created by Rajesh Dhruva

THANKS - Hon.Finance Minister,Sir! Our Memo.re:TDS finds favour & Compies of various Memorandams


HURRAY  !!! 
     HURRAY  !!! 
HURRAY - NRE/ FCNR INTEREST TAX EXEMPTION CONTINUES                                               28.02.2005                                                                                                                                                                                                                                                                                                                                                                             
 
Dear Friends
 
Good wishes.
 
It is indeed a joyous moment, which calls for celebrations, but the credit goes to Shri P. Chidambaram. Many, many thanks to Hon'ble Minister whose action will not only regain the confidence of NRI but will go a long way in strengthening their economic ties with India.
 
Well, on behalf of nribanks.com and my personal behalf, we sincerely thank Shri P. Chidambaram for kindly considering the submissions made out in our Memorandum as also numerous representations of NRIs across the Globe. As made out in our Memorandum, the tax was not the issue. The issue was the possible hardship of preparing accounts, filing tax returns, assessment procedures and so on and so forth.
 
To summarize, it can be stated that -
.01 interest earned on Non-Resident External [NRE] Account; and
.02 interest earned on Foreign Currency Non-Resident [FCNR] Accounts; will continue to be exempt from income-tax in India.
 
2. It may be noted that the income-tax was leviable w.e.f. 01-04-2005 and as such, till date, no income-tax was levied.
 
3. NOW, as the exemption is restored, in effect, interest earned on NRE & FCNR Accountsnever becomes taxable and continues to be exempt from income-tax.
 
5. Similarly, interest earned on Resident Foreign Currency [RFC] Account in case of Returning-NRIs, which was exempt, was also proposed to be taxed w.e.f. 01-04-2005.
 
6. NOW, the said interest of RFC Account will also continue to be exempt from income-tax till the Returnee-NRI's Residential Status under the Income Tax Act remains as "Non-Resident [NR]" or "Resident but Not Ordinarily Resident [RbutNOR]".
 
6. It may be noted that interest earned on Non-Resident Non-Repatriable [NRNR] Account and State Bank of India's India Millennium Deposits [IMDs] was not proposed to be taxed, and hence, was tax-free and continues to be tax-free.
 
7. Of course, interest earned on Non-Resident Ordinary [NRO] Account has been liable to tax and continues to be. 
NO DOUBT , in spite of the continuation of tax exemption, the returns/yields of Mutual Funds outperformed the interest offers on NRE/FCNR Deposits and Mutual Fund Schemes continue to offer more profitable alternatives to Savings and Deposit Accounts of NRIs.
II. As more interest earning and  tax-free alternatives for  INR as also Foreign currency Deposits, Mutual Fund schemes score better. These are –

II.1 INR ALTERNATIVES :

1. Fixed Maturity Plan [FMP] with assured tax-free return of app.5.75% for 16 Months tenure or the Arbitrage Fund with possible tax-free yield of 6.50% p.a. are quite attractive.as compared to
.01 NRE Savings interest 3.50% p.a.;
.02 NRE 1 to 3-year Deposit interest ranges 4.00% to 4.50% p.a.

2.Interest offered on NRE / NRO Savings interest at 3.50% stands beaten by Floating Rate Funds, app. tax-free yield of 4.75% p.a.too.

II.2 FCNR ALTERNATIVES : 

1. India Millennium Deposits [IMDs] 
.01 India Millennium Deposits [IMDs] being State Bank of India’s Bonds offered in Dec, 2000 and due for maturity on 30-12-2005.
.02 Yield to maturity app. 4.50% up.a.
.03 As the transaction is facilitated by Sellers’ Bankers who provide a guarantee to deliver the Bonds to the Buyer,upon receipt of the funds, the transaction of sale and purchase can be taken up at almost no risk.
.04 However, this Scheme is not open for Residents of USA and Canada.
 
2.Foreign Currency Deposits in Far East and Middle East –
 Foreign Currency Deposits being offered by India Centric Banks at attractive rates of interest.
.02 The interest rates offered are tax-free in the Country of Deposit.
.03 The Deposit and interest are fully reparable., and
.04 The interest rates are comparatively better than interest rates offered in India, 
.05 As interest rates world over are on the rise , it is appropriate to place deposits for 1 or at the most 2 years.
1 Year foreign currency deposit rates of India-centric banks in Far East and Middle East are :
US$  3.52% p.a.  ;    GBP  5.11% p.a.   and    Euro  2.36%  p.a.

3.The yield of 3-year FCNR Deposits at US$ 3.60% p.a., GBP 4.66% p.a. and Euro 2.55%  do not compare well to FMP tax-free yield of 5.75% over 16 Months, which together with Foreign Exchange Forward Cover provides yield in the range of US$ 3.80%, GBP 5.75% and Euro 2.80%.
 
Copy of our Memorandum can be found at : http://www.femaonline.com/memo_04-05.htm
 
Best wishes.
 
RAJESH H DHRUVA
Chief Executive
nribanks.com
Tel. No. : 0091 281 2464099 / 2463367
Cell : 0091 98240 49944
 
Anamoly 1.4.06
 
Dear Clients
Unfortunately, the press release quoting the Minister of State for Finance is a misnomer.
 
2. Replying to question in Rajya Sabha, the Hon'ble Minister of State for Finance has said that interest on NRE/FCNR Deposits will be liable to tax with effect from 01-04-2006. 
 
3. Technically, with effect from 01-04-2006 means Assessment Year 2006-07 relating to Financial Year 2004-05.
.02 Accordingly, A.Y. 2006-07 means Financial Year commencing from 01-04-2005.
.03 Therefore, there is no modification nor extension and as finalized in the Union Budget of
2004-05, interest on NRE/FCNR Deposits will be liable to income-tax with effect from 01-04-2005.
 
HURRAY  !!!       HURRAY  !!!    Tax differed to 1.4.2005

Dear Friends,

Cheers !!!

Hon’ble Finance Minister being concerned about NRI’s wooes and to woo NRI’s has differed taxation of interest income of NRE and FCNR deposits till 1st April 2005.

Hence, NRIs will not be taxed on said income w.e.f 1st September 2004 & of course a glitter of hope is seen on horizon with expectation of rethinking in the ensuing finance bill 2005-06 to be presented in Feb. 2005.
 
Best wishes
RAJESH H DHRUVA
Aug-26-2004 12:06:      
 
Lok Sabha passes Finance Bill 2004-05
 
The Finance Bill has been passed. The tax on NRI, NRE deposits has been deferred till April 1, and the tax-free income limit raised to Rs 1.09 lakh.
 
The Finance Bill 2004-05 was passed in Parliament, unopposed after the NDA  decided to boycott proceedings in the Lok Sabha. 
Finance Minister P Chidambaram has deferred the tax on non-resident Indians, NRI and NRE deposits till April 1 2005. He has also deferred the tax on aircraft leasing till April 1. The tax-free income limit has also been raised from Rs 1 lakh to Rs 1.09 lakh.
With its passage, the Lok sabha has given effect to the taxation proposals of the Budget. This was without debate as the entire BJP-led opposition boycotted the proceedings. This is for the first time in the annals of history of Parliament that a Finance Bill has been passed in the absence of the Opposition and without discussion. As many as 55 amendments to the Bill moved by the Finance Minister were adopted by the House. ......
·       economic times
Lok Sabha to vote on Budget on Thursday
 
REUTERS [ WEDNESDAY, AUGUST 25, 2004 01:06:38 PM ]
 
NEW DELHI: The union budget for this financial year will be put to vote in the Lok Sabha on Thursday.

The lower house approved the Appropriation Bill, which outlines spending on various projects by government ministries in 2004/05 (April-March), without any discussion on Wednesday because of differences between the opposition and the government.
 
"The finance bill will be taken up for voting and passage on Thursday," Parliamentary Affairs Minister Ghulam Nabi Azad told lawmakers in the lower house.
Congress Party spokesman Anand Sharma said the budget would also be passed without discussion as had been agreed in a meeting with opposition members.

Proceedings in parliament have been disrupted since last week over the inclusion of members charged with crimes such as corruption and attempted murder in Prime Minister Manmohan Singh's council of ministers.
 
Copy of our memorandum can be viewed at : http://www.femaonline.com/memo_04-05.htm 

 
                                                                     
OOPS !! SORRY - The Mummy Returns.

 
While we had just forgotten the proposals of "Vijay Mathur working groups" for taxing interest income of NRE and FCNR deposits,  with the finance bill 2004-05 " the mummy returns ". 
 
The said bill proposes to tax interest income earned on NRE and FCNR deposits by NRIs. Well, we have presented a memorandum; details whereof can be found at : http://www.femaonline.com/memo_04-05.htm  and in the meanwhile, hopeful the best.
 
If you as an NRI are concerned with the said matter, you may in your personal capacity or preferably through community or business related association of NRIs write to the Hon.Finance Minister and mark a copy to Hon.Prime Minister, Shri Manmohan singh. We welcome your queries on the subject.
 
We once again wishing and hoping for the very best.  
 
Best Wishes,
RAJESH H DHRUVA
 
MEMORANDUM re: NON – RESIDENT TAXATION

HURRAY  !!! 
As you all are aware, VIJAY MATHUR WORKING GROUP ON NRI TAXATION had proposed deletion of income tax exemptions as regards interest earned by NRIs on NRE and FCNR deposits. It was also proposed to delete concessions offered vide Chapter XII A.
We had made presentation to the Hon. Finance Minister to continue the tax exemptions/concessions. We are happy that our request has found favour with the Hon. Finance Minister and the said exemptions continue to be operative.

HURRAY !!!  And of course, many many thanks to Shri Jaswant Singhji, Hon. Finance Minister.

Dear NRIs, 
 
A Working Group for 'Study of Non-Resident Taxation'  was recently appointed by "Task Force on Direct Taxes " which in turn was appointed by Government of India. Said Group has made recommendations which means nothing but "Bad  News" for NRIs. These recommendations are : 
1.    Deletion to tax exemption granted to NRIs as regards interests income from NRE and FCNR(B) Deposits.
2.    Deletion of chapter XII - A granting concessional tax rate for investment income and capital gains and.
3.    Removal of "Not Ordinarily Resident" Status.
 
 
 We have jointly prepared a memorandum being submitted to Government of India on behalf of Confederation of Overseas Indians (In Formation) being prepared by key stakeholders: Shri Praful Patel (London), Shri Russi J. Patel, ACA and Shri Bharatkumar Shah (UAE), Shri Rajesh Kapadia (FCA) and Shri Rajesh Dhruva (FCA) (India). This is presented herein below: 
==================================================================================
Report (Part)                       Representation / Memorandum                              Memorandum re: R but NOR
 
January, 2003

Ministry of Finance & Company Affairs
Government of India
New Delhi.
The Government appointed a Task Force on Direct Taxes under the Chairmanship of Dr. Vijay Kelkar, which presented a "Consultation Paper" in November 2002 Para 3.15 of the "Consultation Paper" relating to tax treatment of non-residents, the Task Force recommended the creation of a Working Group headed by the Director General of Income Tax (International Taxation) and comprising representatives from trade and industry to examine various issues pertaining to non-resident's taxation.
The Working Group for 'Study of Non-Resident Taxation' (Working Group) was constituted by the Ministry of Finance and Company Affairs vide order F.No.153/221/2002-TPL dated November 14, 2002. (Appendix-I)
 Chapter - 4
Domestic Law
4.1      Definition of India
            The definition of India as appearing in the domestic law and that appearing in various DTAAs is not the same. The domestic law, infect, is narrower in its scope. The Working Group is of the view that the
            definition of India provided for in the DTAAs should be introduced in the Income Tax Act, 1961 also for the sake of uniformity. The Treaties Division in the ministry of External Affairs may be consulted in
            this regard.
4.3      Status of "not ordinarily resident" (NOR)
The existing tax law provides that a person is said to be "not ordinarily resident" if he has not been a resident in India in nine out of the last ten previous years preceding the year under consideration or has not been in India for 730 days or more out of the last seven years. Such a person enjoys the benefit of not being taxable in respect of his income accruing or arising outside India unless it is derived from a business controlled in or a profession set up in India. Such a provision acts against the grain of ' residence based taxation', which provides for taxation of a resident of a country in respect of income from any source wherever situated. India follows the concept of 'residence based taxation'. India also is a signatory to more that 65 DTAAs. A person availing of the status of 'not ordinarily resident' in India is not taxed on his overseas income but only on the DTAAs. A resident in India escapes taxation on has passive income in India because of the NOR provision and is required to pay tax only at very concessional rates in the tax at full rate in either country. There is no rationale for continuing with the concept of taxation on global basis in the case of a resident. By doing away with the status of NOR an individual would be taxable in India on global basis if he becomes a resident and the Tax Department would thereafter have to give credit for the taxes payable in the foreign country in respect of the same income. The individual would therefore not be tasted twice on the same income and the Government would get share of revenue. The Working Group recommends deletion of the provision regarding NOR.
4.5      Withdrawal of certain exemptions: 
4.5.1     Section 10(4)(ii) excludes, in the case of an individual, from computation of income, interest accruing in a Non-Resident (External) Account. The exemption from tax is available only to non-resident India's
            (NRIs). under the existing tax regime, non-residents do not pay any tax in India on the interest on such deposits. They may ordinarily be paying tax in the country where they are resident on such interest
            income. In this manner tax in any case is being paid in the country of residence. The Working Group is of the view that with more than 65 DTAAs in place, there is no need for India to of exemption does not
            really flow to the taxpayer but to the other country's treasury. The interest accruing on such deposits should be taxed at source in India at the DTAA rate and credit for the taxes paid can be claimed in the
            country of residence by the NRIs as provided in DTAAs. In this manner double taxation in respect of the same income in the hands of the same individual would continue to file his return in the country of
            residence along with his claim for credit of tax payable in India. The Working Group, therefore, recommends that the provision of section 10(4)(ii) be omitted.
4.5.2    In line with the above, the Working Group also recommends that the provisions of section 10(15)(iv)(fa) and section 10(15)(iv)(fa) be deleted which relate to interest on foreign currency deposits by banks and
           interest on foreign currency loan taken by housing companies respectively.
4.10    Removal of Chapter XII-A
           Chapter XII-A of the I.T. Act deals with special provisions relating to certain incomes of NRIs. Income from long term capital gains or investment income from specified assets are taxable on a gross basis at
           the rate of ten or twenty per cent respectively. With regard to such income they ordinarily should be paying full tax in the country of residence and getting credit for taxes paid in India. The tax should be
           neutral to the residential status of a person. In addition the DTAAs take care that the NRis would not be taxed twice on the same income. On the basis of the above, the Working Group recommends the
           abolition of Chapter XII-A in the I.T. Act.
4.13.3   There are certain provisions in the Act viz. section 194H, 194I, 1919J etc., which require tax to be deducted in respect of payments to any person (including non-residents) for payments of the nature of
           commission, rent, professional fees, etc. Section 195 deals with all payments except interest on securities and salary payable to non-residents. The Working Group recommends that the payments referred
           to in section 194H, 1941I, 194J etc. should exclude payments made to non-residents because they are covered by the provisions of section 195. This would obviate avoidable overlapping of the provisions.
 
 
 
MEMORANDUM re: NON – RESIDENT TAXATION                                                                                                                                                                                                                  Page | 1 | 2 | 3 |
 
MEMORANDUM ON NON-RESIDENT TAXATION 
CONCERNING NRIs, PIOs AND OVERSEAS INDIANS

This Memorandum is submitted to Government of Indiaon behalf of Confederation of Overseas Indians (In Formation)and prepared by key stakeholders: Praful Patel (London), Russi J. Patel, FCA and Bharatkumar Shah (UAE),Rajesh Kapadia, FCA and Rajesh Dhruva, FCA (India)
 
PART I: PROPOSED OMISSION OF TAX EXEMPTIONS
 
1      This has reference to the proposals contained in “Report of the Working Group on Non Resident Taxation”.
2       Para 4.5.1 and 4.5.2 of the report propose omission of Section 10(4)(ii) and Section 10(15)(iv)(fa) whereby NRIs are granted tax exemption as regards interest income accruing on deposits held in Non
         Resident External (NRE) account and Foreign Currency Non Resident (Bank) account [FCNR(B)], citing reasons as:
        i.   Such NRIs do not pay any tax in India, and.
        ii. They ordinarily pay tax in country of their residence. Reference is also made about 65 Double Tax Avoidance Agreements (DTAAs ) in place
3      Certain vital facts seem to have skipped attention of the Working Group, while proposing deletion of exemption.
4      It is estimated that Non Resident deposits as on date amounts to approximately US$ 27 billion.
        Of the total deposits, almost 50 % or more are held by NRIs / PIOs residing in Middle-East.
        In the Middle-East, almost all the countries do not have personal taxation. e.g. there is no personal taxation in UAE which has a substantial share of NRI bank deposits in India.
        As a matter of fact, tax exemption is an incentive for NRIs in Middle-East and many other countries to maintain said deposits in India.
        This is evident from the fact that the NRIs in the Middle-East contributed almost 60 % of the collection of approximate US$ 4.5 billion of State Bank of India’s Resurgent India Bonds (RIBs) issued in 1998 as also almost the same contribution out of app. US$ 5.75 billion. of State Bank of India’s India Millennium Deposits (IMDs) issued in 2000. It may be noted that both the said investments were offered tax exemption in India.
5.     It seems that the working group is also ignoring the fact that collection of tax has not been the primary objective of the Government of India in its offers and incentives to the Non Resident Indians from time to time. The Government also has the intention of promoting NRI investments into India and continuing their close relationship with the country of their origin.
 
PART II: DENIAL OF EQUITY & JUSTICE
 
6      It seems that the objective of taxing Non Residents has totally ignored the principle of equity and justice and commonly accepted principle of Promissory Estoppel.
7      It may be appreciated that NRIs have placed app. US$ 27 billion with various banks in India by way of Indian Rupee as also Foreign Currency deposits.
       At the time of placing the deposits (for periods ranging from 6 months to 10 years), the NRIs have been given a promise and clear understanding by none other than the Government of India that the said
       deposits will be exempt from Income Tax and Wealth Tax in India as is evident from offers of various banks in India.
8.     Now, this abrupt deletion of provisions will not only shake the confidence of NRIs at large but also be a major disincentive for future NRI investments in India.
9      One more vital fact seems to be ignored. NRI deposits have been a strong and steady source contributing to the Nation’s Foreign Exchange Resources. Last two decades have shown that app. a quarter of the external borrowings have been contributed by way of NRI deposits.
       It is feared that the proposed changes in the tax provisions will not only see a flight of capital which may never return to India, but will also create a loss of faith, which may be difficult to recreate again by subsequent acts.
 
PART III: GLOBAL PRACTICE
 
10.  The group also has not considered the fact that granting of tax exemption or concessions to “Non Residents” or “Not Ordinarily Residents” is common in advanced / developed countries too.
       An example is exemption for interest on bank deposits claimed by an individual who is “Not Ordinarily Resident” in the U.K. by complying with certain formalities.
       In the USA also, in case of Residents income arising / earned abroad is subjected to tax only when the same is received / remitted to USA.
       In USA, in case of Non Resident Non–Citizens, Interest Income, Long Term Capital Gains and Short Term Capital Gains are exempt from tax.
 
PART IV: DELETION OF “RESIDENT BUT NOT ORDINARILY RESIDENT”
 
11.  We have already made representation for continuation of the status of “Resident but Not Ordinarily Resident”.
       In furtherance, we are to inform that while dealing with topic in Para 4.3 (Chapter 4) various arguments are put forward by the Group.
However, it seems that the Group has not considered at all the plight of an NRI / PIO permanently residing outside India who might be treated as “Resident” in India by virtue of number of days stay exceeding statutory limits in India on account of personal / compulsory reasons – say health etc. Such Non Resident Indian, who has not come to India for settlement may become “Resident By Default”, and will be required to file a tax return in India including his global income.
12.  Herein again, the plight of NRIs residing in the Middle-East is the worst:
        They do not have personal taxation in the Middle-East:
        The income arising in the Middle-East will be subject to tax in India by virtue of such person becoming a “Resident By Default”.
 
PART V: DELETION OF CHAPTER XII – A
 
13     Similarly, we strongly object to the removal of Chapter XIIA whereby Non Resident Indians are offered concessional tax rate of 20% and 10% respectively for investment income and capital gains on specified   assets.
1st February, 2003
 
 
MEMORANDUM re: NON – RESIDENT TAXATION                                                                                                                                                                                                                                                                                              
 
Memorandum
prepared by
 
Russi J. Patel, FCA
Chartered Accountant
And
Honorary Advisor to The Overseas Indians Economic Forum of UAE
NOT ORDINARILY RESIDENT
UNDER INDIAN INCOME TAX ACT, 1961
We would like to draw your attention to a recent controversial Gujarat High Court judgment on the “Not Ordinarily Resident” (NOR) status of a tax assessee in India. In our opinion the judgment has totally misinterpreted the relevant provisions of Section 6(6) of the Income Tax Act, 1961 with regard to the NOR status. We have been further informed by an eminent legal expert that the judgment has disregarded the commentaries of several learned authors and the ratio of judgments of four different High Courts pointed out during the course of the hearing. Moreover, there is no reference in the judgment to the West Bengal Commissioner’s Circular favouring the assessee. It was also pointed out during the course of the hearing that in interpretation of a provision of Central statute different interpretations cannot be arrived at contrary to judgments of different States in India and uniformity should be maintained and even if two views are possible, in light of several Supreme Court judgments a view favouring the assessee should be preferred. This aspect is also ignored in the said judgment.
 
The judgment virtually makes the first part of Section 6(6) of the Income Tax Act, 1961, which is reproduced herebelow, ineffective -
 
“6. For the purposes of this Act, -
 
(6)   A person is said to be “not ordinarily resident” in India in any previous year if such person is –
 
(a)   an individual who has not been resident in India in nine out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and thirty days or more.”
 
The language of the Section is absolutely clear and leaves no ambiguity for any interpretation. At the cost of repetition it may be once again stated that the Section clearly provides that a person is stated to be “not ordinarily resident” if he has not been resident in India in nine out of ten previous years…HENCE, so long as an individual has not been resident in India in nine out of ten previous years, he will be treated as “not ordinarily resident”.
 
The judgment holds that unless the assessee is not “resident” in India for all the nine years out of ten preceding years, he cannot be treated as “not ordinarily resident”. The judgment runs totally counter to well established legal position accepted by four High Court judgments and even the circular of the Income Tax Department laying down that an assessee is “not ordinarily resident” unless he is resident in nine out of ten preceding years.
We have been given to understand that the Gujarat High Court judgment erroneously equates the phrase “not been resident in India” with “been not resident in India”. It is the position of the word “not” that makes a world of difference.
 
Also, it is important to look into the intention of the legislation. For instance, Section 2 of the Income Tax Act, known as the definition section exhaustively gives the definitions of the various terms used in the Act. In this regard, it is interesting to note that Section 2(30) actually defines the term “non-resident”. Now had Section 6(6) indeed been meant to be interpreted as the Gujarat High Court has done, why wouldn’t the section simply use the term “non-resident” as it has already been defined in Section 2.
 
We would like to emphasise that most NRIs and particularly those returning to India from abroad are extremely upset and concerned about the consequences arising from this judgment in relation to their investment planning and asset protection matters.
 
Apart from the controversial Gujarat High Court judgment, referred to above, we have been informed that the revised Kelkar Report on Direct Taxes recommends the removal of the status “not ordinarily resident” from the provisions of the Income Tax Act, 1961. This is a very serious development and we are certain that all NRIs living abroad would strongly object to the acceptance of this recommendation by the Government of India.
 
NOW, If the definition of “resident but not ordinarily resident” (R but NOR) is deleted, every NRI visiting India, irrespective of his circumstances, or personal compulsions, will be compelled to restrict his stay in India to less than 182 days in a financial year, as otherwise, he would become a “Resident” by default, and he would be subject to considerable inconvenience and losses including the following: (1) all his global income will be liable to tax in India; (2) He would loose all the benefits of tax exemptions available to “R but NOR”, e.g. interest on Resident Foreign Currency (RFC) account; (3) An Overseas Corporate Body (OCB) owned and controlled by the concerned NRI may also be treated as a “Resident Company” and as a consequence, it will not be entitled to the existing tax benefits and other concessions.
 
AND by granting R but NOR tax exemptions many returning NRIs are also encouraged to bring all their savings from abroad to India for deposit in RFC account, thereby facilitating enhancement of our Country’s foreign exchange reserves. If the said provision is removed, it is apprehended that many NRIs returning to India may be prompted to keep their funds outside India without declaring the same to the concerned authorities in India. This change may further create a ripple of fear and doubt in their minds which may affect their investment decisions in India and may also lead to the withdrawal of the technically qualified and competent NRI professionals from their assignments in India causing a serious setback in the economic progress of our country.  
 
It must also be appreciated that although not many NRIs return home for permanent settlement, but the current provisions of the “R but NOR” status gives a kind of a comfortable feeling building confidence amongst the NRI community at large, to the effect that, if they return to India, their assets and funds can be brought and invested safely in India and the tax exemption on RFC account can play a crucial role in encouraging repatriation of their savings into India.
 
In view of the above representations, it is imperative that the Government and the concerned authorities should take immediate steps to confirm and retain the existing “R but NOR” provisions of the Income Tax Act, 1961, which clearly indicate that any one who has been an NRI for atleast two successive years before his return to India, will be a “not ordinarily resident” for the next nine years, including the year of his return to India, and will accordingly be entitled to all corresponding tax benefits and concessions.
 
DUBAI: January 04, 2003.                                                                                                                                                                                                                                               RUSSI J. PATEL