NRI finance roundup for November 2017

Last week we saw an announcement regarding “PPF accounts to be closed, interest  lowered to 4 per cent if you become an NRI”.  This has obvious implications for NRIs who were planning to continue holding their Indian investments in PPF and other funds.

Photo: iStock

An article in TOI this week focuses on “How NRIs can get past their tax worries”

  • TDS can be a pain – Tax deduction at source (TDS) is a major pain point for NRIs. Resident investors in stocks and mutual funds are not subjected to TDS, but NRIs are. Short-term capital gains from stocks are subject to 15% TDS, while those from debt funds and debentures, gold and property are slapped a higher rate of 30%. Even longterm gains from property and gold are subject to 20% TDS. The TDS on the interest on bank deposits is only 10% for resident Indians, but NRIs have to cough up 30%.
  • How to avoid TDS – One way NRIs can avoid the high TDS is by being the second holder in joint investments. For all investments, the tax liability is always that of the first holder’s. If the first holder is a resident Indian, the gain will not be subjected to any TDS. Similarly, if the NRI is the second holder in a property, the TDS will not apply unless the rent is above Rs 50,000 a month.
  • Claim tax benefits – Though NRIs are beaten by the TDS stick, they also get some carrots. The interest earned on NRE account is tax free and continues to be exempt for two years after the individual returns to India. It’s best to retain deposits held in foreign currency in the NRE account to earn tax-free interest for two more years. After two years, when the tax status changes, these deposits can be moved to the regular savings account.

Economic Times also reviews “How NRIs can avoid tax troubles”

A livemint article – While filing tax in India, NRIs do not have to state overseas income – examines a few Frequently asked questions:

  • I am moving to Cambodia for a long-term assignment. I am told that India does not have a Double Taxation Avoidance Agreement (DTAA) with that country. Please let me know how that will impact my tax outgo. I have interest income in India and will continue to file tax return on that. Will I have to include my income in Cambodia in the India tax return as well, and pay tax on it again in India?
  • I am an NRI and I had purchased some land in a rural area of Thiruvananthapuram, Kerala, in October 2014. I am now planning to sell it to buy a new plot in an urban part of the city. We had bought this property for Rs15 lakh and will be selling it for Rs35 lakh. Please tell me my tax liability on this, considering that I am an NRI.
  • I am an NRI, and I want to buy a car in India, without taking any loan. I will be using funds from my non-resident external (NRE) account. Can you explain the tax implication if the car is in my name or somebody else?

 

You may also be interested in GaramChai.com section on Finance 

Advertisements

PPF accounts to be closed, interest lowered to 4 per cent if you become an NRI

Non Resident Indians are continually looking for investment opportunities in India. A few weeks ago, we blogged about “NRIs for real estate investment in India – Know the simple Rules” The Government of Indian recently announced new rules under which select small savings schemes like Public Provident Fund (PPF) and National Saving Certificates (NSC) will not earn you the same rate if you become non-resident Indians (NRI).

A summary of changes to rules and what it means to NRIs:

  • NRIs will no longer be permitted invest in small savings schemes like NSC and PPF. In the past they were allowed to retain their PPF account if they had opened it before becoming an NRI.
  • PPF and NSC currently fetch an interest rate higher than bank savings rates. Some of it is subsidized by the Government of India. (Current rate of PPF is 7.8 per cent while Post Office savings account get 4 %)
  • PPF accounts would be deemed to be closed prior to maturity in case the holder becomes a non-resident Indian (NRI). The investor will be then paid interest at the rate applicable to Post Office savings accounts till the date the PPF account is closed.

The Indian government notification on PPF dated October 3 states,

“Provided that if a resident who opened an account under this scheme, subsequently becomes a non-resident during the currency of the maturity period, the account shall be deemed to be closed with effect from the day he becomes a non-resident and interest with effect from that date shall be paid at the rate applicable to the Post Office Saving Account up to the last day of the month preceding the month in which the account is actually closed.”

The finance ministry notification adds:

“Provided that if a resident Indian having purchased a certificate, subsequently becomes Non-Resident during the currency of the maturity period, the certificate shall be encashed or deemed to be encashed on the day he becomes a non-Resident, and interest shall be paid at the rate applicable to the Post Office Savings Account, from time to time, from such day and up to the last day of the month preceding the month in which it is actually encashed.”

Other media accounts

Singapore’s Passport is the most powerful in the world

Middle class Indians, especially educated younger class aspire to migrate west for work and to live. The eventual goal is to acquire a foreign citizenship and an Overseas Citizenship of India (OCI) status. For middle class Indians, a foreign citizenship, like American Naturalization is not only a status symbol but a sense of having arrived!

flikr_GoodbyeOldPassport
Image: flickr.com/photos/ikkoskinen

This trend is not restricted to Indians alone. Rich and famous people from around the world aspire to get a second passport or citizenship to enable them Visa free travel as and when they please.

Companies like advisory firm Arton Capital frequently track and rank passports that can enable one to travel ‘visa free’ around the world. This year’s 2017 Global Passport Power Rank (link) lists Singaporean passport with a score of 159 as the highest, followed by Germany at 158 and Sweden and South Korea tied at 157.

Arton Capital’s Passport Index is the world’s most popular online interactive tool, which collects, displays and ranks the passports of the world. The real time global ranking of the world’s passports are updated as frequently as new visa waivers and changes are announced. Passports of 193 United Nations member countries and 6 territories (ROC Taiwan, Macao (SAR China), Hong Kong (SAR China), Kosovo, Palestinian Territory and the Vatican) for a total of 199 are considered.

Arton’s report ranked all of the passports of the world for their “total visa-free score,” where a point is given for each country that their holders can visit without a visa, with a visa on arrival, or using electronic travel authorization.  What this means is simple: Singaporean Passport holders can travel to 159 countries visa free or requesting a visa on arrival.

 

Afghanistan ranks at the bottom with a rank of 22 preceded by Pakistan and Iraq tied at 26.  The Indian Passport’s Visa Free score is 51.

In case you plan to rush to acquire a Singaporean Passport, keep in mind it is not going to be easy. According to Wikipedia

Singaporean nationality law is derived from the Constitution of Singapore and is based on jus sanguinis and a modified form of jus soli. There are three ways of acquiring Singaporean citizenship: by birth, by descent, or by registration. Citizenship by naturalisation is no longer granted.

A person can apply for registration as a Singaporean citizen if he or she has been a Permanent Resident for at least two years and is gainfully employed or married to a Singaporean citizen.

NRI woman searching for father in Hyderabad finds decomposed body in flat

About an NRI woman coming to Hyderabad in search of her father who had been missing for over a month.

A couple of months ago, we blogged about “Techie reaches mother’s flat on return from US, finds her skeleton”“Techie reaches mother’s flat on return from US, finds her skeleton”

There is another similar yet bizarre story about an NRI woman coming to Hyderabad in search of her father who had been missing for over a month. The woman, and her mother were shocked to find his decomposed body at their flat in LB Nagar.

Image result for nri parent drawing
Image: lassiwithlavina.com

The NRI and her mother came to Hyderabad because P Lakshminarayana Murthy, a retired government employee, had not been responding to their calls for several days.  Murthy was a native of Rajamahendravaram in Andhra Pradesh. He had two daughters, both of whom were living in the USA. His wife, Lakshmi, had recently gone to America to visit their daughters.

Murthy gone to Hyderabad in August to attend a relative’s wedding and stayed at his daughter’s flat.  During the first few days in Hyderabad, he had been in touch with his wife, after which he had stopped responding to her calls. Worried, the daughters and his wife had alerted relatives in Hyderabad, but none of them had been able to give them any information.

Nearly 40 days later, Lakshmi and her younger daughter Soujanya flew to Hyderabad in search of Murthy.  Despite knocking repeatedly on the door, they received no response. They broke open the door with the help of a local carpenter and entered the flat. They were shocked that none of the residents in the apartment building had noticed a foul smell.

This is yet another morbid story that will send shivers down Non Resident Indians with elderly parents living alone in India.

Story first reported in Deccan Chronicle and thenewsminute.com

Also check out the blog post: The Dilemma of Looking After Aging Desi Parents

Can a US citizen apply for an Aadhaar card?

This is a question that frequently appears in online forums. Here is the response from our editor, Mohan:

Firstly, check out the detailed official FAQ on Adhaar (link). A couple of relevant questions

Image result for adhaar faq

Can NRIs also get Aadhaar?

As per the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, only a resident who has resided in India for a period or periods amounting in all to 182 or more in the 12 months immediately preceding the date of application for enrolment.

What is the process if NRI / OCI holder needs to apply for Aadhaar? And if they don’t have their own residential address in India now?

As per the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, only a resident who has resided in India for a period or periods amounting in all to 182 or more in the 12 months immediately preceding the date of application for enrolment.

Keep in mind, Adhaar is not a proof of citizenship. Therefore, people (including US citizen, OCI) legally residing in India are eligible to apply for an Aadhaar card.


Also, check out an earlier blog post on the topic: Income Tax and Adhaar updates for Non Resident Indians (NRIs)

Q&A: Did the NRI status exist before independence?

This was an interesting question from an online forum.

Wikipedia describes Non-resident Indian and person of Indian origin – “A nonresident Indian (NRI) is a citizen of India who holds an Indian passport and has temporarily emigrated to another country for six months or more for employment, residence, education or any other purpose.”

Before Indian Independence, the British issued a “British Indian passport – Wikipedia

“The British Indian passport was a passport, proof of national status and travel document issued to the British subjects of British Indian Empire, British subjects from other parts of the British Empire, and the subjects of the British protected states in India (i. e. the British Protected Persons of the ‘princely states’). The title of state used in the passport was the “Indian Empire”, which covered all of modern India, Pakistan, Bangladesh, and Burma.”

So, technically, NO. The “NRI Status” did not exist before independence.

India Native Kamal Daya Receives $5,000 Grant from Million Dollar Round Table Foundation

India -native and Founder of Worldwide Education Fund (WEF), Kamal N. Daya, CLU, ChFC, of Dallas, Texas secured a USD $5,000 grant from the Million Dollar Round Table (MDRT) Foundation on behalf of The Worldwide Education Fund of The Dallas Foundation. This grant comes through MDRT’s Worldwide Grant Program. Through its global grants, the MDRT Foundation is committed to building stronger families and communities around the globe. This year, the MDRT Foundation will award nearly $1 million in MDRT member-endorsed grants to more than 100 charitable organizations worldwide.

MDRTF Pic with cheque 2017
Worldwide Education Fund of the Dallas Foundation is shown receiving $5000 from Million Dollar Round Table (MDRT) Foundation

Daya, a 38-year MDRT member and the 2011 recipient of the Top Quality of Life Award from the MDRT, is the co-founder of WEF along with his wife, Connie.  Previously, India Education Fund of The Dallas Foundation, the organization has expanded over the last year into supporting projects in Pakistan, Tajikistan, and here in Dallas. The organization’s sole purpose remains to help improve the quality and scope of education for underprivileged and marginalized children in some of the poorest areas of the world. To achieve this goal, WEF focuses on five key initiatives: quality English language skills training, technology skills training, coaching and mentoring programs, empowering students to reach their maximum potential and educational and vocational scholarships. With the grant, WEF will expand its programmatic scope into three new programs, impacting over 500 kids and an additional 2000 kids in the years to come. For more information about WEF and its work, visit wef.world.

About the MDRT Foundation:  The MDRT Foundation was created in 1959 to provide MDRT members with a means to give back to their communities. Since its inception, the Foundation has donated more than $30 million in more than 70 countries throughout the world and in all 50 U.S. states. These funds were raised by MDRT members and industry partners. For more information, visitmdrtfoundation.org.

About The Dallas Foundation: The Dallas Foundation is the oldest community foundation in the state of Texas, and serves donors and nonprofit agencies through North Texas. The Foundation serves as a keystone – a link between donors and the community issues that the donors care about. For more information, please visit www.dallasfoundation.org.