FAQ

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1. Can a person resident in India hold assets outside India?

In terms of sub-section 4, of Section (6) of the Foreign Exchange Management Act, 1999, a person resident in India is free to hold, own, 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 such person when he was resident outside India or inherited from a person who was resident outside India.

Further, a resident individual can also acquire property and other assets overseas under LRS.

2. Can one pay cash full rupee equivalent of foreign exchange being purchased for travel abroad?

Foreign exchange for travel abroad can be purchased from an authorized person against rupee payment in cash below Rs. 50,000/-. However, if the sale of foreign exchange is for the amount equivalent to Rs. 50,000/- and above, the entire payment should be made by way of a crossed cheque/ banker’s cheque/ pay order/ demand draft/ debit card/ credit card/ prepaid card only.

3. What is the tax treatment for income generated from property selling or renting for NRI?

Income generated by NRI are taxed in the same way as residents. On sale of property it will be capital gains tax which will be at normal rates (i.e. up to 30%) if the asset is held for less than 2 year. Or at a flat 20% if held for more than 2 years( There is non-basic exemption limit for Long term capital gain for NRI’s).

Also any person making payment to NRI be it rent or sale proceeds will have to deduct 20% TDS.

4. Can a Non Resident Indian purchase immovable property in India?

By means of Purchase:

Under the general permission granted by RBI, a Non- Resident Indian/PIO can purchase residential properties in India if the person has a valid proof in India or an OCI card.

By means of Gift:

Yes, a Non-Resident Indian/PIO can acquire a residential property by way of a gift from a person in India or an NRI/PIO.

By means of Inheritance:

Yes, an NRI/PIO/Foreign national of Indian origin can acquire a residential property by way of inheritance from a person who is a resident of India as per the Provisions of Section 6(5) of the Foreign Exchange Management Act,1999. There is also a provision for NRIs/PIOs to acquire residential properties by way of inheritance from a resident outside India by following the guidelines set by the RBI, provided that the bequeather had acquired such property in accordance with the foreign exchange law at the time of purchase.

5. Can a resident continue to hold immovable property outside India which was acquired by him when he was a non-resident?

According to section 6(4) of the FEMA, a person resident in India can hold, own, transfer or invest in any immovable property situated outside India if such property was acquired, held or owned by him/her when he/she was resident outside India or inherited from a person resident outside India.

6. Can a resident individual send remittances and purchase property outside India?

A resident individual can send remittances under the Liberalised Remittance Scheme (LRS) for purchasing immovable property outside India. In case members of a family pool their remittances to purchase a property, then the said property should be in the name of all the members who make the remittances.

7. How can immovable property be acquired outside India by a resident?
  1. Under section 6(4) of FEMA.
  2. As an inheritance/ gift from a person (i) referred to in sec 6(4) of FEMA; or (ii) who has acquired it prior to July 8, 1947 (iii) who has acquired such property in accordance with the foreign exchange provisions in force at the time of such acquisition.
  3. Purchase with balances in the Resident Foreign Currency (RFC) account of the resident.
  4. Purchased with remittances made under the Liberalised Remittance Scheme (LRS).
  5. Jointly with a relative provided there are no outflow of funds from India.

6. By an Indian company having overseas offices, for housing its business or for residence of staff.

8. What are the accepted modes of payment for property acquired in India by a Non- resident Indian?

Payment for immovable property has to be received in India through banking channels and is subject to payment of all taxes and other duties/levies in India. The payment can also be made out of funds held in NRE/FCNR(B)/NRO accounts of the NRIs/OCIs. Payments should not be made through travellers’ cheque and foreign currency notes.

8. What are the accepted modes of payment for property acquired in India by a Non- resident Indian?

Payment for immovable property has to be received in India through banking channels and is subject to payment of all taxes and other duties/levies in India. The payment can also be made out of funds held in NRE/FCNR(B)/NRO accounts of the NRIs/OCIs. Payments should not be made through travellers’ cheque and foreign currency notes.

9. Can a spouse of a NRI/OCI who is not a NRI/OCI acquire property in India?

(i)  A person resident outside India, not being a NRI/OCI, who is a spouse of a NRI/OCI may acquire one immovable property (other than agricultural land/farm house/plantation property), jointly with his/her NRI/OCI spouse.

(ii) consideration for transfer made under this para should be out of funds received in India through banking channels by way of inward remittance from any place outside India or by debit to non-resident account of the person concerned maintained in accordance with the Act or the rules framed thereunder. Payments cannot be made either by traveller’s cheque or by foreign currency notes or by other mode except those specifically mentioned in this para.

(iii) The marriage should have been registered and subsisted for a continuous period of not less than two years immediately preceding the acquisition of such property.

(iv) The non-resident spouse should not otherwise be prohibited from such acquisition.

10. Can a non-resident repatriate the sale proceeds of immovable property in India?

(1) A person who has acquired the property u/s 6(5) of FEMA or his successor cannot repatriate the sale proceeds of such property without RBI approval.

(2) Repatriation up to USD 1 million per financial year is allowed, along with other assets under (Foreign Exchange Management (Remittance of Assets) Regulations, 2016) for NRIs/PIOs and a foreign citizen (except Nepal/Bhutan/PIO) who has (i) inherited from a person referred to in section 6(5) of FEMA, or (ii) retired from employment in India or (iii) is a non-resident widow/widower and has inherited assets from her/his deceased spose who was an Indian national resident in India.

(3) NRIs/PIOs can remit the sale proceeds of immovable property (other than agricultural land/farm house/plantation property) in India subject to the following conditions:

(a) The immovable property was acquired in accordance with the provisions of the foreign exchange law in force at the time of acquisition of the provisions of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations,2018;

(b) The amount for acquisition of the property was paid in foreign exchange received through banking channels or out of the funds held in foreign currency non-resident account or out of the funds held in non-resident external account;

( c) In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

11. What is rate of TDS under section 195 on sale of property for NRI?

For an Indian NRI TDS rate u/s 195 is 22.88% i.e. 20 % TDS plus 10% Surcharge & 4% Education Cess, of sale or agreement value. While 1% TDS rate is only applicable for resident property sellers and not in case seller is NRI or OCI card holder. This rate is same as capital gain tax rate for NRI tax payers.

12. What is the residential status of a student going abroad for education?

(i) When one leaves India for further studies, depending upon the number of days he spends in India in the year of departure and thereafter, his residential status changes.

(ii) If the student goes abroad for education and resides there for more than 182 days in the preceding financial year (April to March), he shall be considered as a Non-resident under FEMA from the following financial year till he returns to India.

13. What is the meaning of investment on Repatriation and Non- Repatriation basis?

(i) Investment on Repatriation basis means that the sale proceeds, profits and dividends/interest of the investment made by the NRI, net of taxes, are eligible to be freely remitted outside India.

(ii) Investment on Non – Repatriation basis means that the investment made by the NRI cannot be freely remitted outside India. The investment proceeds have to be accumulated in the NRO Account. Only the current income in the form of dividend or interest, net of taxes, can be remitted.

14. What are the various schemes available for making remittances from India to a foreign country?

(i) NRI can make investment in India both on repatriation and non-repatriation basis. Certain investments which are made on repatriation basis and any income earned on it, net of taxes can be freely remitted outside India.

(ii) Certain investments are made on non-repatriation basis which cannot be freely remitted outside India, except the income generated on it. However, RBI has introduced the USD one million dollar scheme under which proceeds of non-repatriable Investment can be remitted outside India per financial year.

15. Can NRI borrow money as rupee loan from his resident relatives if he becomes person resident outside India?

(i) Yes, He can borrow money in rupees from his resident relatives ( as defined under Companies Act,2013) within the limit of USD 2,50,000 per resident relative per financial year.

(ii) Such borrowed funds have to be deposited into the NRO account of such NRI and can be used only for his personal purposes and own permitted business and not for relending or investments.

(iii) Further, the proceeds of the said loan cannot be remitted outside India.

16. Can NRI receive any gifts from his resident relatives in Indian Rupees or even in foreign currency after he becomes person resident outside India?

Yes, A resident individual can gift his NRI relatives in Indian rupees as well as foreign currency under Liberalized Remittance Scheme (LRS) within the limit of USD 2,50,000 per financial year.

Note: For the purpose of Gifts, definition of the term relative under Companies Act, 2013 is to be applied. Also, one has to keep in mind the gift tax laws of the foreign country in which such NRI resides.

17. Can NRI continues his investment in PPF account and National Savings certificate (NSC) after he become a person resident outside India?

(i) As per the latest circular dated 3rd October, 2017, if a resident who holds PPF account subsequently becomes a non-resident, the said PPF account shall be deemed to be closed with effect from the day he becomes a non-resident and interest shall be paid at the rate applicable to the Post Office Savings Account, from such day of conversion upto the last day of the preceding month in which it is actually encashed.

(ii) Prior to this amendment, a resident holding PPF account subsequently became a non-resident, then he could continue to subscribe to the fund till its maturity on a non-repatriation basis.

(iii) Hence, post the circular, any NRI holding PPF Account needs to close the said PPF Account or the same would be deemed to have been closed.

(iv) Further, if a resident has purchased NSC and subsequently becomes a non-resident during the period of maturity of the certificate, it shall be encashed or deemed to be encashed on the day such person becomes a Non-resident and interest provisions as mentioned above shall apply.

18. Can NRI continue as a partner in the Indian partnership Firm/LLP?

(i) Yes, He can borrow money in rupees from his resident relatives ( as defined under Companies Act,2013) within the limit of USD 2,50,000 per resident relative per financial year.

(ii) Such borrowed funds have to be deposited into the NRO account of such NRI and can be used only for his personal purposes and own permitted business and not for relending or investments.

(iii) Further, the proceeds of the said loan cannot be remitted outside India.

19. After NRI returns to India, can he still continue to hold bank account, investments and property acquired by him in the foreign country?

Yes. Under FEMA any person who was once a Non Resident, can continue to hold his foreign bank accounts, investments and properties abroad which he had acquired when he was a Non- Resident even after he becomes a person resident in India.

20. What are the penal consequences for non-compliance of any provisions under FEMA?

Any person contravening FEMA provisions may be liable to a penalty as under :

  • Penalty upto thrice the sum involved in such contravention where such amount is quantifiable; or
  • Penalty uptoTwo lakh rupees where the amount is not quantifiable.
  • If such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day during which the contravention continues may also be levied.
21. How is a Branch office of a foreign company setup in India?

RBI permits foreign companies in the manufacturing and trading business to set up Branch offices in India:

  • To represent its parent company to conduct business in India.
  • To undertake research work in its area of business
  • To trade on a wholesale basis
  • To encourage possible technical and financial tie-ups between Indian companies and overseas companies.
  • Offering professional or consultancy services
  • Offering IT and software services.
  • Giving technical sustenance to the products supplied by the parent company.

Branch offices are not permitted to carry out manufacturing, processing and trading activities on their own. An Activity Certificate from a Chartered Accountant has to be submitted annually to the Central office of FED. For annual remittance of income, Branch offices may submit required documents to a bank.

The track record of the Applicant company, its existing trade relations with India and financial position of the company are taken into account by the RBI while scrutinizing the application.

22. Whether FDI is allowed in entities viz Partnership Firms/ Proprietership Firms?

Only a Non- Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can invest in the capital of a firm or a proprietary concern in India on non-repatriation basis subject to the following conditions:

  • Amount invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers/authorized banks.
  • The firm or proprietary concern is not engaged in any agricultural/Plantation or real estate business or print media sector.
  • Amount invested shall not be eligible for repatriation outside India.
23. Can Investments be also made on repatriation basis?

Investments with repatriation option :

NRI/PIO 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.

24. Can a Foreign National other than NRI/PIO also invest in Partnership Firms/Prop. Firms?

Investment by non-residents other than NRI/PIO:

A person resident outside India other than NRIs/PIOs may make an application and seek prior approval of Reserve Bank for making investment in the capital of a Firm/ Proprietorship concern or any association of persons in India. The application will be decided in consultation with the Government of India.

Restrictions:

An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural / plantation activity or real estate business or print media.

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Can I do my own accounting?

It is perfectly possible for you to do your own accounting, yes – but only if you know exactly what you’re doing. When it comes to DIY accounting, you’ll need to know all the rules, all the deadlines and all the standards. For more information about how to handle your own accounts, please visit our accounting services pages.

What are the benefits of hiring an accountant?

If you are struggling to keep up with your business’s financial accounts, or wish to focus more on other aspects of your business, then you may want to consult an accountant for help. An accountant will undertake all accounting duties and remove the responsibility of tax deadlines from your shoulders, freeing up your time and energy so that you can concentrate on other parts of your business.

How could an accountant help my start-up business?

Starting a new business can be a monumental task. A start-up involves, along with a million other tasks, market researching, choosing a company name, designing logos and business cards, branding, networking and product sourcing. It’s easy to get carried away with aesthetics and forget about the numbers. An accountant can get your business running, show you the ropes, free up your time and avoid any mistakes that that could be detrimental to a young business.

How could an accountant help my expanding business?

Proprietors thinking of expanding their businesses, whether to move abroad, upgrade to bigger offices, provide more services or take on more employees, need to handle the transition process delicately. Making the wrong decisions at this transitory stage could ruin the whole business. An accountant will help proprietors control costs by drawing up realistic budgets and using evidence to determine whether or not the planned changes are likely to benefit the business.

How could an accountant help with my personal finances?

Accounting isn’t just for businesses. As an employee, you may face certain points in your career where expert financial advice could come in useful. For instance, an accountant could help with tax, pensions or salary and job changes. In day to day life, situations arise where we may need to spend or handle a substantial sum of money- like marriage, planning to have children, getting a mortgage, handling savings, inheritance and so on.

People who earn substantial amounts of money may benefit from consulting an accountant. An accountant can help with distribution, taxes, investments, shares etc. Remember you only have to book a short appointment every once in a while – hiring an accountant is not the same as employing an accountant. Two hours of advice at crucial times in your life could make a positive difference to your life decisions.

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How regularly will I need to see my accountant?

This is entirely up to you. How often you see your accountant will depend on your personal or business requirements. If you are an individual seeking personal finance advice, you may only want to see an accountant once a year. Similarly, if you are the proprietor of a small business, you may only require an accountant to help with your annual tax returns. If you wish to have absolutely no hand in your accounts, you may want to be in contact with an accountant on a more regular basis. When you contact an accountant, be sure to state your exact requirements and they will be able to predict the length of the job and how often you will need to be in contact.

Are accountants regulated?

The term ‘accountant’ is not regulated in the UK. Essentially, anybody who wants to call themselves an accountant, can do so. Of course, most businesses would be unwilling to hand over delicate business information to complete strangers without being assured of a certain set of standards. There are a number of regulatory boards for accounting in the UK.

What qualifications should an accountant have?

There are a number of different accounting bodies in the UK, all of which have their own regulatory rules, standards and registration requirements. In order to ensure the highest possible ethical and practicing standards, Accountant Directory only accepts accountants who are registered with approved and recognised accounting bodies. Accounting bodies only accept accountants with certain qualifications and experience, so, whoever you choose, you can be assured of receiving a secure and highly professional service.

How do I know which accountant to choose?

Handing over your business’s sensitive financial information can be a delicate process that involves a lot of trust. It is advisable to take your time over your decision and find out as much as possible about the services different accountants offer before deciding.

How much should I expect to pay for my accountant?

Accounting costs can vary widely depending on the practices of the firm or individual you choose, along with the nature of your own accounting needs.

Basic bookkeeping and tax affairs may cost no more than £200-£300 per year, but this really is dependent on your own accounting needs.

For larger businesses with more complex financial accounts, it will cost much more.

Although many people are drawn to DIY accounting because they’re put off by the costs, it is widely thought that businesses eventually recoup the cost of a good accountant in the amount of tax and fees accounting expertise can save.

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