RETURNING NRI'S CORNER - INTEREST RECEIVED ON RFC ACCOUNTS

1

     ·       If a returnee NRI's stay in India exceeds 119/181 days depending upon the taxable                 income  in India during the financial year of return, he will be a “Resident “in India
     during  the said year. A financial year commences on 1st April & ends on 31st March. 

    OR
 

       His stay in India has been 60 days or more in that year, AND in the preceding 4  years, his total stay in India has been 365 days or more.

      ·        Said period of 60 days is raised to 119/181or more days for the benefit of and in case
      of

       a)    An Indian citizen leaving India for employment outside India, and
       b)   An Indian citizen or person of Indian origin i.e. an NRI residing outside India who is on             a visit to India.

      ·      It is important to note that the day of arrival and the day of departure are both included in       number of days of stay in India.

2.01

However, if he has been :

      ·        Non Resident in 9 out of 10 Financial Preceding Years
      OR
 Has not stayed in India for 730 days or more in 7 financial years preceding that year, 

      ·      A Citizen of India or Person of Indian Origin having taxable income other than foreign            source income in India exceeds  INR 15 lakhs or more and if he stay in India for more than     120 days but less than 182 days.

     ·        A citizen of India who is deemed to be resident of India then although a Resident, he will         be defined as "Resident but Not Ordinarily Resident".

     ·        It is important to note that the day of arrival and the day of departure are both included in        number of days of stay in India.

2.02

And thereafter, for a period or 2 years following the date of return, he will be treated as a ''Resident but Not Ordinarily Resident''

3

This may seem complex but the real complexities are yet to follow and hence those viewers who do not have track-record of not being entangled by the web-man alias " the spider-man " i.e. , viewers not having track-record of reading entangling provisions of complex Laws may from now onwards slow down - dangerous curves ahead!!

Sorry for the jokes but the matters are quite a bit complex indeed :

4

Whereas an NRI returning for permanent settlement at the option of the returning NRIs is immediately required to transfer the funds held in NR(E) account to RFC account (if he is eligible to maintain RFC account).

 4.02

And in case of FCNR(B) Deposits, returning NRI is granted permission to continue the same up till the date of maturity of the fixed deposits and upon maturity, funds held in this account is at the option of the returning NRIs required to transfer to RFC account (if he is eligible to open RFC account)

 4.03

Now, In case returning NRI as stated above is Resident But Not Ordinary Resident of India (RBNOR) (i.e. for a period of 9 years following the year of return) then, Interest income of RFC account is exempt from Tax.