Financial Planning for Foreigners, NRIs and PIOs moving to India.
– Vishal Dhawan, Chief Financial Planner, Plan Ahead Wealth Advisors.

 

As India starts to emerge from the shadows of its more famous neighbor, China, there are a large number of foreign citizens moving to India, either for professional reasons temporarily, or to consider settling down permanently to benefit from its spiritual side. A first hand India exposure adds great value to global resumes and increasing salaries for top level positions make India even more attractive.

In addition to these sets of individuals, a very large number of persons who choose to settle down permanently in India tend to be of Indian origin, who left India to pursue a foreign education or work overseas and are now moving back to India due to family reasons, or because they see that the high growth rates in India provides them some excellent professional growth opportunities.

There are multiple factors to be kept in mind for foreigners/Indians who choose to move to India

  • Residency/visa related issues
  • Asset ownership rules
  • Bank accounts
  • Taxation and social security
  • Investment management
  • Estate planning

This is not meant to be a to do guide for moving to India, but simply to give a flavor of some of the items to be kept in mind whilst making the decision to move to India.
Residency
There are essentially two types of visas that can be issued to foreigners for work related visits by India

a. Business visa designated as ‘B’ visa – These are normally issued to foreigners who wish to establish an industrial/ business venture in India. These visas can be granted for a period upto five years or for a shorter duration as per the requirement, and the duration of each visit is restricted to six months. These visas can be granted for a period of ten years for US nationals with multi entry validity, and is issued with the stipulation that the stay in India during each visit should not exceed 6 months.

b. Employment visa designated as ‘E’ visa – Employment visas are granted to highly skilled or qualified professionals, who are engaged by companies in India on a contract or employment basis. The validity of an employment visa can varies for periods upto 5 years depending on the industry and contract. Employment visas are, in most cases, issued with a validity of 2 years, or the term of the assignment,

Family members /dependents of foreigners, who are granted business visas or employment visas, are normally granted ‘X’ visas which tend to be granted for periods which are coterminous with the validity of the visa of the principal visa holder.

For foreign citizens of Indian origin, often referred to as Non Resident Indians (NRIs), the definitions are different depending on whether you look at the definition from a Foreign Exchange Management Act (FEMA) perspective or a tax perspective.

As per FEMA, an Indian Citizen who stays abroad for employment / carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident.

As per the Indian tax laws, there is no separate tax regime for foreign residents in India. Taxation of an individual depends upon his or her residential status for the particular tax year, which in turn depends on the number of days the person was physically present in India. Under the Indian tax laws, a person is considered a resident if one of the following conditions are satisfied.

  • The person is present in India for a period of 182 days or more in the particular financial year ( also referred to as a 182 day rule)
  • The person is present in India for a period of 60 days in the particular financial year, and 365 days or more in the preceding four financial years (also referred to as the 60 day rule).

In case the person satisfies none of these conditions, the person qualifies as a non resident for that particular year.

There is a provision for a Person of Indian Origin (PIO) card and Overseas Citizen of India (OCI) card to facilitate visa fee travel to India, as well as to provide rights of residency and participation in business and educational activities in India. The government is contemplating merging the PIO and OCI card schemes into one. This requires amendment of the citizenship act, for which a bill has been placed before the Indian parliament.

A Person of Indian Origin refers to a foreign citizen if

  • The person at any time held an Indian passport
  • The person or either of his/her parents or grandparents were born in India or permanently resident in India
  • The person is the spouse of an Indian citizen or a person of Indian origin

This is not valid for citizens of Afghanistan, Bangladesh, China, Nepal, Pakistan and Sri Lanka.

An Overseas Citizen of India refers to a foreign national who was eligible.

  • To become a citizen of India on 26.1.1950 or anytime thereafter, or belonged to a territory that became a part of India after 15.08.1947 and their children and grandchildren
  • Whose country of nationality allows dual citizenship under local laws. The US government allows dual citizenship

This is not valid for citizens of Pakistan or Bangladesh.

Both PIO and OCI card holders can obtain Indian citizenship though the tenure of stay required in India differs in each case.