Various facilities are available in India to persons of Indian nationality or Indian origin living abroad (NRIs/ PIOs). The facilities include maintenance of bank accounts in rupees and in foreign currency and investment in shares and securities, immovable properties, Remittance of assets etc. Government of India is offering various tax incentives to NRIs/PIOs to boost Non Resident investments/ deposits in India. Deposit rates offered to the NRIs/PIOs are very attractive as compared to the rates they are getting otherwise. This section deals with selected topics relating to NRIs/PIOs.
- Who is an Overseas Citizen of India (OCI)?
(a) Following category of persons are eligible to apply for OCI status:
- Who is a citizen of another country, but was a citizen of India at the time of, or at any time after, the commencement of the constitution; or
- Who is a citizen of another country, but was eligible to become a citizen of India at the time of the commencement of the constitution; or
- Who is a citizen of another country, but belonged to a territory that became part of India after the 15th day of August, 1947; or
- Who is a child or a grand-child or a great grandchild of such a citizen; or
(b) A person, who is minor child of a person mentioned in clause (a); or
(c) A person, who is a minor child, and whose both parents are citizens of India or one of the parents is a citizen of India; or
(d) Spouse of foreign origin of a citizen of India or spouse of foreign origin of an Overseas Citizen of india Cardholder registered under section 7A, Citizenship Act 1955 and whose marriage has been registered and subsisted for a continuous period of not less than two years immediately preceding the presentation of the application under this section: Provided that no person, who is or had been a citizen of Pakistan, Bangladesh or such other country as the Central Government may, by notification in the Official Gazette, specify, shall be eligible for the registration as Overseas Citizen of India Cardholder.
- Who is a Non Resident Indian?
A ‘Non-resident Indian (NRI)’ is a person resident outside India who is a citizen of India
3. Who is Person of Indian Origin (PIO)
A ‘Person of Indian Origin (PIO)’ is a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions:
- Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
- Who belonged to a territory that became part of India after the 15th day of August, 1947; or
- Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or
- Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c)
Explanation: PIO will include an ‘Overseas Citizen of India’ cardholder within the meaning of Section 7(A) of the Citizenship Act, 1955.4.
4. Who is a person resident in India?
“person resident in India” means-
(i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include-
(A) a person who has gone out of India or who stays outside India, in either case-
- for or on taking up employment outside India, or
- for carrying on outside India a business or vocation outside India, or
- for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
(B) a person who has come to or stays in India, in either case, otherwise than-
- for or on taking up employment in India, or
- for carrying on in India a business or vocation in India, or
- for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
- What is an Overseas Corporate Body (OCB)?
Prior to deletion of OCB as a class of investors with effect from September 16, 2003 the term “Overseas Corporate Body” was defined as a company, partnership firm, society and other corporate body wholly owned, directly or indirectly, to the extent of at least sixty percent by Non-Resident Indians and included overseas trusts in which not less than sixty percent beneficial interest is held by Non-Resident Indians, directly or indirectly but irrevocably.
However, OCBs which had prior to September, 16, 2003 availed of investment facilities under various schemes have general permission to continue to hold/transfer/gift (to Non Resident Indians/Residents in India) their existing investments in shares/convertible ebentures/securities of Indian companies.
Indian companies can allot bonus shares accruing to the OCBs. Those which are incorporated in the host country and are not under adverse notice of RBI may be considered, for undertaking fresh investments, as incorporated non-resident entities by RBI/Government on case by case basis.
TAX INCENTIVES TO NON-RESIDENTS:
TAX EXEMPTIONS FROM INCOME TAX:
Income from the following investments made by NRIs/PIOs out of convertible foreign exchange is totally exempt from tax:
(a) Deposits in under mentioned bank accounts
(i) Non Resident External Rupee Account (NRE)
(ii) Foreign Currency Non Resident Account (FCNR)
(b) Units of Unit Trust of India and specified mutual funds, other specific securities, bonds and savings
certificates (subject to conditions prescribed under the Income-tax laws and regulations).
(c) Dividend declared by Indian company.
(d) Long term capital gains arising from transfer of equity shares in a company and/or equity oriented
schemes of Mutual Funds, which are subject to Securities Transaction Tax.
TAX EXEMPTIONS FROM WEALTH TAX:
Where an NRI/PIO returns to India for permanent residence, the money and the value of assets brought by him into India and the value of assets acquired by him out of such money within one year immediately preceding the date of his return and at any time thereafter are totally exempt from wealth tax for a period of seven years after return to India.