Insights & Research
CS Muhammed Sahal
Partner & Head ,Corporate Advisory
Many Indians move abroad to foreign nations for various purposes such as education,employment and settlement . When a person moves abroad , his/her residential status may change from resident to non - resident under FEMA depending upon the number of days he /she resides outside india as well as intention of such person to stay outside India for uncertain period.when the residential status changes ,along with the provisions of Income Tax Act ,1961 ,he /she also has to adhere to the provisions of FEMA .
The following are the most frequently asked questions ,wherin the residential status of the person changes from resident to non resident :
1. How do I determine my residential status ?
A person will qualify as "resident but not ordinarily resident (RNOR) in India .If he/she is present in India for 120 days or more ,but less than 182 days during the relevant financial year .
2. Is my Income earned abroad taxable ?
An NRI'S income taxes in india will depend upon his residential status for the year .If your status is "resident" ,your global income is taxable in India if your status is "NRI ",your income which is earned or accrued in India is taxable .Income from a house property situated in india ,capital gains on transfer of asset situated in India ,income from fixed deposits or interest on savings bank account are all examples of income earned or accrued in India .These incomes are taxable for an NRI .Income which is earned outside india is not taxable in india .Interest earned on an NRE account and FCNR account is tax free .Interest on NRO account is taxable for an NRI .
3. What is Capital Account and Current Account Transaction ?
Current Account Transactions are freely permitted unless specifically restricted .
Capital Account Transactions are prohibited unless generally or specifically permitted .
4. What are the major Capital Account and Current Account Transaction?
(a) Capital Account Transaction ;
(b) Current Account Transaction
5. Do I need to inform any authority about the change in the residential status and the risks of not informing ?
No , you don't have to inform any authority .However some immediate changes need to be made in the status of your bank accounts and update the PAN card if required .
6. As an NRI do I need to follow any regulations under FEMA for investments in immovable property in India .If so what are they ?
(i)Non -agricultural property can be sold or gifted ;only to indian residents (even if they are foreign citizens)
(ii)They can sell or gift non-agricultural property to an indian resident or NRI, without any approval .
7. Can I continue to hold bank accounts and other investments in India /abroad as the case may be ?
In short ,there are various additional procedures to be complied when a person becomes an NRI ,and the investments made using the income generated .Its highly advisable to consult the concerned experts for appropriate legal opinions .
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