RUPEE LOAN AGAINST NRE DEPOSIT

During a recent development , RBI have removed the cap of INR 100 Lacs for Loan against NRE Deposit , there may be several reasons for RBI’s this step but NRI’s are always demanding this as this type of Loan is gaining popularity day by day.

Features and Benefits of this Loan is as under

i)                    As all of us aware that NRE Fixed Deposit should be prepared for a minimum period of one year and if you require funds before one year of then you have to forgo the interest portion , now at this time this loan will help you to ensure your liquidity without taking premature payment of your fixed deposits.

ii)                  Loans available to self as well as third party individuals , so if you wantg to lend some money to any of your relative and at the same time you want separate accounting  then you can use it and tell your relative to repay this loan , by doing this your relative will get money and you need not to break your Tax Free NRE FD’s

iii)                 Loans available up to 90% of the principal amount of the deposits without any upper ceiling.

iv)                You can take overdraft facility so that whenever you require, you can withdraw money. you can also take it as Demand loan in which the entire loan amount will be credited to your NRO account

v)                Repayment to be made either by adjustment of the Fixed Deposit or by fresh remittances from outside India through normal banking channels. Loan can also be repaid out of the funds in the NRO account of the borrower. In case of loans to third parties, the same can be repaid out of the local rupee account of the borrower.

vi)              Interest will be charged at 0.50% above the rate of Fixed deposit against which you are taking loan and this interest will be charged at daily reducing balance

So go ahead and utilise this facility

For other details / queries, drop a mail at prashant.singh@sbi.co.in

RESIDENT / NON RESIDENT / NOT ORDINARY RESIDENT

Basically residential status is determined for the Taxation purpose which also depends on the physical presence of the taxpayer in India in the course of the "previous year" which would be the twelve months from April 1 to March 31.

Now for more simplification we will assume as

Y => This Year and for other years we will use + / -

A person is said to be "resident" in India in any previous year if he -

(a) Is in India in that year (Y-1) for an aggregate period of 182 days or more; or

(b) having within the four years (Y-2 to Y-5) preceding that year been in India for a period of 365 days or more, is in India in that year (Y-1) for an aggregate period of 60 days or more.

However, as a special concession for Indian citizens and foreign citizens of Indian origin, the period of 60 days referred to in Clause (b) above, will be extended to 182 days in two cases:

(i)                  Where an Indian citizen leaves India in any year for employment outside India; and

(ii)                Where an Indian citizen or a foreign citizen of Indian origin (NRI), who is outside India, comes on a visit to India.

In the above context, an individual visiting India several times during the relevant "previous year" (Y-1) should note that judicial authorities in India have held that both the days of entry and exit are counted while calculating the number of days stay in India, irrespective of however short the time spent in India on those two days may be.

A "non-resident" is merely defined as a person who is not a "resident" i.e. one who does not satisfy either of the two prescribed tests of residence.

An individual, who is defined as Resident in a given financial year is said to be "not ordinarily resident" in any previous year if he has been a non-resident in India 9 out of the 10 preceding previous years or he has during the 7 preceding previous years been in India for a period of, or periods amounting in all to, 729 days or less.

For other details / queries, drop a mail at prashant.singh@sbi.co.in

INOPERATIVE OR DORMANT ACCOUNT

Inoperative / dormant is very important word for NRE account holders as they usually open so many accounts and leave their funds but at the time of withdrawal of funds they came across with the said words

Why account becomes Inoperative

 
If no transaction — credit or debit other than crediting of periodic interest or debiting of service charges — takes place in your savings account for more than 2 years the account becomes inoperative. Once an account turns inoperative, you can’t perform several operations. In case of an inoperative account you cannot request that a Cheque book be issued, the address be changed, the signature be modified, a joint holder be added or deleted, or an ATM/debit card be renewed. You will also not be able to withdraw money from an ATM or carry out any transaction either through internet banking or a branch of the bank.
However, even after your account turns inoperative, interest is still credited to your saving account regularly.

How to reactivate an account

To reactivate an inactive account you need to conduct a transaction by Cheque or ATM. In case you have other active accounts, you could send the bank a secure message from your Personal Internet Banking ID instructing it to debit Re 1 from this account to another.

To reactivate a dormant account, submit a formal application to the bank stating the reason for your absence, and provide a photo identity proof. Your signature will be verified by the authorized bank personnel. The bank may even charge you a small fee for reactivating your account.
To nip this problem in the bud, keep using your account before it turns inactive or dormant. Carry out a transaction once in a while in all your accounts if you want to escape bearing the penalty or having to run to the branch to reactivate the account. At least once a year, carry out a transaction: withdraw cash, transfer funds through any of the banking channels, or make a Cheque payment to ensure that your account remains active.

Important: if you have not used your accounts in last 6-8 months then before issuing any Cheque, contact your Branch to know the status of the account as it may happen that your Cheque may be returned due to Inoperative / Dormant Status of the account

For other details / queries, drop a mail at prashant.singh@sbi.co.in

FUNDS REMITTANCE DIRECTLY TO RESIDENTS ACCOUNT: GIFT AND WEALTH TAX

Recently during the discussion with an NRI , I observed a normal tendency of Short Term NRI’s that they don’t open NRE account to remit funds to india and they are sending funds directly to their relatives / friends accounts and from these accounts they do further investment in real-estate , stock market , fixed deposits etc.

Now it looks normal that it’s your money that you are sending funds to your Indian friends / relatives but this time you forgot about 2 major tax implications on this act or in other words we can say that 2 major tax benefits if your route these transactions from your NRE accounts , these are Gift Tax & Wealth Tax

Gift Tax says that the receiver has to pay tax for receiving any gift valued at Rs.50,000 and more, there are exemptions for gifts received from certain people and the major exemption is that gift received from close / blood relative is exempted from gift tax

All the countries have made their gift tax rules for e.g. If a US person receives a gift or inheritance from a non US person (or people) in total of over $100,000 in a given calendar year, an information form needs to be filed with the IRS. The gift or inheritance to an individual is excluded from gross income on the tax return. The form to be filed is not a tax return because there is no tax on gifts from foreign persons. However, this informational form must be filed to avoid strict penalties.

Now wealth tax i.e. all resident Indians are required to pay wealth tax and file a wealth tax return if their net wealth from assets exceeds Rs 30 lacs.
The Assets in this case include land, property, jewellery, cars, aircrafts, yachts and cash in excess of Rs 50,000. For Resident Indians (Resident Ordinary Residents - ROR), wealth tax is payable on all these assets, irrespective of whether they are located in India or abroad. For Non Resident Indians (NRIs), wealth tax is payable only on those assets that are located in India.

Now when you are sending money to India in your friends / relatives account then knowingly or unknowingly you are raising their Tax liabilities at the same time when you require back that money then again that will be subjected to taxes so be straight and always route all your fund through your NRE account and always keep your excess funds in NRE account as

An NRI can gift to his/her parents in India from their NRE account without their parents suffering any tax.

Likewise, balances held in such accounts are exempt from Wealth-tax in terms of Section 6(ii) of Wealth-tax Act, 1957.

For other details / queries, drop a mail at prashant.singh@sbi.co.in

RESIDENT ACCOUNTS TO NRO ACCOUNT

As per instructions of Reserve Bank of India (RBI) contained in RBI Circular no. RBI/2012-13/75 DBOD No.Dir.BC.1/13.03.00/2012-13 dated 02.07.2012 (copy available at RBI Website), when a resident becomes a Non Resident Indian (NRI), his/ her existing normal resident accounts should be converted in NRO Account.

 The said stipulation is applicable to all Banks operating in India as well as all type of accounts i.e. Savings / Current / Fixed Deposits etc, so being a statutory requirement we advise you to approach your Bank for conversion of your Normal Accounts to NRO Account, for this your bank may ask for copies of Passport & Visa / Green Card / OCI Card etc. Conversion of Normal Account to NRO Account is a simple process and will not change your account no. / ATM Card / Internet Banking Pass book etc

 Details and other operative instructions are available in the said RBI Circular

For other details / queries, drop a mail at prashant.singh@sbi.co.in

NRE RECURRING DEPOSIT BENEFITS

Recurring deposit is very popular in salaried class resident Indians, but I personally feel that this is the best way to save for future planning’s as it locks your present rate of interest for future savings , say if a persons invests in fixed deposit today he will get today’s rate of interest and after 6 month if he will again deposit in FD then he will be getting the then prevailing rate of interest , but in RD if you opt for a period of 10 years then each and every instalment will get the benefit of today’s rate of interest

 Maturity values for different interest rates and period

 If a person starts a NRE RD of Rs. 10000.00 and his bank offers interest rate at 8.50% then maturity value for different period will be as under

i)        For 12 months (1 year)     =       1.24 lacs (approx)

ii)       For 36 months (3 year)     =       4.08 lacs (approx)

iii)      For 60 months (5 year)     =       7.44 lacs (approx)

iv)      For 120 months (10 year)  =       18.81 lacs (approx)

 

Normally Banks are charging penalty @ Rs.1.5 to Rs.2.00 per Rs.100 per month for delayed payment of instalment

In case of premature withdrawal, banks are usually giving the interest 0.50% below the rate applicable for the period the deposit remains with the bank or 0.50% below the contractual rate which ever is lower

If you break this deposit before 1 year, you might not get any interest

 

For other details / queries, drop a mail at prashant.singh@sbi.co.in

NEW CURRENCIES FOR FCNR/FCNB DEPOSIT

Reserve Bank of India has given permission to the banks for accepting FCNB deposits in several other currencies and now some Banks have started accepting deposits in Switzerland Franks (CHF), New Zealand Dollar(NZD), Swedish Kroner (SEK) ,Denmark Kroner (DKK) in addition to existing six currencies viz., USD, GBP, JPY, EUR, CAD, AUD

 for latest rate of interest visit respective Banks website 

For other details / queries, drop a mail at prashant.singh@sbi.co.in