56 Comments

1. Dear Sir,
   Currently I reside in US.I brought property in India by sending money earned in US.
   would like to know what documents needed by Indian tax dept. if I need to bring back the money to US after selling the property in India.
   thanks

   • You would need to convince the Bank that taxes, if any, on sale of property has been paid. For that, you would need the TDS or tax payment details, income tax return as well as 15CB/15CA. Please contact your CA. If stuck, let me know. Thanks.

2. Dear Sir,
   Please Resolve my query..!!
   I have received 2 lacs dollars from a client in hongkong. I have received advance payment from the party.Before i provide the services the client business is wound up, So now the amount is lying with me.. I opened NRO account and have deposited that amount.
   Would you please help me knowing what effect should i give to this amount or how should i route/book the same.

   • 1. If you are a resident, you can not open NRO account.
     2. If this was towards your services (export), you can refund the money back and no 15CB/CA required as “Refund or rebates or reduction in invoice value on account of exports” is included in the Specified List. But, you have to go in detail to analyze the transaction.
     3. You have to be very careful as no one would give 2L dollars just to wind up the business.
     4. If the client instructed you to transfer the money in someone else’s account abroad, it may not be legal. Thanks.

     • thank you so much sir.
       The information provided was really helpful..!!

3. Hello Sir,
   Need your suggestion.
   We have Twenty Partnership Firm and now we decided to close all the firm and convert in one LLP (New LLP to be form).
   All the these twenty firms are trading concern.These firm were doing trading business through stock exchanges in derivative segments.
   All these each firms have carried forwarded business losses Rs. 1-3 Lakhs approximately.
   All these firm have same partners and having same profit and Loss ratio.
   We need to know the possibility of the same

   • Before I answer, the LLP act as well as constitution and financials of 20 firms to be reviewed in detail. Also, this is an off-topic and blog is not a right forum to answer this. Please contact through email if interested. Thanks.

4. Hello Sir,
   Need your suggestion on the following:
   I had invested money in NRE Fixed Deposits in India in FY 2012-13 for a period of 1 year 16 days which matured in FY 2013-14. I had to move back to India and held my status as NR for FY. 2012-13. But for FY 2013-14 my status in R-OR. Can you please help me understand how will the interest on NRE FD be taxed after I become R-OR? Will it be taxed proportionately? For e.g. I invested Rs.1 Lac in Apr. 2012 and the FD matures in May, 2013. So until 31st Mar.2013, I was NR and from 1st April 2013, I am R-OR. Hence, will the interest on FD will only be taxed for 2 months interest of April & May 2013?
   Thank you.

   • The NRE account needs to be converted to resident account or the Resident Foreign currency (RFC) account on your return. As you are not allowed to keep NRE account after return, interest would become taxable after return. Your Resident or not-ordinary resident (NOR) is as per Income Tax act and does not matter for taxation of interest on NRE deposits. Thanks.

5. Hello Jigar,
   This is one of the most informative blog. Thanks for great insight you offer.
   I need your advise on the following. I am a US citizen and I was posted in India for a period of 3 years. I would like to repatriate my savings fro earnings in India to my US bank. I continue to file Indian Taxes. Please advise how this can be done and if there is any ramification for transferring equivalent of USD 100k.

   • After paying income tax, you are allowed to transfer funds to USA. Please contact your CA, who will issue a CA certificate and follow required procedures for you to transfer money to USA. Thanks.

     • Thanks. Yes, indeed, all taxes are paid and India IT Records in order. After transfer, is it required to inform US authority?

       • If you have already reported your financial accounts (FBAR), assets (FATCA-8938) and income (to IRS), there is no additional reporting required after transfer. Thanks.

6. Hi. I am a NRI based in Oman. I am regularity remitting money to my NRE account from my Omani rial salary account here after converting into Indian rupees.
   My son needs to be admitted to a medical college in India next year in NRI category and the fee is to be paid in US Dollar as draft.
   Will my bankers in India SBI & HDFC allow me to convert funds in my NRE account to a U.S. Dollar draft payable to an educational institution in India at the time of payment of fees ?
   Regards
   Rajiv Tandon

   • Yes. You may issue the draft in USA out of your NRE account. I would also think that the college may also take a check from NRE as funds from only foreign source can be credited in the NRE account and only NRIs are allowed to maintain NRE account. Thanks.

7. Dear Sir, I am an NRI receiving fees for some service I provide resident Indians. I have been paying tax regularly on my Indian income. Customers usually transfer rupees into my bank account. Some customers are choosing to deposit cash into my account instead of making a bank transfer. Am I violating any rules if I accept rupee deposit by cash into my bank account? Of course, these deposits are accounted by me as income. Thanks.

   • If you are reporting all your income to the income tax department, you are not violating anything. If there is any inquiry, you would have all proof that you have reported all the income and paid tax on the same. Thanks.

8. Dear Mr. Jigar Patel,
   Thanks a lot for the blog and your responses to the critical issues.
   I need a clarification on IRS taxes related to 401K withdrawal.
   I lived in US for 12 years and a obtained a greencard. Having 401K account, accumulated tax differed savings to the tune of $200K. Now I returned to India during July 2015 and retired (now 60 years old). On consulting Fidelity, received a suggestion that I shall file Form 8WBEN declaring that I moved back to India permanently, there would not be any tax deducted upfront and there won’t be 10% penalty. Fidelity promised that I would receive the entire amount, if I opt for it. My question is whether Indian Citizens are subjected to US tax on 401k withdrawal? I heard there is a bilateral tax treaty, based on which Fidelity will not withhold any tax. Is this right? If my assumptions are wrong what is the best alternate to withdraw my 401k balance. My planning was to withdraw all the amount at once and invest in Mutual funds so that I can get a regular income through SWP. Kindly guide me in this matter. What is RNOR and how long it is valid?
   Thanks a lot for your patience.
   With best regards,
   Satya V Muddada

   • 1. I don’t think Indian residents are taxed on withdrawals. However, you would need to pay tax on any dividend distributed, interest credited or capital gain (on sale of funds/shares) during the year in India.
     3. If you decide to sell all shares/funds in one year, you would incur capital gain and would have to pay tax in India on the gain amount. However, you may not have to pay tax on foreign income while on RNOR status, which you would be able to enjoy for at least 2 years 2015-16 and 2016-17. Provided you have not been to India in last 7 years, you may also qualify for 2017-18.
     4. If you need any consulting for investments in India including MF, please let me know. Thanks.

9. Dear Mr Patel,
   I was working in Muscat / Dubai for last 15 years & I have returned back to India in the month of May 2015 for good. I was not filing any income tax returns while I was NRI since I did not have any income in India. Now that I have come back I assume my status now will be RNOR.
   In accordance with law I am in the process of converting all my NRE/NRO accounts to Resident accounts. Bulk of my investments are NRE FDs with two banks. One bank has agreed to convert the NRE FD to Resident FDs at agreed rate of interest till maturity but the other bank says they will continue to maintain the FDs as NRE FDs till maturity date of Nov 2016. They will also not deduct TDS.
   Alternatively they want me to break the NRE FDs & reinstate them as resident FDs at the lower prevailing rate of interest. This means big loss of interest for me. I wanted to check from you whether maintaining NRE FDs is by law correct & how do I file tax in absence of Form 16.
   Would this lead to any problems with the tax authorities..
   Beyond this I need to know :
   a) Do I need to compute advance tax & pay it.
   b) If yes, is there a prescribed IT format for computing tax & how does one deposit such tax.
   Looking forward to your early response.
   Thanks & Regards
   Rajiv Batra

   • As per FEMA rules, on return to India, you are no longer allowed to maintain NRE account but change them to resident accounts. It would be upon banks as they have separate procedures how they would transfer funds to resident account. Bank would deduct TDS on the interest income from resident account. You would file tax return after the year is over and pay any tax. I suggest you contact your CA for the same. Thanks.

10. Dear Sir,
    I need clarification on the tax incidence on the 401K funds (US based savings) withdrawn in lumpsum by Indian Resident.
    What is RNOR for US returned Indians and how it helps?
    Thanks a lot.
    Regards,
    Satya

    • I would think there is no tax on withdrawal of 401k funds. In India, tax is on the income generated from investments – dividend, interest or capital gain. If your status is RNOR, you would not pay tax on any foreign dividend, interest or capital gain generated outside India. Thanks.

11. Sir,
    I am a resident of Saudi Arabia. I have 2 questions.
    1) Is this FATCA declaration only for NRI or also OCI holders residing outside India?
    2)If we live in Saudi Arabia, do we declare Saudi our tax Country? If yes, we do not have a tax number to declare as there are no income taxes here.
    Please advise and thanks a lot for your blog.

    • 1. Any person who is not a resident in India, includes both NRIs and OCIs.
      2. Yes. You may give any unique number – given to you as your ID. it may be a resident number or even visa. Please check with your bank and get confirmation. Thanks.

12. Hello Mr. Patel,
    *I am fore. PP holder (Isr), with OCI visa; *I came 6 mnths back for a job here where the co. opened my Sal acct; *As I’m quitting this job, I went to the bank to close my sal acct. they gave me Fatca form. Can you advise me on my foll queries:
    1. Whats my Status: Resident Indv, Foreign National, NRI or PIO
    2. Does being Indian by birth, make my Natioanlity INDIAN?
    3. I am not aware of TIN number, so what can I give instead? Is the OCI Visa no. a valid option?
    4. Since I am working here now, what would be my country of Tax Residency? (My IT is paid every month here by my present Co.)
    5. The Sal acct has the representation of my Co. addr since I didnt have residential addr. docs, so what current addr should I fill on the acct closure: the Co. addr. OR my foreign resi addr.?
    6. Wht documentation is reqd on my behalf to close this acct since I’m quitting the job? (I’ve given my PP and Visa docs). Am I right in closing this account?
    7. Can I keep this Sal acct functional for a couple of months after I leave or should I close it the same month I leave? Whats your opinion?
    8. Though would prefer to close it a month after I quit as my Sal credited into that acct., but on the other hand, would not like issues as to why the account was maintained after I quit the job, confused whats legal? Maybe the last sal could be cash.
    [in Sal acct min bal can be Zero would be functional for 3 mnths before it is converted to Saving Acct. wherein min bal is Rs.10K]. Since I would quit the job, am I right in maintaining the Sal acct for a couple of mnths considering my Status of PIO?
    9. Is there any obligation if I worked here now, that hence forth in the future I need to keep paying taxes even if I work abrd? (I do not have any investments/ property here).
    Thanking you for your time to reply.

    • 1. You are a resident of India but may also be a resident of your country (Isr)
      2. Yes, however, India do not allow dual citizenship so as you are a foreign passport holder, you are not an Indian citizen.
      3. Any tax ID or ID of your country of residence.
      4. Yes, you need to review laws of your home country to determine if you are a resident or not.
      5. I would think to use your permanent addresss.
      6. Yes, you can close your account. The documents would depend on the bank.
      7. You may keep if you expect any more money or plan to use it in future. If not, just close an account. One less hassle.
      8. It depends on what you want and your preferences.
      9. If you are an NRI and have no income in India, no need to pay tax or file tax return. Thanks.

13. Dear Sir,
    Am a resident of Germany and I wish to purchase an apartment here. I am planning to sell a property of mine and bring in the proceeds to Finance the margin required. Since the sale of the property takes a while, my family and friends had offered to help me with some money as the deadline for the margin money payment is nearing.
    Question
    Am I allowed to repatriate fund (received from friends and family) for purchase of an immovable property abroad ?
    Would money received from friends / family and paid back within a year still count as a gift (and is it taxable) ?
    Would appreciate your advice.
    Thanks

    • Your close relatives (parents and siblings) may gift upto $250,000 to you and you may remit the same to Germany. As per tax laws in India, it won’t be taxable to you or the gift giver. I am not sure about the gift tax laws in Germany. Please contact a tax lawyer in Germany. Thanks.

14. Dear Sir,
    I needed to know of old Indian stocks bought 30 years ago with NRE funds.
    Can this be sold and repatriated to US. Has this to be shown in US tax return.
    Please explain if FATCA is involved in this.
    I found your blog very useful.
    Thank you
    Walsa

    • 1. Yes, you can sell the shares and repatriate the funds.
      2. Yes, you need to include the shares as a foreign financial asset in FATCA and when sell, need to include in your tax return. Thanks.

15. Dear sir,
    Currently I reside in US on H1B Visa and have been there for last 8years and have following questions
    1) Can I get a license for pawn brokers shop either by myself or in joint with my parents for an proprietorship firm ?
    2) If I cannot get license then what is the best way to give that money to my parents for use in the business and then be able to bring it back to USA ?
    3) Can I purchase an agricultural land on my name or my wife’s name ? I recently heard that NRI’s cannot purchase. Not sure as mywife & I are still citizen of India. Also what happens to the agriculture land I purchased 2 years back ?
    Appreciate your help on this .

    • 1. I don’t an NRI can invest in a business related to money lending i.e. pawn shop.
      2. An NRI is also not allowed to lend his parents/siblings on a repatriable basis for business that is related to money lending.
      3. An NRI can not buy agricultural land. Citizenship would not matter. If you had purchased an agricultural land as an NRI, it would be in contravention of FEMA laws and you could be penalized for the same. And, you may not be able to remit the same funds to USA. Thanks.

16. I am a USA citizen and a coparcener in a Hindu Undivided Family (HUF) trust established in India by my late father(Indian citizen) in 1950 .  After his demise my mother became “karta” and I became “coparcener”. The trust owns apartments which are rented and the rent is deposited in a HUF bank account. After his demise my name was added to the huf bank account as a “coparcener” in 2016.  I have not received any distribution of funds. Should I be required to file IRS form 3520 and/or 3520-A for tax year 2016? 
    Thanks in advance.

    • HUF is the highly disputable subject when it comes to IRS reporting and different CPAs have different ways to treat the same. I would recommend you to contact your CPA, explain the situation and then seek his guidance.
      That being said, HUF is not a trust. Also, you are a co-parcener since your birth. Your name may be included as a signatory authority to manage bank account after your father’s death. Usually, elder son becomes the karta of the HUF after death of father. While mother can be a karta, in certain exceptional situations. If you are the only son or all your siblings are US residents, I would recommend that you do a full partition of the HUF property and close HUF. There is no purpose for you to have a HUF. Thanks.

17. Hi. I am British citizen, My mother in India would like to gift me GBP10k this year. Do I have a uk tax liability for receiving this money in my UK bank account? thank you

    • There is no gift tax as per Indian tax laws to you or to your mother. While I don’t think it will be taxable for you in UK, I would recommend you check with your UK based CA for the same. Thanks.

18. As per FEMA & IT Act I am Non Resident since April 2010 as I am Greencard holder in USA. I am getting pension from Bank of India as VRS from Bank of India. I have continued my domestic SB A/cs and FD A/cs in BoI till today as domestic A/cs . I have filed all my INDIAN Tax returns as Resident till for AY 2016-17 and have paid all Taxes on my Pension and bank interest income. I am also filing USA- IRS tax Returns and have shown/added Indian Income here in USA and have paid US Taxes after claiming Foreign Tax Credit including reporting of Bank Acconts/ balances in US Tax Returns- Form and also in FBAR- Fin CEN under SDOP. Now I want to get my domestic A/cs SB and FD to be changed as NRO and to file Indian Tax Returns as Non Resident. What is the formalities/ procedure to be followed by me with my bank (Bank of India) for redesignatig/conversion of My existing domestic SB -FD A/cs as NRO SB-FD A/cs without closing it and reopening it. I have already requested bank for this but, they are unable to do it. Do you have any idea how the Bank of India can do it? Are you providing any counseling for such matter on individual basis to me ? If yes , then let me khow about how to contact you and about your fees and mode of fee payments etc. to you? You can also reply to me on my above email id.

    • As a banker, who have worked for so long in Bank of India, I would think you are better person to answer the question. Anyway, the procedure is simple that you need to inform the bank of change in residential status from resident to NRI. Then, bank will do the rest as per its internal procedures. Earlier, resident would be re-designated to NRO with same account number and chequebook. However, recently, the banks close the resident account and open the NRO account to better track the accounts.
      I am surprised that even after your employment in a bank, you have not changed your resident account to NRO for 7 years. Please note that greencard would not change the residential status to NRI. Your physical stay outside India would change your status to NRI. Greencard/citizenship is an immigration issue and is different from residential status. Thanks.

19. Greeting Sir,
    I have a query related to FEMA,
    I want to remit an amount of $3000 service Fee to Britain(UK)
    Whether LRS scheme is better in case of individual ?? or any other method ??
    In case of Registered entity how could i remit an amount ???
    Kindly advice a suitable answer.

    • You would need to define the nature of service fee and also whether you will be sending the money in personal or business capacity. TDS may be applicable. Please contact your CA. Thanks.

20. Sir,
    I am NRI since last 4 years. I am also a coparcener to HUF created by my father. After demise of my father, the Karta is my elder brother. We have mutually decided to close the HUF account and take individual share. Our HUF regularly files IT returns.
    I also hold NRO and NRE Accounts.
    My question is that, Is it possible I receive my share through cheque or Bank transfer from HUF account in my NRE account directly? Please advise relevant formalities to execute this transfer.
    Thanks

    • I would recommend for FULL Partition of an HUF and officially close the HUF in the Income tax’s records. It is not taxable and would be simple (not easy) but right thing to do. Please contact your CA or whoever made the HUF. Thanks.

21. I have a query and would your expert advice on the same.
    ‘A’ who is a resident indian wishes to buy agricultural land in India on his & his spouse (also indian citizen) . He has part of the sum required ready, and for another ( and substantial larger part , say for about 70% of the required amount ) amount , he is receiving a gift from his NRI daughter & NRI son-in -law.
    It may happen later that ‘A’ may want to pass on this property to NRI daughter as an inheritance.
    Can this be classified as Benami transaction?
    Also how can the transaction be carried out so that all legal and tax considerations are followed ?
    Please advise.

    • 1. As per RBI rules, NRI is not allowed to invest in agricultural property – directly or indirectly. This may be considered as NRI buying agricultural property indirectly.
      2. If it is a genuine gift, the money would belong to the donee and he can do whatever, including investments. As the money belongs to the investor and the property is also in the name of the investor, it may not be considered a benami transaction.
      3. I would not recommend as this does not appear to be a genuine gift and an NRI is buying agricultural property, which is not allowed under FEMA. Thanks.

22. Dear Sir,
    I hold trading&bank accounts in India and am planning to move to US for work. As of now, I don’t know how long I will be there – a year or a few years. I am also a co-parcener along with my mother in my father’s huf who is the karta. Hence, I want to know :
    1. Can I continue holding the trading account in India . Is there a time limit? If not what is an “advisable” time-frame.
    2. Can I remit money from US to my Indian bank account and keep trading in my account?
    3. Can I continue being a co-parcener? Any change of status declaration needed?
    4. And can I remit USD to the HUF account?
    Thanks for your help!
    Regards

    • 1. You can do 1-3 however, make sure you inform your bank, broker, DP and every organization of your change of status. Please update your KYC of your change of residential status.
      2. We do not recommend transferring money to HUF. Thanks.

23. Dear Sir,
    I am 71 years old, acquired USA Green-card 2 years back, live in the USA for about 190 days in a calendar year and for the rest of the period I live in India. As per FEMA, I have turned NRI in the current FY because I lived out of India for more than 182 days in the previous FY, but as per Income tax Act, I am still a resident in India. My query pertains to my HUF which has a 3-in-1 bank account in a private bank since long whereby I on behalf of HUF trade in shares, Mutual funds. Income in my HUF is from dividends, interest. My wife expired in the year 2009; the co-parceners in my HUF are my 2 daughters, both live in the USA, one is a USA citizen having a daughter, the other is on H1B visa. No funds have been transferred from USA or vice versa qua the HUF. I believe that my granddaughter (minor) is also a co-parcener in my HUF. What are the consequences of the HUF in the USA for my daughters and me qua USA Tax Laws as I am also filing US IT returns? I and my 2 daughters also file IT returns in India who have rental Income and income from dividends. (30-Jun-2019, USA)

    • 1. HUF is one of the most complicated for IRS and there is no clear guidance. As both of your daughters are US residents and as you are also a greencard holder, who are taxed on a global income, we recommend you fully partition your HUF and transfer the funds in the individual names and invest / report income / file taxes accordingly.
      2. As per Income Tax act in India, the HUF would be having a Resident status as the karta visits India (total control for full 12 months not outside India). With dividend tax free and flat income for capital gain, there may not be much benefit to maintain HUF status. Also, due to complications in reporting of income / assets or treating HUF as trust or joint ownership or other structure, it is advisable to close by fully partitioning the HUF. Thanks.

24. The date mentioned in my query has been wrongly mentioned as 30-Jun-2019 in place of 30-July-2019.
    Regards.

25. My daughter, an NRI, has no assets in india. A small pension amounting to about Rs 14000 per annum is her only income in India apart from a few rupees of bank interest as she maintains NRO savings account with no more than a minimum balance of 4000/- rupees at all times, In a Blog reply of your’s dated March 13, 2018 you state that NRIs are required to file tax return only if their income in India is more than Rs 250000/-annually. She has been filing tax Returns for all these past years. If she stops filing Returns from now on, due to the paltry amount earned by her in India, will their be any IT problem. Is their any official Circular or other for what you have stated in your Blog 14-3-2018? I have not been able to find any- hence this query. Thanks.
    Tenelur
    23/8/2019

    • 1. There is no penalty for not filing tax return if the income is less than 250,000.
      2. However, you would need to inform of her NRI status at all the banks, pension office and all other places.
      3. In such case TDS would be deducted from savings account and may also be from Pension amount. And, as a result, she may have to file the tax return to claim the refund of tax.
      Technically, yes, if you inform eveywhere that she is an NRI and tax is deducted officially and income is less than 250,000, there is no need to file income tax return. Thanks.

26. I got green card . Entered USA on July 31, 2019 and stayed in USA for 88 days and came back to India and shall stay in India beyond dec 31, 2019. I have zero income from USA. But as green card I am required to file US income tax return for tax year 2019 on worldwide income. As per Income Tax rules of India my status will of resident of India. For tax year 2019 I shall be having dual resident status. I think it will be completely legal if I file my US return as non resident alien under tie breaker rule of Tax Treaty. I shall be required to file form 1040NR EZ (as I have no dependent) and Form 8833. I further think that I shall not be required to file FBAR and Form 8938. Will you agree to help me complete my US Tax Return, may be electronically then what will be the fee and mode of payment. I shall appreciate your reply on my email address with thanks

    • I suggest you contact your CPA in USA who will be able to properly guide you. Thanks.

27. Dear Sir,
    Your blog is very informative, I have two Queries :
    1. Can a person who left India at the age of 26 years for employment to USA continue to be a coparcener in a Hindu Undivided Family,
    Is there any FEMA compliance required by the HUF or Non Resident. Please advice
    2. After the death of a person, He has three legal heirs his wife, His Son and His daughter. He had several properties, out of which in case of residential house his wife and daughter bequeathed their rights in the favour of son, who at the time of bequeathing was a Non resident, After that the property was transferred in the Name of his Son, Can NRI hold such property or after bequeathing he has to immediately sell the property.
    Thanks in Advance
    Jia

    • 1. Yes
      2. Yes – assuming it was not an agricultural land or plantation property. Also assume, property was owned in individual capacity and not owned by HUF. Thanks.