property in India subject to the conditions prescribed under the relevant regulations, etc.
Funds can be transferred from NRO to NRE account within this USD 1 Million facility, as mentioned above.
Can a resident individual give rupee gifts to a NRI/PIO relative?
A resident individual can make a rupee gift to a NRI/PIO who is a relative of the resident individual [‘relative’ as defined in 2(77) of the Companies Act, 2013] by way of crossed cheque /electronic transfer within the overall limit prescribed under Liberalised Remittance Scheme for a resident individual and the gifted amount should be credited to the beneficiary’s NRO account only.
Whether a NRI/OCI can acquire an Immovable Property in India?
Yes, under the general permission of RBI, an NRI or an OCI may acquire immovable property in India other than agricultural land/ farm house/ plantation property.
Can an individual resident Indian borrow money from NRI/PIO?
An individual resident Indian, may borrow in rupees on non-repatriation basis from a NRI or a PIO, subject to the fulfillment of certain conditions such as the period of loan shall not exceed 3 years, the amount of loan should be received by way of inward remittance from outside India or by debit to NRE / NRO / FCNR /NRNR / NRSR A/c of the lender, the rate of interest on the loan should not exceed two percentage points over the Bank Rate prevailing on the date of availment of loan, etc.
There is general permission to borrow up to USD 250,000 or its equivalent in foreign exchange on a repatriable basis by an individual resident from his close relatives (as defined in Section 6 of the Companies Act) resident outside India subject to that the loan is free of interest, the minimum maturity period of the loan is 1 year and the amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender.
Can a NRI/OCI purchase capital instrument issued by an Indian Company?
Yes, an NRI/ OCI including a company, a trust and a partnership firm incorporated outside India and owned and controlled by NRIs or OCIs may subscribe or purchase capital instruments of an Indian company, either on the stock exchange or outside it, on both repatriation and non repatriation basis, in the manner and subject to the terms and conditions as specified in Schedule 1, Schedule 3 and Schedule 4 (non repatriation basis), respectively, of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, as amended from time to time. Any investment made by NRI/PIOs under Schedule 4 deemed to be treated as domestic investment at par with the investment made by residents.
What is the limit for the remittances of assets outside India by NRIs/ PIOs from their Non Resident Ordinary (NRO) Account?
NRIs/ PIOs may remit up to USD one million, per financial year, out of balances held in their non-resident (ordinary) (NRO) accounts/ sale proceeds of assets, immovable property/ assets acquired in India by way of inheritance/ legacy or in respect of assets acquired under a deed of settlement made by either of his/ her parents or a relative as defined in Companies Act, 2013 or in case settlement is done without retaining any life interest in the property i.e. during the lifetime of the owner/ parent, it would tantamount to regular transfer by way of gift and the remittance of sale proceeds of such property would be guided by the extant instructions on remittance of balance in the NRO account.
Can a NRI/ OCI sell /gift/transfer any immovable property in India which was acquired by him/her way of inheritance to a person resident outside India (other than NRI/OCI)?
NRI/ OCI can sell/gift/transfer any immovable property in India to a person resident outside India (other than NRI/OCI) only with the prior approval of the RBI.
Can a NRI/ OCI sell/transfer any immovable property held in India which was acquired by him/her way of inheritance from a person resident outside India who had acquired such property in accordance with the FEMA Regulations?
Yes, NRI/ OCI can sell/transfer any immovable property in India which was acquired by him/her way of inheritance to a person resident in India and may also transfer any immovable property other than agricultural land/farm house/plantation property to an NRI/OCI.
Can a NRI/OCI contribute to the capital of a Limited Liability partnership/ a firm/ a proprietorship concern in India?
Yes, an NRI/ OCI including a company, a trust and a partnership firm incorporated outside India and owned and controlled by NRIs or OCIs, may contribute in the capital of a Limited Liability Partnership on both repatriation or non-repatriation basis, subject to the fulfillment of the conditions as prescribed under Schedule 6 and Schedule 4 respectively of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, as amended from time to time.
However, in case of firm or a proprietary concern, an NRI or an OCI may invest by way of contribution to the capital of a firm or a proprietary concern in India, on a non-repatriation basis, provided such firm or proprietary concern is not engaged in any agricultural/ plantation activity or print media or real estate business.
NRIs may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option. The application will be decided in consultation with the Government of India.
Can a NRI/OCI acquire immovable property in India by way of gift?
Yes, NRIs and OCIs can freely acquire any immovable property in India other than agricultural land/ farm house/ plantation property by way of gift from a person resident in India or from an NRI or from an OCI, who in any case is a relative as defined in section 2(77) of the Companies Act, 2013.
However, in case of firm or a proprietary concern, an NRI or an OCI may invest by way of contribution to the capital of a firm or a proprietary concern in India, on a non-repatriation basis, provided such firm or proprietary concern is not engaged in any agricultural/ plantation activity or print media or real estate business.
NRIs may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option. The application will be decided in consultation with the Government of India.
How many residential / commercial properties can NRI / OCI purchase under the general permission?
There are no restrictions on the number of residential / commercial properties that can be purchased by NRI/OCI.
However, in case of firm or a proprietary concern, an NRI or an OCI may invest by way of contribution to the capital of a firm or a proprietary concern in India, on a non-repatriation basis, provided such firm or proprietary concern is not engaged in any agricultural/ plantation activity or print media or real estate business.
NRIs may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option. The application will be decided in consultation with the Government of India.
Corporate Law
Can a Non‐Resident become a shareholder or a director in an Indian Company?
Yes, a Non‐Resident can become a shareholder or a director in an Indian Company.