Taxation and Banking Regulations for Returning Indians

India has the second largest diaspora in the world. The Overseas Indian community estimated at
over 25 million is spread across the world in approximately 200 countries. Amongst the Non
Residents across the world, Indians shine bright because of their inherent multi-professional and
multi-technical expertise. This coupled with rich Indian cultural ethos and traditional value
system, makes them most respected and sought after resource abroad. With the Indian economy
on a long-term growth curve, the Non-Resident Indians (NRIs) are looking at India as not only a
safe investment destination but also for taking up employment in senior roles in Indian
Corporates and for setting up business by investing their knowledge, skills, expertise to capitalise
on the India growth story.

A returning NRI should know and understand various aspects of Indian Foreign Exchange,
Taxation and Banking Regulations in order to rearrange his financial investments /affairs in India
and outside India. A returning NRI, who intends to return to India permanently for settlement or
for setting up business or take up employment, is required to take within a reasonable period, the
following actions:

A returning NRI should plan his return to India and should consult his tax advisor, to understand
host country tax regulations as well as Indian Income Tax regulations, to ensure minimum tax
liability in the year of return and in the subsequent period by claiming benefits under the Double
Taxation Avoidance Agreement (DTAA) wherever applicable, ascertain his tax residency status
and filing of timely and correct Tax Returns etc.

A returning NRI should inform the following Institutions, about change in his residential status:

Banks in India, where he maintains his Savings (SB), Current (CA), Term Deposit (TD)
Accounts etc.

Depository Participants where he has Demat Accounts for holding shares in electronic
form

Indian Companies where he has share holdings in physical form

Mutual Funds whose units the Returning NRI holds

A returning NRI should request his Bank in India to re-designate his existing NRO Accounts (SB,
CA, TD) to Resident Account status with immediate effect and to change his tax slab status to the
one applicable to Resident Indians as against the higher withholding tax slab applicable in NRO
A/c's.

A returning NRI has an option to convert his existing NRE SB A/c to either Resident SB A/c or
to RFC (Resident Foreign Currency) SB A/c. Similarly, the returning NRI has an option to
continue his NRE & FCNR Term Deposits till maturity at the contracted rate and on maturity the
same may be converted to RFC A/c (TD, SB,CA) or to Resident (TD, SB or CA). However, on
the date of informing the Bank about change of Residential status from Non-Resident to Resident,
tax slab (TDS) as applicable to Resident Indians will become applicable.
The Government of India attaches importance to investments by NRIs and Returning NRIs and
offers liberalised foreign exchange policy framework to encourage and protect their investments
in India.

Facilities to returning NRIs/PIOs:

Foreign Assets: All kind of foreign assets such as properties, bank deposits, stocks and securities,
life insurance policies, loans, company deposits, debentures, bonds etc. acquired, held or owned
by an NRI while he was abroad can be continued to be so held and dealt in any manner even after
the NRIs return to India for permanent settlement.

Indian Assets: The entire amount of foreign exchange brought to India at the time of their return
to India for permanent settlement as well as the balances standing to the credit of their NRE and
FCNR accounts at the time of return can be credited to their RFC accounts. However, the foreign
exchange brought to India in the form of foreign currency notes, travellers cheques etc should be
declared to Indian customs authorities at the time of arrival on a Currency Declaration Form
(CDF) as per extant CDF rules.

Advantages of RFC Account:

Proceeds of assets held outside India at the time of return can be credited to RFC account.

Income received from overseas assets in the form of dividend or sale proceeds of such
assets repatriated to India can be freely credited to RFC accounts.

Pension and retiral benefits received from abroad can be credited to his RFC account.

Funds in RFC accounts are free from all restrictions regarding utilisation of foreign
currency balances including any restriction on investment in any form outside India.

Returning NRIs /PIOs may transfer balances held in NRE/ FCNR A/c to RFC A/c.

Balances in RFC A/c retain their repatriability i.e. funds in RFC accounts can be remitted
abroad for any bonafide purpose of the account holder or his dependents including
exchange required for travel and other personal purposes and investments.

Funds in RFC accounts can be withdrawn freely for local payment in Indian rupees.

RFC accounts can be maintained in the form of current or savings or term deposit
accounts, where the account holder is an individual and in the form of current or term
deposits in all other cases.

RFC accounts are permitted to be held jointly with the resident close relative(s) as
defined in the Companies Act, 1956 as joint holder (s) in their RFC bank account on
former or survivor basis. However, such resident Indian close relative, now being made
eligible to become joint account holder shall not be eligible to operate the account during
the life time of the resident account holder.
 The Balances held and interest earned in RFC A/c can be utilized for funding of NRE/
FCNR A/c, in the event of change of residential status of the same customer from
Resident to Non Resident, at a later date.

Please be advised that RFC SB and TD A/c, is a special offering for returning Indians, wherein
the returning NRI has an option to retain the balance in foreign currency, earn interest and the
same is fully and freely repatriable for any bonafide purposes and the same should not be
confused with another offering with similar name i.e. RFC (Domestic) Account which is a non-
interest bearing account, for Resident Indians. For details, please visit the official website of The
Reserve Bank of India www.rbi.org.in

Axis Bank offers the wide range of banking products, remittances and investment services
for NRIs, returning NRIs and resident Indians, through its branch network of more than 1500
branches, across 971 centers in India, backed with strong network of more than 8300 ATMs,
the largest amongst private sector Bank's in India.

For details, please visit the official website of Axis Bank www.axisbank.com.