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Home > India > Business > Guest Column > A N Shanbhag and Sandeep Shanbhag


How much cash can an NRI take to India?

June 18, 2008

A N Shanbhag, the highly respected investment guru, and his son Sandeep Shanbhag, answer your questions on NRI investment.

A Rediff India Abroad feature:

How much cash can an NRI carry with him to India? Does it need to be declared anywhere?

 --  Suhas Kulkarni

1. A person coming into India from abroad can bring with him foreign exchange without any limit. However, where the aggregate value of foreign exchange in the form of foreign currency notes, bank notes, travelers' checks, etc., exceeds $10,000 (out of which there is a separate ceiling on currency notes of $5,000) it should be declared to the customs authorities at the port of arrival in the Currency Declaration Form.

My wife and I are American citizens since long. Way back, I had bought an apartment in India that I would now like to sell and get the proceeds to the United States. This apartment was purchased in 1968. What are the formalities? We also have some investments in bank deposits and PPF which are continuing. Can you give us some guidance?

 --  Ramniklal Doshi

When you sell the apartment, you will be liable to pay long-term capital gains tax in India. After paying the same, the balance amount may be remitted to the US, if it is under $1 million. If it is more, you will have to spread it over such that each year not more than a million dollars may be remitted.

You will require an Indian chartered accountant to issue a certificate certifying that the tax amount has indeed been paid or provided for. Your bank deposits (NRO) may be continued. The PPF account will have to be closed upon its maturity. NRIs aren't allowed to open a fresh PPF account.

I have some NRO deposits in an Indian bank [Get Quote] that earn interest in the region of Rs 200,000. The bank withholds tax on this interest and credits the balance amount to my account. On a recent visit to India, someone gave me to understand that I should be filing a tax return. I was surprised to learn this since I was under the impression that NRIs aren't required to file a tax return. Can you clarify the exact position of the law on this?

 --  Vikram Singh

If your income chargeable to tax from all the Indian sources is over the tax threshold of Rs 150,000 you have to file the tax return, even if your tax liability is nil. And this rule is independent of the amount of TDS (tax deducted at source) or withholding tax.

If your liability happens to be more than the TDS, you are required to pay the additional tax. If it happens to be less, you can get a refund from the Income Tax Department, but only after you file the returns and claim the refund. You will require a Permanent Account Number (PAN) in case you file IT return.

I am an NRI living in the US. I am engaged to be married this month. In this regard, I wish to send some money to my fianc�e. However, her family is concerned that since the money is substantial in terms of Indian rupees, will she be liable to tax on this amount? Will it provoke any inquiry from the authorities? Is there some sort of a limit beyond which if money is transferred it will be taxed?

 --  S Kabra

Any sum of money in excess of Rs 50,000 received from a non-relative is to be taxed as income except if it is in contemplation of death, under a will or on the occasion of marriage. If the residential status of your fianc�e is Indian Resident then till you do actually get married, you do not become a spouse/ relative of the recipient.

However, there are no time limits declared for giving gifts on the 'occasion of marriage.' Therefore, if your marriage is round the corner, then your fianc�e may claim the gift as tax exempt on account of it being on the occasion of marriage. However, the wedding has to be within a reasonable period of time, else the tax authorities may object to the exemption claimed.

I plan to buy an apartment in Bombay for Rs 8.5 million. I have some savings in Foreign Currency Non-Resident (FCNR) and Non-Resident External (NRE) accounts that will cover about half the cost. For the balance, I will need to avail of a mortgage loan the interest rate on which is indicated at around 11%-12% pa. Is it advisable to apply for a loan only for the shortfall or take a larger loan that would cover the entire cost? I do not have any taxable income in India.

 --  M R Ramnathan

Taking a loan is advantageous as the tax concessions are excellent. But since you have no use for these concessions (having no taxable income in India) taking a loan is not advisable unless you can earn more than 12% on your own capital. Currently, your money is in FCNR and NRE accounts that earn much lesser than 12%. However, if you have a little risk appetite and can let the money stay invested for a period of ten years or more, equity-based mutual funds in India could provide a much higher rate.

On the equity-based schemes:

The dividend is tax-free.
There is no dividend distribution tax.
Long-term capital gains are tax-free
Short-term capital gains are taxed at the concessional rate of 10%.

The capital is repatriable if the original investment was made through forex remitted from abroad or through NRE/FCNR accounts.

I started NRI and FCNR accounts in India many years ago when I was a permanent resident in the US. Now I have taken up US citizenship and also applied for OCI. How will my Indian tax consequence change?

 --  M Venkat

The tax impact on your investments in India does not change on your changing your citizenship or option for OCI card. When you change your citizenship, essentially you change from being an NRI to become a Person of Indian Origin. Tax consequences are not different for NRIs and Persons of Indian Origin.




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