Earlier, the crew of an Indian ship was not treated as having left India.

To facilitate NRIs who come to India on vacation or for short trips (business or otherwise) ---

If an Indian citizen or a person of Indian origin who is out of India, comes to visit India, the period of '60 days' is to be replaced by 182 days. This period was 90 days upto AY 89-90 and 150 days upto AY 94-95.

Residents can be of two types ---

1. Resident but not Ordinarily Resident (RNOR) is a person who satisfies one of the following conditions ---
a) he has been a non-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 twenty-nine days or less.

The above definition is a change brought about by Budget-03. Let us examine the implications of this change.

2. A Resident individual who is not an RNOR is a Resident and Ordinarily Resident (ROR).
Now, as per the old definition, "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.

Note that as per the above definition, a person who is NRI for at least 2 successive years preceding his arrival in India (which is the situation in most of the cases) would enjoy the status of RNOR for the next 9 years.

It was the Division Bench of Ahmedabad high court comprising Justice R. K. Abhichandani and Justice Kundan Singh who delivered the controversial judgement when the Income Tax Appellate Tribunal (ITAT) referred the issue of deciding the residential status of the assessee to it.

The Bench observed, "To say that an individual who has been resident of India for eight years out of ten preceding years, should be treated as RNOR in India, does not stand to reason and such contention flies in the face of the clause (a) of section 6(6) which contemplates the period of nine years out of ten preceding years of not being a resident in India before an individual could be said to be NOR in India, which position will entitle such person to claim exemption under section 5(1)(c) of the Act in respect of his foreign income".

An individual who has been a Resident for 8 years (or 7 years or 6 years, or et al) out of the ten previous years is an individual who has 'not been Resident in India' in nine out of the ten previous years. On the other hand, been not resident in India means been an NRI.

The proposed amendment is scary. I am afraid, most of the NRIs will be caught by the requirement of stay in India for 729 days or less during the last 7 years. Those returning after being NRIs for 5 continuous years will become Residents immediately. Others can be RNOR for 2 years at the most.

I also wonder why this amendment is labeled as 'clarificatory in nature'. I hope to God that those who have already returned and are enjoying RNOR status will be continued to be recognised as such.

NRI is not at all liable to tax in respect of income accruing or arising outside India, even if it is remitted to India. He is liable to pay tax only in respect of income received or deemed to be received in India or which accrues or arises or is deemed to accrue or arise in India.

Salary or pension received in India from abroad is taxable in India as income received in India. However, if the pension is received by or on behalf of the employee in a foreign country and later on remitted to India, it will be exempt from tax in India since it is not treated as income received in India.

a) while on a visit abroad by way of payment for services not arising from any business in or anything done in India;
b) from an ROI who is on a visit to India, as honorarium or gift or for services rendered or in settlement of any lawful obligation;
c) by way of honorarium or gift while on a visit abroad;
d) unspent forex acquired by him from an AD for travel abroad.

Now, AP (DIR) Circular 37 dt 1.11.02 allows a person resident in India to open, hold and maintain with an AD a Resident Foreign Currency (Domestic) Account, out of foreign exchange acquired from the sources specified above.

The account will be maintained in the form of current account and shall not bear any interest. Cheque facility is available. There will be no ceiling on the balances held in the account.

The holder of the LoA can issue cheques to third parties for bonafide reasons. He should avoid withdrawal in cash. The amounts withdrawn can be construed as his income for services rendered and would be taxable in his hands. There should an express agreement between the NRI and the holder of LOA in writing that the cash withdrawals are gifts to the LoA holder.

Interest on FCNR is exempt u/s 10(15fa) in the hands of an NRI or RNOR until its maturity.

An NRI who has returned to India permanently is allowed to continue with his all NRI-related bank accounts, including NRE FDs, until their maturity. Thereafter, he will have to convert the NRE and FCNR into repatriable RFC accounts or non-convertible ordinary bank accounts. The interest on NRE would become taxable and it would be from the date of the return, irrespective of the date of information to the bank about the change of the status. The interest on FCNR however, is tax-free if he becomes an RNOR after his return.

He is allowed a reasonable time to inform all the companies and banks about the change in his status wherever he has his investments. What is reasonable time within which one should inform the bank about the change of his status? CBDT and God alone know the answer but both of them do not clarify. I strongly feel that a period of 3 months is a reasonable assumption. This was the period allowed by RIFEE (Returning Indians Foreign Exchange Entitlement scheme) before it was abolished.

PPF Contributions Limited to INR 70,000
Interest earned is completely exempt from tax without any limit. The current rate is 8% p.a. Annual contributions attract tax rebate u/s 88. Most of the NRIs do not have taxable income in India and therefore, the rebate does not mean much to them. Nonetheless, the 8% tax-free interest, by itself, makes PPF worthwhile, especially for NRIs.

An individual can open only one account in his name. Two accounts, even at different places anywhere in India are not permitted. Moreover, Notification GSR 908(E) dt 6.12.00 requires the ceiling on the aggregate contributions to be INR 70,000 to accounts of self and all the minor children of whom he is a guardian (and also HUF and AOP of which he is a member). If one exceeds this and the irregularity comes to the notice of the accounts office, it will return the excess contribution without any interest to the account holder.

I feel that this notification is promulgated without any home work. Normally, the income of a minor is clubbed with that of the parent, having higher income than that of the other. Income of a physically or mentally handicapped minor is separately assessed directly in the hands of the child. Similarly, the clubbing provision does not apply in the case of a minor earning income by way of manual work done by him or an activity involving application of his skill, talent or specialised knowledge and experience. I strongly feel that this ITA provision will overrule the NSO notification in this regard.

As per ITA, Contributions by the assessee to PPF accounts of the spouse and children, major or minor, married or otherwise, male or female, dependent or not, are eligible for the rebate. As a matter of fact, a parent may contribute even in the name of married daughter and still claim rebate. Such contributions are construed as gift. At its maturity, if the account is closed and the funds are reinvested, clubbing provisions becomes applicable in the case of spouse and minor children. If the child is major at this stage, there is no clubbing.

Finally, the clubbing provision exists in the case of contributions made by the husband to his wife's account and vice versa. This notification does not cover the contributions to account of spouse. Is this logical?

This notification is silent about accounts already opened in the name of minor children. There is a well settled principle against interference with vested rights by subsequent legislation unless the legislation itself is made with retrospective effect expressly or by necessary implication.

All said and done, at the current juncture, it is possible to earn around 9%+ tax-free interest from other sources in India. (Read FGJ33).

This account was (note the past tense) useful for availability of foreign exchange to the account holder for some specific predefined purposes. Now, thanks to the process of liberalisation, RFC has outlived its utility. Following are the reasons :

1. Forex is liberally made available to the Residents when it is needed for bonafide reasons.
2. The interest on RFC is quite low.
3. Tax is deducted at source @30% (plus surcharge, wherever applicable) on this interest, though it is tax-free in the hands of RNOrs. Possibly, the reason for application of TDS is to relieve the banks the responsibility of ascertaining whether the account holder is an RNOR or not.
4. Now NRIs are allowed to keep their assets abroad.
5. At the current juncture, it is possible to earn around 9%+ tax-free interest from other sources in India. (Read FGJ33).

RFC has become a useless commodity. It has become more useless, since its interest is tax-free only for RNORs and the definition of RNOR has been changed in such a way that most of the returning NRIs will find that they are not entitled to this privileged status. Others may enjoy this status at the most only for 2 years.

There is no need of any approval from RBI even after the NRI becomes, after his return, a person resident in India.

This general permission will not apply in respect of any asset received after becoming a resident by way of gift or inheritance from abroad. Similarly, the benefit is not available on earnings from employment secured subsequent to the return. If the ex-NRI wishes to retain such assets abroad or liquidate them and deposit the money in an RFC account, he has to apply for permission from RBI.

Any income which is derived from FEA is connoted as 'investment income'. The definition of FEA does not include bank deposits! But mostly, these can be brought under the purview of the provisions through the above mentioned 'deposits with an Indian company'. All the banks, i) of which shares are listed in the stock market (e.g. SBI, HDFC bank, ICICI Bank) ii) banks which continue to be Indian Companies (e.g. United Western Bank Ltd.) and iii) nationalised banks which were originally incorporated as Indian Companies before nationalisation (e.g., Canara Bank, Bank of Baroda) are eligible for the concessions of special provisions.

It is evident that none of the foreign banks, or co-operative banks are eligible for this facility, a point which dawns on the NRIs only when it is too late.

Once the NRI returns to India permanently, he can continue to be covered by these provisions until the FEA are liquidated.

Note that FA03 has exempted all listed equity shares that are acquired on or after 1.3.2003 and sold after a lapse of one year or more from the incidence of capital gains tax.

Similarly, dividends received from companies and MFs are tax-free in the hands of the investor but suffer a distribution tax of 12.5%

The special provisions u/s 115C have to be read in the light of these Budget changes.

Salient Features

The NRI is given the option in respect of investment income to be governed either by the special or the general provisions of the ITA. This option can be exercised by expressing his desire appropriately in the return of income. He is free to change his mind every year and decide for each FY as to whether he wants to opt for the special provisions or not.

If the individual opts for the special provisions, his investment income is taxed at a flat rate of 20%. No deduction under Chapter VI-A of ITA, i.e., u/s Sec. 80L, 80G, etc., is allowed. However, the benefit of tax rebate is available, if his total gross income during the FY is less than INR 5 lakhs. In that case, an NRI can contribute INR 70,000 to PPF, LIC, etc., and further INR 30,000 to instruments of infrastructure companies and save tax amounting to INR 15,000. Also he is free to contribute the entire INR 1,00,000 to infrastructure instead of breaking it up. An NRI is not eligible for the rebate of senior citizens u/s 88B or junior female citizens u/s 88C, but once the individual becomes a Resident, (RNOR is a Resident with special privileges) he can claim the benefits of the rebates.

In case the assessee has other taxable income in addition to investment income, the other income will form a separate block, and taxed at the rates applicable to the residents as per the general provisions.
Return of income need not be filed if tax is deducted at source correctly (Sec. 115G).

In order to avoid delays in remitting the sale proceeds of FEA, Sec. 204(iia) authorises an AD to deduct tax if it is not a short-term gain and remit the balance to the NRI or credit it to his Easy Rupee Account, without the requirement of any NOC from the Department.

Indexation is not available for computing long-term capital gains on FEA. If the long-term capital gains on transfer of FEA are redeposited in FEA within 6 months, the tax on capital gains becomes exempt u/s 115F.
Continuation of Special Provisions

When an NRI becomes a resident assessee, the concession of the Special Provisions continue to apply.

Note that the status of residentship is applicable for income tax purposes, for the entire financial year. In the case of FEMA, in most of the cases, the residentship changes from the day an individual goes abroad or returns to India permanently. Therefore, if you are an NRI, even after you return to India permanently, by virtue of your being outside India for 182 days, the income is free from tax and you can start claiming the benefits of these special provisions from 1st April of the year when you become an RNOR and even after you become a full-fledged resident, unless you have encashed or transferred these deposits. This concession is not applicable after the deposits are liquidated or renewed.

To Be or not to Be
An NRI has the option of selecting either the flat tax rate of 20% or the normal rate of tax. What should he opt for? Well, let us see.

Suppose an NRI's entire income of INR 2,87,000 is investment income from FEA.

If he opts for normal rates,

Gross Income INR 2,96,000
less : u/s 80L INR 12,000
INR 2,84,000
Tax Thereon* INR 59,200
If he opts for the Special Provisions
Tax @20% on INR 2,96,000* INR 59,200

Obviously, it will be advantageous to opt for normal rates if his gross 'investment income' is less than INR 2,96,000 and for special rates if the income is more than that level.

If an Indian citizen leaves India in any year for the purpose of employment, the 60 days in clause 'b' is to be replaced by 182 days.

Those of you who have gone abroad as students, visitors, for medical treatment, etc., are caught by condition 'b' above and do not become NRIs unless your stay in India is less than 60 days. Even if the stay in India is for less than 60 days, one may be caught by the requirement of less than 365 days stay during 4 preceding years.This period of 60 days is replaced with 182 days only if you have gone abroad for the purpose of employment.

Anyone who has gone abroad on deputation of an Indian company cannot be considered to be having gone abroad to take up an employment since he is already employed in India. The position does not change if he gets a stipend abroad in forex either from the Indian company or the foreign company (or both). The position also does not change if he remains abroad for over 182 days for 2 successive years since his stay in India for the preceding 4 years would be over 365 days.

Allowances granted to cover expenses incurred wholly, necessarily and exclusively in performance of office duties are not taxable. It would be illogical to impose any tax on such allowances. Some unscrupulous employers used to take undue advantage of this and dole out allowances far in excess of what was necessary. Therefore, it is logical to tax any savings effected out of this allowance. Such savings obtains the colour and character of salary income.

In a few cases, the individual gets some payment directly from the foreign company, over and above the salary paid in India by the Indian employer. If there is an employer-employee relationship between the individual and the foreign employer, this payment is tax-free in India. It may be taxed in the host country and the amount is dependent upon the tax provisions of the country.

If the said relationship does not exist, the foreign payment is also taxable in India since its nexus is of Indian origin. This is irrespective of the residential status. If an income is taxable in both the countries, it is eligible for the benefit of DTAA between the two countries. Details of the DTAA is available on www.incometaxindia.gov.in.

Now let us turn to the right to hold NRE/FCNR accounts in India. This is governed by FEMA. Apart from the employment criterion, the FEMA definition excludes those who have gone abroad in circumstances that would indicate their intention to stay outside India for an uncertain period.

Again, persons going abroad on deputation may go for an uncertain period. However, the fact that they will come back to their Indian employment is certain. Therefore, they do not fall under this clause. The individual is abroad but his employment is not. Therefore, he is not a Resident Outside India. He is not entitled to open NRE/FCNR accounts which are related with forex. Obviously, a Resident does not normally earn any foreign exchange, and therefore, what will he do with the NRI-related accounts?

However, once his stay outside India is over 182 days in a FY, he will become a Resident Outside India, in the next FY, thanks to the FEMA definition. It is possible for him to open the NRI-related accounts after the first financial year.

If the individual earns any side income by way of moonlighting assignments, the taxability of this income is dependent upon his residential status for income tax. It is tax-free in India if he is an NRI and taxable if he is a Resident.

This is theory. In practice, I am aware that some of the banks allow the deputies (and even students!) to open and operate the NRI-related accounts and this was the situation even during the old FERA regime. They are quite keen to have accounts earning forex and are not too careful. The phrase, 'for or on taking up employment outside India' is interpreted broadly and extrapolated even to deputies. Note that when a person is allowed by a bank to open such accounts, the Department normally assumes that the bank has checked the eligibility. You need not worry much for having breached the law. The bank (AD) is more responsible than you.

It is also necessary to inform all the companies of whose shares you hold, and UTI/MFs about change in your status. In practice, most of the NRIs do not follow these rules and do not face any problems because the regulatory mechanism of the income tax department is not yet in place. Obviously, a few are apprehended and I hope you are not one of them. Realise that you do not gain anything by not following the rules.

When you inform a company about your changed status, it will inform the RBI, if necessary, to enable it to keep a track of the percentage investment of individual NRIs and also all the NRIs put together in a company. There are some specified limits, beyond which, the investments are not permitted.

You will also start filing your tax returns in your new NRI status. True, if the Indian income is below the taxable threshold, there is no need to file the returns but it is prudent to do so for maintaining the continuity.

Even after you become an NRI, you are free to deal with all your investments and assets you held prior to becoming an NRI any which way you desire. The only restriction is that the original corpus is non-repatriable. Fortunately, income arising out of these assets is repatriable if you have paid proper taxes thereon.

It would be advisable to give a power of attorney or letter of authority to anyone of your choice to operate your NRE bank account. Withdrawals can be effected from this account for local disbursements, investment in units of UTI, some MF schemes, government securities etc. In the case of NRO or NRSR, you can have a Resident as a joint holder. The maturity proceeds of PPF, KVPs, NSCs, etc., can be credited freely to your NRO account by the joint holder.

Your PPF will have to be run until its maturity. In the unlikely event of your Indian income becoming taxable, you can use it to save taxes. On the other hand, if your Indian income is not likely to come into the tax net, even in distant future, you need not contribute even the INR 500 and let the account become discontinued. I strongly recommend you to keep it alive so that you will be entitled to make the partial withdrawals and earn higher interest from other sources in place of PPF.

Give some thought to surrendering your LIC policies unless the maturity date is in the near future. If you are going abroad permanently along with your family, repatriability of the payment made by LIC on your demise may be problematic if the family decides to continue to stay abroad.

Since your Indian income would have gone down substantially, you will be in a good position to withdraw from your NSS account. If the total income inclusive of NSS withdrawals is less than the minimum chargeable to tax a resident individual can file Form 15-I in duplicate with the post office declaring that the tax payable for the year is nil and therefore, no tax should be deducted at source. For some strange reasons, once you become an NRI, you are not allowed the privilege of filing Form 15-I. If however, the income crosses the minimum level because of NSS withdrawals, you may use your PPF account to bring the tax liability down to nil level.

Residents, on return from a foreign trip are required to surrender unspent foreign exchange within 90 days and travellers' cheques within 180 days of return. However, they are permitted to hold foreign currency up to US$ 2,000 or its equivalent provided the forex was acquired as permitted.

On receiving such an NOC or accountant's certificate, the AD may allow the proceeds to be repatriated or credited to the NRE/FCNR account of the NRI (which is equivalent to repatriation).

Incidentally, the NRIs enjoy concessional rate of 10% on long-term capital gains earned on sale of shares and securities. They also enjoy protection against exchange risk.

In the case of equities and units, the Residents can opt for 10% tax without indexation or 20% with indexation but not the NRIs.

Then again, it is true that the NRIs stand protected against the slippage of the rupee but what if it stops slipping? What if there is an appreciation? They should have also been offered the privilege of opting between 10% and 20%.

This 'at par with NRIs' business appears to have turned the tables.

Only the following are considered as 'assets' for wealth tax :

- Any building or land appurtenant thereto used as residential, commercial, guest or a farm house situated within 25 kilometers from the local limit of any municipality, but does not include ---

1. Residential house of a company allotted to its employee or a whole-time director with a gross annual salary of under INR 5 lakhs.

2. Houses forming part of stock-in-trade.

3. Houses used for his business or profession.

4. Residential property let out for minimum of 300 days in a year.

5. Commercial establishments and complexes.

6. One house or part of a house or a plot of land not exceeding 500 square meters, belonging to an individual or an HUF.

- Motor cars, yachts, boats, aircrafts and also jewellery, bullion, furniture, utensils or any other article made wholly or partly of precious metals other than those used in the business of running them on hire or as stock-in-trade used for commercial purposes.

- Cash in hand in excess of INR 50,000 of individuals and HUFs and in other cases, amounts not recorded in the books of accounts.

- Urban land situated within the jurisdiction of municipality or cantonment board with a population of not less than 10,000 according to the preceding census or within 8 kilometers or such local limits. The related office of Mamletdar/Gram Panchayat can supply the details through their sat-bara (7-by-12) record of the land. However, the following types of lands are exempt :

1. On which construction is not permissible under any law.
2. Unused land for industrial purposes held for less than 2 years.
3. Held as stock-in-trade for 10 years.
4. Occupied by a building constructed with the approval of an appropriate authority.
5. Net Wealth is the aggregate value on the valuation date of all these assets in excess of the debts outstanding on such assets.

The minimum threshold of wealth tax is as high as INR 15 lakhs. Above that limit, the tax is as low as 1%.

It is better to prepare a gift deed and get it registered (with related plus stamp duty) but such a precaution is normally needed in the case of high-value gifts, particularly related with real estate.

However, take note of the fact that the Department has a right to inquire into the genuineness of the gift to ensure that it is not a payment made for any havala or smuggling transaction.

Before the GTA was abolished, aggregate gifts over INR 30,000 in a financial year was taxable at the penal rate of 30% and therefore, it was a wise strategy to give gift up to that limit and build up a corpus for the children (and also spouse). When the child needed a large sum for some specific need such as education or marriage or start up of a business or profession, the money would be readily available. This strategy avoided the need to give a gift of a large sum when needed. Now that you can give need-based gifts as and when it arises, there is no need to build a corpus for your child and take the risk of the child running away (and worst, your wife eloping away) with the money.

All the income earned by a minor children is taxed in the hands of the parent who has an Indian income more than that of the other, unless the child has a physical or mental handicap or the child earns an income by virtue of its special skills or knowledge. There is a paltry exemption of INR 1,500 per year per child (more, the merrier).

In the case of the spouse, the income on gifted corpus is clubbable. Once you have paid the tax on this first-stage interest, it becomes her own property. Any income thereon is not clubbed in the hands of the donor. It is taxed in the hands of the donee.

An ROI who has been permitted by the RBI to establish a branch or office or place of business in India (excluding a liaison office) can acquire a property which is necessary for or incidental to the activity. A declaration, in prescribed form (IPI), is required to be filed with the RBI, within 90 days of the acquisition of the property.

An NRI does not require any permission to acquire any immovable property in India or transfer any property in India to a Resident citizen or an ROI.

A PIO has some restrictions. He does not require any permission to ---

1. Purchase a property out of forex.
2. Acquire a property by way of gift from a Resident or from an ROI.
3. Acquire a property by way of inheritance from an ROI who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or FEMA or from a Resident.
4. Sell any immovable property in India to a Resident.
5. Gift or sell agricultural property to a Resident who is a citizen of India.
6. Gift or sell a residential or commercial property in India to a Resident or an ROI.

Nonetheless, there is some slender advantage in giving a gift. The income on income is not clubbable. In other words, once you have paid tax on the income of your wife (through your own funds), it becomes her own asset. Any income earned on this asset is not required to be clubbed in your hands.

All situations not falling in the category of the general permissions as stated above, including requests for acquisition of agricultural land by any ROI or a foreign national may be made to The Chief General Manager, Reserve Bank of India, Central Office, Exchange Control Department, Foreign Investment Division (III), Mumbai 400 001.

Repatriation of Income : ROIs can freely rent out their immovable property, whether purchased through application of forex or otherwise, without seeking any permission from the RBI. The rental income being a current account transaction is repatriable outside India, only if proper tax is paid on the same. The AD is empowered to arrange for such repatriation.

Salaries to the employees deputed by foreign companies to their Indian offices may be directly paid abroad to the extent of 75% of the net salary (after-tax on full salary) and balance may be paid in India. [Notification No. GSR 103(E) dt 22.1.01].

If the entire salary is paid in India, ADs are permitted to allow such an individual to make remittances for family maintenance, etc., up to 75% of his income or net salary (i.e., after deduction of contribution to PF, etc., and taxes) provided he makes an application (Form-A2) together with a statement (Form-EFT in duplicate) and 'No Objection Certificate' from the income-tax authorities indicating the remittable amount. Even higher remittances may be allowed if the employee is in receipt of perquisites such as free housing, conveyance and medical facilities and his family (wife and children) is resident outside India.

When the foreign national eventually retires and leaves India, all his current assets such as savings from salary, dividend, interest, commission, provident fund balance, sale proceeds of personal effects, etc., can be repatriated in full. Same rule is applicable to pension from India received in future. In addition, he will also be allowed to repatriate his Indian assets of a capital nature such as sale proceeds of investments, up to a limit of INR 10 lakhs at the time of retirement and upto INR 5 lakhs annually thereafter. For this purpose, the entire family will be considered as a single unit. However, RBI permission for the repatriation is necessary (Form-RFN). Same facility is available to foreign-born widows of Indian nationals who desire to go back (Form-EMG).

Strangely, it appears that such a person is not allowed to have an FCNR account in India since he has become ipso-facto, a Resident in India.

So what then are the real benefits of the PIO card? Why should anyone go for it instead of much cheaper long-term multiple entry visas? Can one still not freely hold and sell property in India without PIO cards? Can one not inherit ancestral property and later dispose it, if he so wished? Can this money not be repatriated totally or partly? Can one not live in India indefinitely, say upon retirement? What about children applying for PIO cards?

The PIO card has become more useless after the advent of FEMA which has many more liberalised provisions.

All this is also applicable to stock options offered by a foreign parent company to employees of its Indian subsidiary even when the transfer takes place 'on behalf of' an employee.

The right to accept is understandably not transferable. As and when you sell the shares or transfer them (to your parents through the gift channel) you will be liable to the tax on capital gains. Nomination is a different story. The shares would be transferred in the name of your parents after your death. This transfer does not attract any tax (or stamp duty for the transfer).

God! quite complicated indeed!! In the first place, why does LIC require a certificate from the bank when it has all the necessary details with it? Then again, why should you need any special permission from RBI every time you receive the survival benefit, leave alone the maturity proceeds.

In the case of the death of the policy holder, the proceeds are not repatriable if the nominee happens to be a Resident. This is understandable. But an NRI nominee has to go through the same process as mentioned above and obtain RBI permission. I feel that this is unreasonable. The bereaved nominee may not even know the existence of such a policy and the bank details.

2. The current exchange rate (as on 20.3.03) is INR 47.79 per US$. Now, INR 47.79 deposited @6.25% will grow to INR 57.3223 in 3 years and US$1 grows to US$ 1.0650 @2.12% during the same period. The conclusion is, if you feel that the rupee will quote at higher than INR 53.83 (= 57.3223 / 1.0650) after 3 years, go for FCNR; otherwise, NRE is a good parking place.

This compares NRE with FCNR. FCNR provides protection against exchange risk whereas NRE does not. If you keep the money abroad, you will be lucky to earn even 2.12%. Remember you are interested in safety of the highest order.

It is your money and it is you who have to make a choice. Forget, history. It may not repeat itself. Your gut feeling is important.

This compares NRE with FCNR. You may as well invest in non-repatriable avenues and earn higher returns.

A careful examination of the amount of forex available for specific purposes will surely make one realise that there is no need to sacrifice even a small portion of income on investible funds just for maintaining its repatriability.

The following is a list of the limits up to which forex is made available to Residents for various purposes:

Throughout the last year, funds held by NRIs/PIOs in their NRO Accounts were allowed to be converted in forex with specified ceilings and taken abroad for the following purposes :


Education up to US$ 30,000 per academic year.
Medical Expenses up to US$ 100,000.
Sale Proceeds of immovable property, held for a period of 10 years, up to US$ 100,000 per calendar year.
Remittance of assets of foreign nationals, including retired employees/widows of Indian citizens resident outside India and assets in India acquired by NRIs/PIOs by way of inheritance/legacy up to US$ 100,00
AP (DIR) Circular 67 dt 13.1.03 has removed the present dispensation of permitting different amounts for different purposes and has enhanced the overall limit to US$ 1 million per calendar year. Accordingly, it will be in order for ADs to allow remittance/s up to US$ 1 million, out of balances held in NRO accounts/sale proceeds of assets, on production of an undertaking and certificate by a person making the remittance.

The existing prohibition regarding repatriation of assets to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan shall continue.

This relaxation shall be effective up to 30.6.03 and will be reviewed thereafter.

Miscellaneous Concessions

FERM (Possession and Retention of Foreign Currency) allows a Resident to possess foreign coins without any limit. It has laid down a limit of US$ 2,000 on retention of foreign currency notes, bank notes and foreign currency travellers' cheques provided these were acquired by him for some permitted use.

Business Travel Quota : US$ 10,000.

Person going abroad for employment can draw forex up to US$ 5,000.

Residents can remit up to US$ 5,000 per year per remitter for maintenance of close relative.

Persons immigrating abroad can draw up to US$ 5,000 per person

ADs may release an amount up to US$ 500 or its equivalent for all miscellaneous purposes provided these relate to permissible transactions.

A Resident can remit up to US$ 5,000 in cash in any one year as a gift to a person residing outside India or as donation to a charitable, educational, religious or cultural organisation outside India.

A Resident may buy from any post office any foreign exchange in the form of postal orders or money orders.

has retired from an employment in India, or
has inherited the assets from an ROI who held assets in India when he was a Resident or inherited from a Resident, or
is a widow ROI and has inherited assets of her deceased husband who was an Indian citizen resident in India may remit an amount, not exceeding US$ 1 lakhs per calendar year, on production of ---

Documentary evidence in support of acquisition of assets by the remitter.

A tax clearance/NOC from the income tax authority for the remittance or a certificate from an accountant declaring that proper tax has been paid or arranged to be paid.

For arriving at annual ceiling of remittance, the funds representing sale proceeds of shares and immovable property owned or held by the citizen of foreign state on repatriation basis in accordance with the FEMR (Acquisition and transfer of immovable property in India) and FEMR (Transfer of Indian security by a person resident outside India) shall not be included.

It is necessary to make the remittance of all installments through the same AD.

Had come to India for studies/training and has completed it, may remit the balance available in his account, provided such balance represents funds derived out of remittances received from abroad through normal banking channels or rupee proceeds of FE brought by such person and sold to an AD or out of stipend/scholarship received from the government or any organisation in India. An AD may effect such remittances.

Foreign nationals on temporary visit are allowed to take back the unspent amount against Encashment Certificate or Bank Certificate in Form-ECF and Form-BCI respectively and forex tendered at the customs counter while going abroad.

Take care. Both the ECF and BCI are valid for 3 months for reconversion of rupees into forex in all the cases, temporary visits or otherwise.

No rupee loans can be granted to foreign nationals or liaison offices of foreign companies except for personal purposes such as purchase of household articles up to a maximum of INR 5 lakhs on the total borrowings of the depositor and his dependents from all the banks.

Nevertheless, it is prudent to file the returns to ensure continuity after the indiv