NRI remittances to India
This query is : Resolved
02 April 2009
An NRI as per Income tax act is remitting money from salary earned abroad to his ordinaly SB account maintained in India
Is it necessasary that he maintain an Non resident account in the bank in India in order to claim his remittances as not taxable? Kindly quote circulars /references/sections if any.
Thanks ,
Anil.
Is it necessasary that he maintain an Non resident account in the bank in India in order to claim his remittances as not taxable? Kindly quote circulars /references/sections if any.
Thanks ,
Anil.
02 April 2009
Not required to maintain nri account.
Every bank will give FIRC which is called as foreign inward remittance certificate and in that it should be mentioned the money is proceeds of his salary earned outside india.
NRI account has to be maintained if he wants to maintain foreign currency account.
Not required to maintain nri account.
Every bank will give FIRC which is called as foreign inward remittance certificate and in that it should be mentioned the money is proceeds of his salary earned outside india.
NRI account has to be maintained if he wants to maintain foreign currency account.
02 April 2009
Thanks for your reply sir.
I am aware of companies in Indian collecting FIRC certificates.
Do individuals too should collect FIRC? What is the purpose of collecting FIRC? What should the individual do with them?
Can you please quote any section references?
Thanks.
Anil.
I am aware of companies in Indian collecting FIRC certificates.
Do individuals too should collect FIRC? What is the purpose of collecting FIRC? What should the individual do with them?
Can you please quote any section references?
Thanks.
Anil.
03 August 2024
When an NRI (Non-Resident Indian) remits money from salary earned abroad to an ordinary savings bank (SB) account in India, it's important to follow certain guidelines and maintain proper documentation to ensure that the remittances are handled correctly under the applicable laws.
### **1. NRI Remittance and Account Types**
#### **A. Necessity of NRE/NRO Accounts**
- **Non-Resident External (NRE) Account:** This account is designed for NRIs to deposit their foreign earnings in India. Interest earned on NRE accounts is tax-free in India, and the principal and interest are repatriable.
- **Non-Resident Ordinary (NRO) Account:** This account is used to manage income earned in India, such as rent or dividends. Interest earned on NRO accounts is taxable in India.
**For tax purposes:**
- **NRE Account:** If an NRI has a valid NRE account, it is preferable to deposit foreign earnings into this account. Interest earned on this account is exempt from Indian income tax.
- **Ordinary SB Account:** While it is not illegal to deposit foreign earnings into an ordinary SB account, this may not be the most efficient choice for tax purposes. It may lead to complications in proving the source of funds and their tax-exempt status.
#### **B. Maintaining NRE/NRO Accounts**
- **Not Mandatory for All Cases:** It is not strictly necessary to maintain an NRE account if you have an ordinary SB account, but having an NRE account is advisable for better management of foreign income and to avoid potential issues with tax and repatriation.
### **2. FIRC (Foreign Inward Remittance Certificate)**
#### **A. Purpose and Use**
- **FIRC Definition:** A Foreign Inward Remittance Certificate (FIRC) is a document issued by banks confirming the receipt of foreign currency into an Indian bank account.
- **Purpose:** The FIRC serves as proof that the funds received are foreign income and can be used to claim tax exemptions or repatriation benefits.
- **Individuals’ Requirement:** While it is typically companies that collect FIRCs for verification, individuals should also obtain and keep FIRCs if they are receiving foreign remittances. This helps in proving the source and nature of the funds, particularly for tax purposes.
#### **B. Documentation**
- **Collecting FIRCs:** Individuals should request FIRCs from their bank whenever they receive foreign remittances. This helps in:
- Demonstrating the nature of the remittance if questioned by tax authorities.
- Supporting claims of tax exemptions or repatriation benefits.
- **Usage:** Keep FIRCs for record-keeping and provide them if required for tax assessments or to show proof of the origin of the funds.
### **3. Relevant Sections and References**
- **Income Tax Act:** Section 10(4) of the Income Tax Act, 1961, provides exemptions for interest on NRE accounts.
- **FEMA Regulations:** FEMA (Foreign Exchange Management Act) governs foreign remittances and requires proper documentation of foreign income.
- **RBI Guidelines:** The RBI provides guidelines on the operation of NRE and NRO accounts. Refer to relevant RBI circulars for detailed rules on maintaining these accounts.
#### **Relevant Circulars:**
- **RBI Circular No. 14/2010:** Provides guidelines on the operation of NRE accounts and repatriation.
- **Income Tax Circular:** Circular No. 19/2017 explains the tax treatment of income from NRE accounts.
### **Summary**
While it is not legally mandatory for an NRI to maintain an NRE account if they have an ordinary SB account, doing so is advisable to ensure that foreign earnings are managed correctly and are tax-exempt. It is essential to collect FIRCs for foreign remittances to substantiate the source of funds and support claims for tax exemptions. For the latest regulations and guidelines, consult relevant RBI circulars and Income Tax Act provisions.
### **1. NRI Remittance and Account Types**
#### **A. Necessity of NRE/NRO Accounts**
- **Non-Resident External (NRE) Account:** This account is designed for NRIs to deposit their foreign earnings in India. Interest earned on NRE accounts is tax-free in India, and the principal and interest are repatriable.
- **Non-Resident Ordinary (NRO) Account:** This account is used to manage income earned in India, such as rent or dividends. Interest earned on NRO accounts is taxable in India.
**For tax purposes:**
- **NRE Account:** If an NRI has a valid NRE account, it is preferable to deposit foreign earnings into this account. Interest earned on this account is exempt from Indian income tax.
- **Ordinary SB Account:** While it is not illegal to deposit foreign earnings into an ordinary SB account, this may not be the most efficient choice for tax purposes. It may lead to complications in proving the source of funds and their tax-exempt status.
#### **B. Maintaining NRE/NRO Accounts**
- **Not Mandatory for All Cases:** It is not strictly necessary to maintain an NRE account if you have an ordinary SB account, but having an NRE account is advisable for better management of foreign income and to avoid potential issues with tax and repatriation.
### **2. FIRC (Foreign Inward Remittance Certificate)**
#### **A. Purpose and Use**
- **FIRC Definition:** A Foreign Inward Remittance Certificate (FIRC) is a document issued by banks confirming the receipt of foreign currency into an Indian bank account.
- **Purpose:** The FIRC serves as proof that the funds received are foreign income and can be used to claim tax exemptions or repatriation benefits.
- **Individuals’ Requirement:** While it is typically companies that collect FIRCs for verification, individuals should also obtain and keep FIRCs if they are receiving foreign remittances. This helps in proving the source and nature of the funds, particularly for tax purposes.
#### **B. Documentation**
- **Collecting FIRCs:** Individuals should request FIRCs from their bank whenever they receive foreign remittances. This helps in:
- Demonstrating the nature of the remittance if questioned by tax authorities.
- Supporting claims of tax exemptions or repatriation benefits.
- **Usage:** Keep FIRCs for record-keeping and provide them if required for tax assessments or to show proof of the origin of the funds.
### **3. Relevant Sections and References**
- **Income Tax Act:** Section 10(4) of the Income Tax Act, 1961, provides exemptions for interest on NRE accounts.
- **FEMA Regulations:** FEMA (Foreign Exchange Management Act) governs foreign remittances and requires proper documentation of foreign income.
- **RBI Guidelines:** The RBI provides guidelines on the operation of NRE and NRO accounts. Refer to relevant RBI circulars for detailed rules on maintaining these accounts.
#### **Relevant Circulars:**
- **RBI Circular No. 14/2010:** Provides guidelines on the operation of NRE accounts and repatriation.
- **Income Tax Circular:** Circular No. 19/2017 explains the tax treatment of income from NRE accounts.
### **Summary**
While it is not legally mandatory for an NRI to maintain an NRE account if they have an ordinary SB account, doing so is advisable to ensure that foreign earnings are managed correctly and are tax-exempt. It is essential to collect FIRCs for foreign remittances to substantiate the source of funds and support claims for tax exemptions. For the latest regulations and guidelines, consult relevant RBI circulars and Income Tax Act provisions.
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