Post by Sapphire Capital on Jul 11, 2008 23:58:07 GMT 4
Indian citizens who want to weigh their options in the context of flexibility for repatriation overseas, retaining the income in foreign currency as well as tax implications on interest earned in India.
Residential status under the Foreign Exchange Management Act, 1999, ('FEMA') influences the nature of account that can be opened and operated. For returning Indians, the residential status, is determined by the following parameters:
1. Physical presence in India for more than 182 days in the preceding financial year (April 1 to March 31);
2. Intention for coming into India ie for taking up employment, for carrying on business or vocation in India or to stay in India for an uncertain period.
If someone qualifies as a person resident outside India as per FEMA he can open:
• Non Resident (External) ('NRE') Rupee Account;
• Non Resident (Ordinary) ('NRO') Rupee Account;
• Foreign Currency (Non-Resident) Bank Account ('FCNRB Account')
NRE account: An NRE account is a rupee account which may be opened in the form of a current, savings, recurring account or fixed deposits by way of inward remittances of foreign exchange funds. Balances in an NRE account are freely repatriable outside India. An NRE account cannot be opened jointly with residents.
Interest earned on an NRE account is exempt from tax in India. The entire credit balance in an NRE account (together with the interest earned thereon) is freely repatriable.
NRO account: An NRO account is a 'non-repatriable' rupee account which can be in the form of current, savings, recurring account or fixed deposits and can be opened jointly with residents.
Balances in NRO accounts are generally not eligible for remittance outside India without prior approval from the Reserve Bank of India ('RBI'). However, someone can remit balances representing sale of assets (including immovable property) within an overall limit of USD 1 million per financial year without an approval, subject to prescribed documentation requirements. Local payments may also be made from any funds in an NRO account.
FCNRB account: FCNRB account is a term deposit account which can only be opened and maintained in designated currencies, viz. Pound Sterling, US Dollar, Deutsche Mark, Japanese Yen, Euro, etc. Interest earned on a FCNRB account is exempt from tax in India. The entire credit balance in a FCNRB account (together with the interest earned thereon) is freely repatriable.
Apart from inward remittances through normal banking channels, this account can also be opened by transfer of funds from existing NRE/ FCNRB accounts. There are no restrictions on the repatriability of funds lying in an FCNRB account.
Nomination facility: A nomination facility is available for all the above accounts.
If someone qualifies as a person resident in India as per FEMA, he is allowed to retain, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by the account beneficiary when he was resident outside India (or it was inherited by him from a person resident outside India)..
Further, any person qualifying as resident in India as per FEMA is eligible to open a foreign currency account in India known as Resident Foreign Currency ('RFC') Account to credit, inter-alia, foreign exchange
• Realised on sale, transfer or conversion of the assets outside India acquired by him when he was a person resident outside India; or
• Received as pension or any other superannuation or other monetary benefits from his employer outside India.
The funds in a RFC Account are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investments outside India.
Further, on becoming a resident, such account beneficiary is allowed to open ordinary savings account, fixed deposit account, etc with a bank in India. The facility of remittance from such bank accounts under the liberalized remittance scheme of USD 200,000 per financial year, subject to prescribed conditions.
Depending on the specific circumstances and needs there is an option to maintain both rupee accounts as well as foreign currency accounts with banks in India on his return to India, subject to the view of his bankers on his residential status on his return to India.
links:
www.sbici.com/nriinformation.htm
www.statebankoftravancore.com/nristat.htm
Residential status under the Foreign Exchange Management Act, 1999, ('FEMA') influences the nature of account that can be opened and operated. For returning Indians, the residential status, is determined by the following parameters:
1. Physical presence in India for more than 182 days in the preceding financial year (April 1 to March 31);
2. Intention for coming into India ie for taking up employment, for carrying on business or vocation in India or to stay in India for an uncertain period.
If someone qualifies as a person resident outside India as per FEMA he can open:
• Non Resident (External) ('NRE') Rupee Account;
• Non Resident (Ordinary) ('NRO') Rupee Account;
• Foreign Currency (Non-Resident) Bank Account ('FCNRB Account')
NRE account: An NRE account is a rupee account which may be opened in the form of a current, savings, recurring account or fixed deposits by way of inward remittances of foreign exchange funds. Balances in an NRE account are freely repatriable outside India. An NRE account cannot be opened jointly with residents.
Interest earned on an NRE account is exempt from tax in India. The entire credit balance in an NRE account (together with the interest earned thereon) is freely repatriable.
NRO account: An NRO account is a 'non-repatriable' rupee account which can be in the form of current, savings, recurring account or fixed deposits and can be opened jointly with residents.
Balances in NRO accounts are generally not eligible for remittance outside India without prior approval from the Reserve Bank of India ('RBI'). However, someone can remit balances representing sale of assets (including immovable property) within an overall limit of USD 1 million per financial year without an approval, subject to prescribed documentation requirements. Local payments may also be made from any funds in an NRO account.
FCNRB account: FCNRB account is a term deposit account which can only be opened and maintained in designated currencies, viz. Pound Sterling, US Dollar, Deutsche Mark, Japanese Yen, Euro, etc. Interest earned on a FCNRB account is exempt from tax in India. The entire credit balance in a FCNRB account (together with the interest earned thereon) is freely repatriable.
Apart from inward remittances through normal banking channels, this account can also be opened by transfer of funds from existing NRE/ FCNRB accounts. There are no restrictions on the repatriability of funds lying in an FCNRB account.
Nomination facility: A nomination facility is available for all the above accounts.
If someone qualifies as a person resident in India as per FEMA, he is allowed to retain, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by the account beneficiary when he was resident outside India (or it was inherited by him from a person resident outside India)..
Further, any person qualifying as resident in India as per FEMA is eligible to open a foreign currency account in India known as Resident Foreign Currency ('RFC') Account to credit, inter-alia, foreign exchange
• Realised on sale, transfer or conversion of the assets outside India acquired by him when he was a person resident outside India; or
• Received as pension or any other superannuation or other monetary benefits from his employer outside India.
The funds in a RFC Account are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investments outside India.
Further, on becoming a resident, such account beneficiary is allowed to open ordinary savings account, fixed deposit account, etc with a bank in India. The facility of remittance from such bank accounts under the liberalized remittance scheme of USD 200,000 per financial year, subject to prescribed conditions.
Depending on the specific circumstances and needs there is an option to maintain both rupee accounts as well as foreign currency accounts with banks in India on his return to India, subject to the view of his bankers on his residential status on his return to India.
links:
www.sbici.com/nriinformation.htm
www.statebankoftravancore.com/nristat.htm