My wife and I are considering applying for United States
citizenship. Though retired, I receive some income in India
from bank interest, dividends from shares, etc. I submit my
income tax returns every year. My wife is not assessed.
How do we regulate our investments in India (bank
accounts, fixed deposits, post office investments, senior citizen deposit schemes, government
of India schemes, shares and capital gain bonds)?
How can we repatriate our funds
and pensions to the US? What are
the limits and regulations?
If I stay in India for an extended
period can I use my funds locally
and also repatriate?
We own a flat in India. If I rent
it/sell it/gift it, how can the pro-
ceeds be regulated/repatriated
with governing rules?
Is there any impact on the above
if I obtain dual citizenship (India
— S K Mony
If you stay in India for a period of 182 days or more, you
will be termed as a resident. In this case, you cannot open
Non Resident Indian-related accounts, etc. However, if you
intend to live abroad, then you will have to redesignate your
Indian accounts as Non Resident Ordinary.
An NRI (or Person of Indian Origin or Overseas Citizen
of India) cannot invest in post office or senior citizen saving
scheme unless the NRI had invested while his status was
resident. In such cases, the existing investment can run its
course, but cannot be renewed once matured.
Your pensions and other funds, including rent, may be
remitted to the US from the NRO account. The limit is $1
million per year. Similarly, if you sell your property you may
remit the proceeds abroad after providing for capital gain
taxes. For all remittances, you will have to provide Forms
15CA and 15CB.
The rights and privileges enjoyed by an NRI who is a citizen of India are the same as those enjoyed by an NRI who
is a foreign citizen or an Overseas Indian citizen. The tax
provisions are related with being a resident as defined by
Income Tax Act and not citizenship.
Please continue to file your Indian tax return as you have
been doing so far.
After having lived and worked in the US for over 25 years,
my wife and I are settling in India.
a. We have two properties in Bengaluru. One we will be
using to stay, the other we may
rent out. Will the rental income
be subject to tax? If so, at what
b. Apart from the rent, our
principal source of income will be
our Social Security payments that
we plan to get remitted to our
local account. Will this be subject
to any income tax?
c. Are we allowed investing in
business, property or stock mar-
ket (Initial Public Offerings), etc?
If so, under what category — NRI
d. How will our Rupee (NRO a/c) be taxed, treated? Can
or resident Indian? Regarding
shares, since as NRIs we received
RBI permission to buy and sell
shares under the Portfolio Investment Scheme, do we need
to inform them about the changed status as US citizens and
PIO card holders?
we continue to maintain this, and invest from this account?
We have Non Resident External and separate foreign cur-
rency accounts. What will their status be?
e. Are there any police/local authorities registration for-
malities involved? My understanding is that PIO card gives
all benefits except voting and holding of public office.
a. Rental income is taxable and the rate will depend upon
your other income. Putting it differently, as per the law,
Indian Income Tax law and also because rental income taxation is a bit involved, it would be advisable (at least initially for the first couple of years) to employ the services of a
chartered accountant to compute and file your taxes.
b. Social Security benefits will not be taxed in India as per
the Double taxation Avoidance Agreement between the US
c. One is allowed to invest in business, property or stock
market whether one is an NRI or a resident. In your case,
you will invest in your status as a resident. You will have to
inform the bank about the change of your residential status.
The PINS permission is only relevant for NRIs. As you will
be Indian residents now, you need not obtain or use PINS,
you can invest in the stock market directly.
d. The NRO account will have to be redesignated as a resident account. As per the law, an NRI who has returned to
India permanently is allowed a reasonable time to inform
all the banks about the change in his status wherever he has
his investments. On receipt of this information, the bank
will redesignate the NRE/FCNR accounts as a resident
accounts. These can be run up to their maturity but the
interest on NRE becomes taxable from the date of the
return whereas the Foreign Currency Non Resident a/c
interest is tax-free as long as the holder remains an NRI or
becomes an RNOR.
e. Yes, your understanding is correct.
A N SHANBHAG SANDEEP SHANBHAG Readers who wish to ask A N Shanbhag a question can fill in the following details and mail the coupon to: The Business Editor, India Abroad, 42 Broadway, 18th Floor, New York, NY 10004 Or fax it to 212-727 9730
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