A N Shanbhag, the highly respected investment guru, and his son Sandeep Shanbhag, answer your questions on NRI investment.
A new Rediff India Abroad feature:
My wife (64) and I (67) are US citizens with PIO cards. We are returning to India on our retirement, next year. We own residential properties in Bangalore and Chennai, where we plan to settle down with our children. Here are some issues that need clarification and advice:
a) We shall have our Social Security payments remitted to our, say, Citibank dollar account. This will be our main source of income, other than our savings. Will this be subject to income tax?
b) Depending upon where we live, may rent one of the above properties. Will the rental income be subject to tax; if so, at what rate?
c) Are we entitled to benefits under Transfer of Residence Rules -- such as used home appliances like fridge, washing machines, TVs, VCR, computers, cars etc? What are the taxes, if any? We have never availed TR facility before.
d) Are we allowed to take paid/unpaid employment?
e) Are we allowed to invest in business, property or stock market (IPOs) etc? If so, under what category, as NRI or Resident Indian?
f) How will our Rupee (NRO) a/c, currently operative because of taxed rental income be treated? Can we continue to maintain this, and invest from this account?
g) We have NRE and separate foreign ($) accounts. What will be their status?
h) Is there any police/local authorities registration formalities involved? My understanding is that a PIO card gives all benefits except voting and holding of public office.
i) Since as NRIs we received RBI permission to buy and sell shares under portfolio management scheme, do we need to intimate to them the changed status as US citizens and PIO card holders?
We would like to follow the law, and don't want to claim ignorance.
-- K P Eswara
a) Social Security Benefits will not be taxed in India as per the DTAA between the USA and India.
b) Rental income is definitely taxable, and the rate will depend upon your other income. In other words, income tax is to be paid at the slab rate applicable to you. Depending upon your income slab, you will have to pay tax.
c) Yes, you are entitled to the TR benefit. TR passengers are allowed additional allowance, besides the general allowance of Rs 12,000 on personal and household effects up to Rs 5 lakh (Rs 500,000), provided such articles have been in the use of the passenger for at least one year, or were purchased by him from duty-free shops. The customs duty is 30 per cent on these goods.
TR is not available to each member of the family if they were having a common establishment and staying together. Not more than one unit of each item can be imported by a family.
d) Yes, you can take employment in India.
e) You will be allowed to invest in business, property or the stock market whether you are an NRI or a Resident.
f) NRO account will have to be redesignated as a Resident account.
g) An NRI who has returned to India permanently is allowed a reasonable time to inform all banks about the change in his status, wherever he
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