These days, most of the non-residents of India (NRIs) in the US are countering discomfort. India and the US governments have signed a deal under the banner ‘FATCA’ which is the US’ Foreign Account Tax Compliance Act. Since I have been living in America for half a decade I am very much aware of this act. It is ratification by the United States Department of Treasury and the US internal Revenue Service (IRS) that observes and takes action against the tax invasion in the US.
This act will cross examine if the NRIs as well as the US natives (in India) are paying tax on income generated from the wealth abroad or not.
Two property/wealth plans for NRIs
Under first plan, such NRIs who have property income from Indian property, they can declare that they don’t have any idea about the liability and also, be ready to pay the tax of three years.
Under second plan, those who don’t declare and are not ready to be in compliance, they are to be slapped with the tax amount of eight years. In addition, 27.5% penalty is to be paid to compensate for non-compliance.
FATCA creates fear and confusion among NRIs
Like me, many NRIs have been facing off fear since implementation of FATCA will enable HSBC Expat to exchange account’s details and finances’ information of the persons living in America with the IRS. Now, both Indian and the US government will do this sharing for knowing which NRI is generating income from the property investment in India. It can be rental income or money from lease through NRI property management. All these happening indicate that Indian diaspora’s assets, bank accounts, mutual funds, capital investment in India are under US tax authorities’ scanner. However, it is the toughest nut to crack for the Indian government to check the status of NRIs property in India.
Many migrants from India, like me, have property in India. Now, since the system under FATCA is going to be stricter and robust, NRIs have started selling their properties in India. Even, some have transferred their property to the name of their relatives as well in order to escape legal trouble in future and be abided by the rules and regulations.
How NRIs can get back their property investment capital?
Since NRIs are in a hurry to sell their property to the real-estate companies, their intension is very much clear that they want neither legal troubles nor bear the loss of money. There is very good chance for them to remit back their money. If they transfer their property to the relatives and then sell it, they can get their money invested on property from their relatives.
If they prefer to keep it to their own name, then the amount gotten from the selling of the property could be kept in a separate account or, even tax on that amount required to be paid through cheque.