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June 27, 2000

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"Can I maintain my foreign bank account on returning?"

The Rediff Money Channel presents everything you wanted to know about tax issues, but didn't know whom to ask.

What is the position of the law for a resident Indian gone abroad on a work permit holding bank accounts abroad? Can the bank accounts remain open after he returns? Does the same hold for international credit cards. The bank account contains income earned while abroad, which has been taxed at source and covered under the Double Tax Avoidance Law between India and that country.

Sashi Shekar

Persons who have lived abroad for a continous period of one year are allowed to maintain their bank accounts and investments abroad provided this funds/assets were lawfully acquired by them out of foreign exchange earned outside India. You can also hold international credit cards.

I am employed by an Indian company. During my travels, I was paid an allowance in dollars. According to the definition on rediff website, I am an NRI. According to my CA I am not ! This is how I would answer the questions on the calculator.

Are you an Indian citizen who left India during the previous year for the purpose of employment or as a member of crew of an Indian ship? No.
Are you an Indian citizen or a person of Indian origin (who is abroad) who came to India on a visit during the previous year? Yes.
Were you present in India for 182 days last year? No

I saved about $5,000 during 1998-99 and $4,000 during 1999-00. Can I open NRI accounts in India with this amounts and does this become taxable? If I should have paid tax on these, how do regularise these amounts and pay tax on them if necessary? Can I get any tax benefits on these savings and if so how much? Do I have to pay tax on the allowance amount I spent abroad?

Suryanarayan Ganesh

Based on the information provided by you, we presume that you have been travelling abroad on business visa and not on employment visa. Taking this as the starting point, we observe that you would need to answer "No" against the question.
"Are you an Indian citizen or a person of Indian origin (who is abroad) who came to India on a visit during the previous year?" This is because you are not a person staying abroad and coming to India merely on a visit but you basically operate from India. Hence, in your case you would become a non-resident if your answer were "No" for the question "Were you present in India for 60 days or more and 365 days or more during 4 years immediately preceding the previous year?"

You can open an NRE account in case you are an NRI and accordingly the income earned outside India for services rendered vide contract of employment with any foreign employer would be exempt from tax in India. In case you are a resident in India then your global income (including allowance) would be taxable in India. However, you would be eligible for deduction u/s 80RRA of the I.T Act, 1961. Such deduction is available only to technical persons (specifically mentioned in the above referred section) and only in case such income earned outside India is brought back into India within six months of return to India.

I am on my business visa and will be residing in Paris for three months. Am I eligible for an NRI account? How do I transfer the money in hand to my parents in India?

S Mohan Kumar

Only NRI's are eligible to open NRE accounts. As you are not an NRI (based on your question), you will not be eligible to open a NRE account. You could remit the money from outside India to your bank account or your parents bank account through regular banking channels.

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