S2NRI

As the Foreign Exchange Management Act (FEMA) has approved migrants with Indian passports to invest in the Indian Stock Market, their wish to invest in the Indian securities has become more prominent. But, being a deficient of NRI investment knowledge, they wonder how to get through the operational paperwork and procedures to sell and buy these securities. However, profit making is the primary goal that often pushes them to grab this investment opportunity.

So, here are a few tips that ensure non-residents to invest in the Indian Stock Market:

1. Open a PIS account: Also called the Portfolio Investment Scheme, the PIS allows Indian diaspora in the foreign to acquire shares or convertible debentures from the stock market. For this purpose, they should have a bank account from a nominated branch. If they have an NRO account (Non-Resident Ordinary), the PIS account cannot be opened. It is so because this account, itself, is treated as an investment.
2. Procedure for a PIS account: The aspiring NRIs have to open an NRE or Non-resident Rupee account with an RBI affiliated bank in India. With whomsoever you deal through, that broker should be registered with SEBI. Subsequently, the bank will issue a PIS permission letter to initiate NRE investment. Handover this letter to the PIS broker. Upon this formality, the migrant can open a DMAT/ Trading Account for investing with the broker.
3. Put investment in PIS: As this account is meant for investment, the non-residents can hold the investment amount. If they buy some equities, the amount will directly deduct from this account. And, the sale proceeds will be credited.
4. Trading & DMAT account: This account enables sale and purchase of securities in the secondary market. On the flip side, the DMAT account initiates online transactions of shares. When they trade, the shares are automatically credited to or debited from this account.
5. Documentation: As an NRE account is required to trade in stock with, the Indian diaspora in abroad should have these documents for KYC that must be duly attested by the Indian embassy:

• Self- attested photograph
• Photocopy of the PAN card
• A cancelled cheque from an RBI affiliated bank
• PIS permission letter
• Foreign address proof
• Indian address proof
• Photocopy of valid passport and valid visa

6. Deploy Mandate Authority: A “Mandate Holder” is an authority that is deployed to locally operate the NRE bank account on behalf of the NRI investor. For it, the non-residents should fill up and attest an “Appointment of Mandate Holder” form. The intended person can procure it from the bank. Later, pass through the KYC by enclosing all the aforementioned documents together with the specimen signature of the mandate holder on the form.

Also, the mandate holder would sign it. Upon verification, the account will be active. Then, the mandate holder can withdraw & deposit cheques, transact and even uses an ATM card on behalf of the migrant.

7. Power of Attorney (PoA): It determines the temporary deliverance of the power to act on behalf of the owner freely.  Beforehand, the owner must execute the POA on the prescribed stamp paper while clearly stating the purpose and aim of this POA. Thereafter, its holder can make and redeem investment, besides handling the necessary paperwork.
8. Digital Investment: It’s a blessing to live in the digital era, where NRI investors can directly carry out all sale and purchase transactions without needing any POA. Digitally, it’s a frictionless process to trade through portals.

However, there are many websites and portals to trade through brokers for NRI investors. Upon registering with them, they can easily open their trading account with those brokers. Even, the maximum limit could be set for the mandate holders to debit certain amount.

But, the investment can be denied if the PoA is not notarized and the KYC is not done prior. Take time zones into account while making an investment using the trading websites.

Guidelines:

• Prefer delivery based transaction.
• Avoid intraday transaction for NRIs.
• Don’t invest in the prohibited sectors.
• Reconcile the DMAT account balance with the bank balance.
• The bank will deduct PIS account maintenance charges in the name of PIS AMC fee, PIS Issuance fee and PIS reporting charges.

Should an NRI deduct TDS on rent if his taxable income?

Yes, he has to pay because it is an income that he receives against his accommodation being on rent. Now, the question arises that should every NRI pay.

Here comes the challenge! The Income Tax of India states that the rental income contributes to the capital income of an immigrant from India. Hence, it is taxable. But, it is noteworthy that only those non-residents of India who have more than 2.5 lakh rental income, that is taxable for tenants to be deducted as a TDS on rent.

How can you compute taxable rental Income? 

Here is the prescribed method of computing taxable rental income under the income tax law:

Simply put, it is:

Net Annual Value= Gross Annual Value-Municipal Taxes

Upon computing this value, there occurs a standard deduction of 30% of the net annual value and interest on the housing loan. This deduction evaluates the taxable rental income. Also, the gross annual value should be the higher of these:

1. The amount at which the NRI’s property might reasonably be expected to be let out (It is the property  that the owner hands over its occupancy or usage to another person)
2. The rental income or receivable rental income

In short, the gross annual value compares what actual rental income you have received with the expected rental income of the property.

There is another aspect, i. e. the housing loan, which should be considered parallel to the aforementioned computation. If the non-resident repays the principal amount against the housing loan for acquiring the ownership of that property, would have a right to get a deduction on TDS under the Section 80C of the Income Tax Act.

While this calculation, the immigrant should remember that he is eligible for deduction worth INR 1.5 lakh to the max.

If it’s the case of a “resident” owner of the property, it is the tenant who is required to deduct TDS @ 10% on rent paid to the owner of that property. There are two exceptions in this case:

1. The tenant is an individual or HUF (Hindu Undivided Family), but he cannot undergo the tax audit under Section 44AB in the preceding financial year (FY)
2. The rent paid or payable is not more than 2.4 lakh per financial year

If the case is similar to aforementioned one, but the rent amount exceeds INR 50,000 per month, the TDS will be deducted at the rate of 5%.

On the flip side, the TDS rate goes up to 30% when it comes to compute the TDS on the non-resident’s rental income exceeding the requisite limit.  It includes applicable surcharge and education cess.

In the nutshell, the tenants of NRIs, who receive rental income below INR 2.5 lakh, are inarguable expelled   from the tax payers’ list.

Investment is a critical decision that surrounds you with lots of puzzles. This information hides wealth management solutions via investment opportunities for 17.4 million NRIs, PIOs and OCIs.

Let’s get down for some interesting facts and investment tips.

Investment Opportunities In India

Being lived in a foreign country does not mean that investment opportunities will be as interesting as your income is. They may or may not be good enough to bring along a hefty return. On the flip side, you can be sure about India. It is an emerging economy with a staggering growth of seven percent. A recent PwC report projects that this trend will continue for the next 15 years. By 2050, it will trail only China, which will be on the top of the world’s economies.

This is the only reason that the Indian diaspora runs ahead ( $79 billion) of China ($67 billion) and Mexico ($36 billion) in terms of inward remittance.

Therefore, you, being an NRI, can choose it over other countries. If you look for precisely the best investment options for 2019 in India, go through these non-resident investment tips.

Where can NRI invest money in India?

Realty Sector: A report by the Reserve Bank of India (RBI) states that the realty sector flashes first in the mind of non-residents.  But still, you should step back if you’re likely to join the herd of non-residents because of these risks:

• High transaction cost
• Illiquidity
• Delayed construction
• Probability to be cheated by the developer

If you still intend to stick to this investment option, you should think seriously over the ultimate motto-investment or buying it for the end use.

Tips to invest in realty sector for the end use:

• Residential prices have been significantly stable in most of the metro cities over the past few years.
• The transaction in this sector has been shifted to transparency, which is identified by the eased norms for the NRI investment.
• Developers now offer customized housing solutions, such as smart houses with international settings.
• Commercial realty sector has a better propensity to generate income.
• Good rental income and capital appreciation for A Grade offices, IT parks, logistic centres and REITs (Real Estate Investment Trusts), as commercial property can yield 6-10% rental income whereas a residential property can generate 1.5% or 3.5% rental income.
• The Foreign Exchange Management Act (FEMA) and the Reserve Bank of India regulations do not interfere on legal terms, provided that you have not invested in any agricultural land.
• You can make payment to the account of the property dealer via the funds in your NRO account, NRE account or FCNR account in any Indian bank.
• The repatriation from the sale of a property must not exceed $1 million in a financial year. But, this amount can exceed if it is an inherited property.
• You need to withhold TDS from the price payable to the property dealer. If your property values for more than INR 50 lakh, you need to deduct TDS at 1% of its total value.
• In case of rental income capital gains, you have to pay tax similar to what amount a citizen pays. The tax rate could maximize upto 30% and the surcharge shall be based on the total income.
• The capital gain arising from the sale of immovable property shall be taxed at the rate of 20% or more plus surcharge.
• If it comes to long-term capital gains, the tax will be levied up to 30 % together with applicable surcharge.

However, there are bonds and mutual funds or equities, which could levy 15% and 10% tax on short and long term equity respectively if the capital gain exceeds INR  1 lakh. In case of debts, the tax shall be 30% and 20% with indexation for short and long terms respectively.

A non-resident can be trapped in several doubts regarding PPF account. Certainly, it measures a big share of your hard-earned money, which you never want to give up. Being an NRI, you cannot stay tuned with every update or amendment in investment schemes. But, the one providing with NRI investment services can play the role of an assistant. He acknowledges about all amendments in the investment policies.

Being one of them, I’ m sharing amendments in the PPF account eligibility and its maintenance in India through this blog.

Can NRIs contribute to the existing PPF account?

This is the very first question that grips your mind subsequent to changing status from a resident to non-resident of India. It is an outcome of the fear to lose the invested money in the PPF account.

This fear was certain to spring up. The Department of Economic Affairs (DEA) has announced in October. It states that the one who opened this account as a resident and later, changes into a non-resident, his PPF account shall be deemed to be closed. The closure will be effective from the day he becomes a non-resident.

Later on, the DEA had to amend this policy. An office memo was released on 23^rd February, 2018 in the scope of NRIs PPF a/c. However, it has a crystal clear barring message for non-residents that they cannot be able to open it.

The office memo added a little twist in it, stating that the one who opened it before becoming a non-resident can continue to run it till maturity, i.e. 15 years.  But, such people won’t be able to extend it. On the flip side, the residents will have a leverage to carry on this investment in the block of five years.

What happens if an NRI open PPF account?

First and the foremost thing to consider is that this account is not meant for emigrant Indians. The DEA has decided to take a ‘U’ turn in 2017 that stuck to barring NRIs from this investment scheme. It clearly stated these norms:

1. NRIs cannot open a new PPF account.
2. They can maintain their existing PPF account and will continue to get the same interest rate as the citizens get.

Erstwhile, the penultimate amendment pushed several non-residents to close their account. The government was firm to release interest on it at 4%, which was less than the previous interest rate.

Why did the government introduce review of these rules between Oct., 2017 and Feb., 2018?

The good rate of return attracted Indian diaspora in abroad. They often planned to get the interest rate, which touched 7.8 % in the beginning. Also, this is the safest NRI investment plan wherein fraud probability is zero.

They opt for it as the best retirement plan. Upon serving abroad for 10 to 15 years, they think about resettlement in India and look for its extension. There were none of the schemes, apart from this, that ensured a fixed high return, unlike NPS investment, without any volatility. However, mutual funds are good to invest in. But, the interest consistently fluctuates, depending on the market stock performance of the company’s equity.

Can he maintain PPF account in India?

Now, the NRI PPF Rules, 2019 are introduced. Let’s get through what it iterates in the layman’s words:

• The PPF is a 15 years scheme.
• It can be extendable beyond 15 years in blocks of 5 years any number of times.
• But, non-residents cannot extend it beyond 15 years.
• With just INR 500, this account can be operational.
• Now, the interest rate will be subjected to review and reset every quarter.
• Partial withdrawal can be made after 7 years from this account.
• This account can be closed before maturity, but only after 5 years, under certain conditions.
• The account holder can avail a loan between 3^rd and 6^thfinancial year. It is simply because there is an option of partial withdrawal from 7^th

Can a non-resident claim for PPF deduction?

The amount you invest in this scheme is taxable under Section 80C. But, you can earn tax-free returns on maturity, but only if it matures while being in India. This is why it is the foremost choice of expats from India.

If it attains maturity when you’re abroad, the rule of taxability will differ. You might have to declare the amount in the current residence country. The country will levy appropriate tax on it. In short, this scheme is tax free under certain terms and conditions.

Are you hunting for the authentic way of getting a domicile certificate?

This blog is dedicated to you. You can get through it and administer the related challenges.

What is a domicile certificate?

The domicile certificate is a valid proof of one’s residency in a particular city or state of a country. Let’s say, you live in Delhi for 5 years. How can you prove that you’re a citizen of this metropolitan city?

It’s where this certificate proves its viability. This certificate, in writing, proves that you are the citizen of Delhi. Its necessity arises when you want to claim multiple government services, perks and schemes by the state.

Why should you have it?

The domicile certificate, as foregone, is provided with a concrete support to claim government facilities and schemes. It validates the preference of the locals in many situations. You can also avail:

• Residence-based reservation in educational institutes, railways and other government jobs
• Scholarship based on city
• Loan, as it is treated as a proof of place or residence.

Who can be eligible to apply for this certificate?

• The applicant must be living in the state for the past three years.
• He/she should own a house or land in that state.
• His/ her name should be integrated into the list of voters.
• A female applicant, who is married, can apply for this certificate in the state where she lives with her husband.

Which documents are required to get it?

• A duly filled domicile application form attested by Class I gazette officer in Delhi or central government
• Aadhaar Card or any of these photo identity proofs-PAN Card/ Passport/ Driving Licence/ Voter Card (In case you don’t have Aadhar Card)
• Notarized affidavit in a requisite format (The major, like father or mother, can provide affidavit in case you’re applying for the minor one)
• The recent photograph of the applicant
• Address proofs, such as the Voter Card, Electricity Bill, Water Bill or Telephone Bill etc..
• Birth proof (birth certificate/ school certificate or passport)
• Proof of residency where you live for the past three consecutive years, such as Education Certificate, Electricity Bill, House Tax or Water Bill etc..
• Phone number/ Contact number
• Copy of ID Card of Class I gazetted officer who has attested the application form

It is noteworthy that the aforementioned documents should be verified by the Class I gazette officer for proving authenticity.

How can you get this certificate online and from the SDM office?

1. From SDM Office:

If the person is in a capacity of visiting the SDM office, he/she can approach the SDM office in the nearby location. Alternatively, he/she can visit the concerned Deputy Commissioner of that area. The application is entertained during working hours, i.e. 10 A.M. to 01:00 P.M., of week days.

You can visit the office with the downloaded & duly attested form and documents.

2. Online application: This method is viable for those who have this facility available online in their state. Therefore, I’ve taken the case of Delhiites.

• Visit the official website of the Delhi Government, i.e. https://edistrict.delhigovt.nic.in/
• Hover over the right pane wherein “Apply for Certificates Online” option is available.
• Select that option from the Home page.
• Create a log in while registering with the website.
• Input the Aadhar Card Number. Create a password and then, type the code to move on.
• As you get registered, log into the website with the credentials.
• Click on the “Apply for services” given under the “Apply Online” pop down.
• The successful login will lead to “Form for Displaying Services at Citizen Dashboard for Applying Online”.
• Select “Issuance of Domicile Certificate” and click “Apply” tab.
• The click will proceed to a form. Fill it completely while inputting authentic details.
• Upload all supporting documents and then, hit the “submit” tab.
• The successful submission will pop an acknowledgement number on the screen. Take its print screen or screenshot. Save it.

What is the response time of the authority?

You will get a response within 14 days from the date of application. However, the application process may be different in case of diverse states. But mostly, the authority issues it within a fortnight.

How can you download that certificate?

• Visit the link: https://edistrict.delhigovt.nic.in/in/en/Public/DownloadVerifyCertificate.html
• Select the certificate you have applied for from the dropdown.
• Enter 14-digit application number.
• Type date of birth in the next field.
• After typing the required security code, push the “continue” tab.
• Download your domicile certificate.