avoidance of double taxation agreement

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CA Sanat Pyne (Querist)
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27 December 2007 My client has indian & foreign income .he wants to repatriate total income from usa.
He has to pay 6% as federal income tax,5% as income tax,5% as medicare tax and 5% as other tax
His foreign income is $240000 .Please tell me what is the procedure to bring the money to india .
His residential status is NRI.

R.V.RAO

R.V.RAO (Expert)
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27 December 2007 SIR,
I DO NOT SEE ANY PROBLEM IN REMITTING MONIES TO INDIA, AFTER PAYING ALL TAXES DUE IN USA.
YOUR CLIENT CAN BRING ALL MONEIES OR ASSETS TO INDIA. BUT THE FOLLOWING INFORMATION IS OF USE AS TO TAXATION OF THE SAME AS PER INDIAN TAX LAWS.
BUT AS SRI SRINIVASARAGHAVAN STATED ABOVE,PL. ASCERTAIN THE CURRENT RESIDENTIAL STATUS OF YOUR CLIENT BASED ON WHICH ALL THE TAX ISSUES WILL BE DECIDED
AND RESOLVED.
A) OVERSEAS ASSETS
Foreign exchange / Overseas assets acquired, held or owned by an NRI while he was abroad can be continued to be so held and owned even after the NRI's return to India for permanent settlement.
If required, such assets can be repatriated to India.
B) INDIAN ASSETS
I. BANK ACCOUNTS. (In India)
Returning NRIs, upon his return to India, is required to redesignate all his banking accounts as Resident Accounts.
Resident Foreign Currency Account (RFC Account)
A Returning NRIs, on becoming residents are free to open and maintain such accounts with authorised dealers.
The funds held in RFC accounts are fully repatriable and also denominated in Forex.
Also, the Interest on RFC Account will be exempt from the Income Tax in the hands of person whose status under the Income Tax Act is either NRI (Non-Resident) or RNOR (Resident but Not Ordinary Resident).
II. SHARES , SECURITIES ETC (In India).

Returning NRI is required to inform all the companies, funds etc. as regarding change of status from Non-resident to Resident.

INCOME TAX

Under the Indian Tax Laws overseas income is liable to Tax in India only if the assessee is an ordinarily resident.
A returning Indian who has been a Non Resident for consecutive 9 years or more, then for 2 successive years he shall be a resident but not ordinarily resident (RNOR) AND
All income earned in India shall be taxable in India.
Income which accrues or arise outside India will not be liable to tax in India unless it is derived from business controlled or profession set up in India.
Interest on Non Resident External Account (NRE) and Foreign Currency Non-Resident Account (FCNR) [Section 10(4)(ii)] is exempt in the hands of a person who is a Person Resident outside India as per section 2(w) of FEMA, 1999 and defination of 'Non-Resident' under Income Tax is not relevant for this sub section.
Income in respect of Interest, premium on redemption, other payment on notified securities, bonds, certificates and deposits are exempt u/s 10(15)(i) which covers:
Interest on India millennium Deposits(IMDs)/Resurgent India Bonds(RIBs) issued by State Bank Of India (The exemption from tax continues even if the NRI becomes a resident and is also available to the nominee or the survivor of the NRI or to a donee to whom the bonds have been gifted by the NRI.).
Interest on NRNR Rupee Deposits Scheme. The exemption is available to Non Resident only and therefore, interest on NRNR deposit is not exempt from income tax when a person becomes Resident but Not Ordinary Resident or Ordinary resident.

Interest paid by schedule banks to Non-resident or to a person who is not ordinarily resident on RBI approved foreign currency deposits (i.e. RFC deposits) is exempt (S. 10 (15) (iv)(fa)). The exemption, in respect of RFC account, continues till such time as the account holder continues to be "Resident but Not Ordinarily Resident"
NRIs have been offered a separate concessional tax regime in respect of certain types of income under Chapter XIIA comprising section 115C to 115I. As per section 115E, concessional tax of 20 % is available in respect of investment income and 10% in respect of long term capital gains from the specified assets which are acquired out of convertible foreign exchange. The benefit of concessional tax treatment under chapter XIIA continues even after NRI becomes a resident.
WEALTH TAX

Assets located outside India of Non-resident(NRI) /Resident but Not Ordinary Resident(RNOR) are exempt from Wealth Tax.
If NRI return to India with the intention of permanently residing in India, the assets brought by him and within one year after his return, will be exempt. This exemption is available to NRI for a period of seven years after his return to India. [sec. 5(1)(v)]

source:www.nritaxservices.com

PLEASE VISIT THE ABOVE SITE. IT HAS LOT OF USEFUL INFORMATION FOR RETURNING NRIs/NRIs ALSO.
R.V.RAO