The Income Tax Act, 1961 defines a non-resident Indian as an individual, being a citizen of India or a person of Indian origin, who is not a resident. A person is of Indian origin if he or either of his Indian parents or any of his grandparents was born in undivided India.

Over the years, the number of Indians moving abroad has been increasing steadily. People leave the country for better prospects of work or study, or even on business and holiday.

Many of the people who go abroad maintain bank accounts in India to either invest here or save money here or just for ease of transactions to and fro. But if you are a Non Resident Indian (NRI) with a bank account in the country, it is advisable that you are aware of all the existing tax rules as far as NRIs are concerned.

Even if you are a Non-Resident Indian, you are liable to pay tax for any income that is earned or accrued in India. This is irrespective of whether the income is directly or indirectly received by the Non-Resident Indian in India or is accrued or deemed to have been accrued in India as far as the laws are concerned.

A Non-Resident Indian will have to pay tax for any income from business transactions and also income generated from assets and investments in India.

The major difference between tax paid by a resident Indian and a Non-Resident Indian is that the latter only has to pay tax for his ‘Indian Income’ and his foreign income, that is income earned and accrued abroad, is completely exempted from tax in Income India.

It is important to note that Indian Income is income that accrues /arises (or is deemed to accrue/ arise in India) or which is received (or deemed to have been received) in India, though it might have accrued/risen elsewhere. Foreign Income is that which accrues or arises (or deemed to accrue or arise) outside India AND received (or deemed to be received) outside India.


Non-residents Indians are granted certain tax exemptions if they are defined as or fulfill the criteria of Non-Resident Indian under the Income Tax Act, 1961.

These tax free incomes available to Non-Resident Indians are: Interest earned on Savings Certificate, Interest earned on Non Resident (Non Repatriable) [NRNR] Deposit, Interest earned on Foreign Currency Non Resident (Bank) [FCNR(B)] Deposit, Overseas income of NRIs, Dividend income from Indian Public/Private Company, Indian Mutual Fund and from Unit Trust of India, Long-term capital gains arising on transfer of equity shares traded on recognized Stock Exchange and units of equity schemes of Mutual Fund is exempt from tax at par with residents, Remuneration or fee received by non-resident / non-citizen / citizen but not ordinarily resident ‘consultants’, for rending technical consultancy in India under approved programme including remuneration of their employees, and income of their family members which accrue or arise outside India, Interest on notified bonds.

There are several tax saving options available for Non-Resident Indians. Non-Resident Indians are allowed the following deductions under Income Tax Act, 1961:

a. Home Loan Interest Deduction: Non-residents Indians are eligible to avail deductions on home loan interest for the interest portion of the EMI paid towards the repayment of home loans.

b. Savings Deduction: From the various tax saving avenues available to the general public – Equity instruments like ELSS, Debt instruments like PPF, National Savings Certificate, Bank FDs etc and Life Insurance and Pension Plans, Non-residents Indians are not allowed the following investments:

i.) Non-residents Indians not allowed to open a PPF account. An existing PPF account can be continued till maturity.

ii.) Non-residents Indians are also barred from investing in National Saving Certificates (NSC), Senior Citizens Savings Scheme (SCSS) and Post Office Time Deposits (POTD). Existing investments (ie, those that were purchased before becoming an NRI) can be continued till maturity.

  1. Health Insurance Premium Deduction:Non-residents Indians can also claim deduction for premium paid on mediclaim / health insurance policy of self and family (Rs 15,000 / Rs 20,000 as the case may be) and another Rs 15,000 (Rs 20,000 if either of parents is a senior citizen) premium paid to insure the health of parents.

    d. Other Deductions:There are many other deductions available to resident Indians – Health Insurance Premium, Medical treatment of disabled dependent, Medical treatment of certain specified ailments, Deduction for Handicapped person, Educational loan, Deduction for Donations and Rent paid. NRIs qualify for these deductions:

    i). Deduction for interest paid on educational loan

    ii). Deduction for certain specified donations

    Deduction for Medical treatment of disabled dependent, Deduction for Medical treatment of certain specified ailments, and Deduction for Handicapped person are not available for Non-residents Indians.


The wealth tax is chargeable for every fiscal year in respect of individual’s net wealth. The incidence of wealth tax depends on both residential status and nationality.

An individual is taxable in India on his global net wealth if the individual is a resident but not ordinarily resident in India and the individual is an Indian national.

In all other cases, the individual is taxable in India only on assets located in the country.


Wealth tax is levied at 1% on net wealth, which exceeds Rs 30,00,000 on March 31 of a given fiscal year.

Assets: An individual’s net wealth includes guest house, farmhouse, residential house or commercial building, cars, jewellery, bullion, gold and silver utensils, yachts, boats and aircraft, urban land and cash in excess of Rs 50,000.

Specific exemptions are available on some of these assets.


Special exemption for seven successive years is available to a PIO or an NRI repatriating to India with the intention of permanently residing in India. The exemption is available on the following assets:

Moneys brought to India (including any balance in the NRE account).

Assets: Any asset acquired by sending money from a foreign country within one year immediately preceding the date of return to India.

Any asset acquired after arrival in India out of money or assets brought in India.


The government of India has entered into DTAA or tax treaties with several countries to safeguard taxpayers against double taxation.

Under the DTAA, the income of an NRI or a PIO is either only taxed in one of the two countries (i.e., it is exempt from tax in one country) or in both countries, but the country of residence allows credit of the taxes paid in the other country.

Sometimes, due to tax-rate reductions under the domestic law domestic rates become more favourable to NRIs or PIOs. Since the object of tax treaties is to benefit NRIs or PIOs, they can, under such circumstances , be assessed either according to the provisions of the treaty or the domestic law.

NRIs should consider the time horizon available to accumulate money for retirement.

Secondly, plan for the emergency and health insurance. In fact, health insurance should be an integral part of the retirement planning.

If you have any goal to meet, factor those expenses too. For example, if you plan to visit your children abroad every year, plan for these expenses in your retirement planning.

Finally, never underestimate the power of inflation to eat into your purchasing power. You must decide upon the requirement based on high inflation rate.



Indian market is well developed and it provides enormous options to plan for retirement as per individual’s risk profile. Let’s take a look at the financial investment options available for NRIs.

Bank Deposits: The long term bank deposit in India is a risk free option. It also pays a good interest rate of 8% to 9%.

Equity and Mutual Fund: With Indian economy slated to grow at a rate of 8% for the next few decades, Indian stock market offers tremendous opportunity for NRIs to invest and profit from the growing economy. Indian stock market is pretty well regulated and covered by analysts. Though the risk is high, the returns from market have been the highest in the long run.

Real Estate: Real estate is another good investment for retirement because of booming economy.

Insurance: Insurance firms offer variety of products promising security and returns to suit retirement needs of overseas Indians. ICICI, LIC, HDFC, and many other insurance firms have retirement & pension plan which can be availed by NRIs. Most of the insurance companies also offer comprehensive health insurance which must be taken for retirement purposes.

You can buy retirement plan with cover or without cover. You can also have unit linked retirement plan which will give high returns but also presents high risk. ULIP, after the changes made by IRDA, has become more attractive and can provide much better returns than typical insurance products.

Look at the typical returns provided by the retirement plan. You should also look at the returns provided by the plan in last 5-10 years, compare the plans and select accordingly.

Be sure about the repatriation clauses in the plan. It will set the right expectation.

Lastly, your retirement plan is for your retirement purpose. Avoid the temptation of withdrawing from it to meet other needs.


For a non-resident Indian (NRI) who has been away from home, there are many investment options across various categories.

However, while other investment options can be timed, investments in real estate have to be planned well in advance, as time and costs overrun to acquire the property will be high. The input and labour costs are increasing.

While the short to medium-term investors can shop around for developed plots in order to hedge their bets, long-term investors should invariably look at apartments or villas depending on their family size and future requirements. A number of projects ranging from apartments to villas and penthouses are being launched at various locations across the city.

The government of India has proposed a new direct tax law that is likely to be effective from April 1, 2012. Among the key personal tax proposals likely to impact include wealth-tax .

The Direct Tax Code (DTC) has extended the levy of wealth tax on assets located worldwide (i.e. global assets) to all residents , whether Indian or foreign citizens. Under the existing provisions, foreign citizens even on becoming resident in India were not liable to wealth tax on assets outside India.

This change may have repercussions for PIOs visiting India and qualifying as residents during the relevant financial year, as they would potentially be liable to pay wealth-tax on worldwide assets, since there is no safe harbor on the taxation of worldwide asset base as in case of income taxation for first-time residents (i.e. total stay less than the cumulative presence of 730 days as in preceding seven years).



The definition of assets for wealth-tax purposes has been expanded to include bank deposits outside India, any interest in a foreign trust or any other body outside India (whether incorporated or not), helicopter, archaeological collections, drawings, painting, sculptures, or any other work of art, watch (value in excess of Rs 50,000) and any equity or preference shares held by a resident in controlled financial corporations.

Wealth-tax will be levied at 1% subject to the basic exemption of Rs 10,000,000 vs Rs 3,000,000 currently. DTC has introduced the concept of tax residency certificate (TRC).

It provides that an individual shall not be entitled to claim relief under the provisions of the DTAA unless a certificate of being a resident in the other country is obtained from the tax authority of that country, in such form as may be prescribed by the tax authorities.



Our society is changing. Nuclear families are the norm. Inflation is high and hence money needed to fund the retirement is increasing. Additionally due to longevity of life, the requirement for retirement fund will further increase. This is where the right retirement planning helps individuals spend their time in old age with dignity.

Most of the Indians living in foreign countries plan to come back to India at some point in time in the future. Hence it is important that they plan for their retirement in India.

Even though many NRIs plan to come back in the later stages of life, their children will not come back. They do not have much idea about the options available in the Indian market which prevents them from planning well for their retirement.


Start early: The importance of starting early cannot be emphasized enough. This is the key to a happy and wealthy retired life.

Have a concrete plan: You must have a plan as how much you need post retirement keeping inflation in mind. Once you have a figure, work backward to find out your retirement requirement. This will enable you choose appropriate financial products for your retirement requirement.

Here is a simple example

You will need a corpus of 3 crore, and 83 lakhs for the purpose of retirement under the above mentioned condition.

Monitor your plan: You should keep monitoring your investment and change as per the demand of the times and your age. For example, you may have decided to invest almost 80% in equity when your age was 25 but the proportion will have to come down when you turn 40.


  • With improved connectivity and transportation network, investments in such projects are bound to appreciate in the coming years. Those who do not immediately require a home for their occupation can minimise their initial funds outflow by opting for greenfield projects. Even an investor opting for an apartment to rent out can go for a similar project to minimise the initial liability and also phase out the payment plan.

    For returning NRIs, the timing is appropriate to look at ideal options and strike a bargain deal for investments in residential projects that would be ready for occupation in a year or two. The continuing liquidity crunch has necessitated developers to tap private sources outside the banking sector in order to fund ongoing real estate projects.

    This is where investors who can mobilise substantial down-payments by raising cheap funds from abroad can leverage their bargaining capacity. As part of the festival season offers, a number of developers and housing finance companies in Bangalore are offering pre-EMI interest-free options while investing in select residential projects.

  • It is said that NRIs with good credit record in the US can mobilise short-term funds locally at zero percent interest rate and plough it back into lucrative investment options in real estate. The double taxation treaty with US enables NRIs to offset the cost incurred in India. For those NRIs keen to earn return on investment, rental income coupled with fiscal sops make investments in residential property a viable option.

    Those having taxable income in excess of Rs 1.5 lakhs per annum can save as much as Rs 45,000 on account of income tax sops. Moreover, residential property leased for a minimum period of 300 days in a calendar year is exempt from wealth tax.

    Besides, tax in respect of ‘income from house property’ would be taxed only in the year of receipt of such rent. If there is any loss under the head ‘income from house property’ which cannot be set-off under any other head of income, it will be allowed to be carried forward for the next eight assessment years to be set-off against any ‘income from house property’

  • A significant development is the proliferation of property management companies that simplifies the investment exercise by NRIs. Even developers who are keen to market their projects among NRIs have now realised the need to offer such services to NRIs while investing in their projects.

    This not only provides a safety cushion for NRIs to manage their properties during their absence in India but also eliminates the apprehension prevailing among NRIs about their real estate investments. Developers here are regularly joining trade shows in various countries to directly interact with NRIs to market their projects.

    A few developers are even opting for road shows exclusively to market their projects. This provides an opportunity to directly interact with the property developers and also facilitates phased payment plans to fund their investment exercise.

  • Normally, NRIs invest in property during their holidays. They can also invest through a power of attorney.

    For the purpose of income tax and wealth tax, a power of attorney holder accompanied by the possession of the property through an agreement to sell is deemed to be the owner of the property.

    They can sell their existing residential units and go for larger units, and full tax exemption is available. They may get 100 percent tax exemption in respect of longterm capital gains even if they sell other assets and invest in residential property. The benefit of cost inflation index is available to NRIs for the purpose of computation of taxable longterm capital gains.

    Unlike in other countries, NRIs have the benefit of raising short-term resources through their investments in real estate here.


    They can get 5-year rental income upfront by raising a loan against future rental income or provide real estate assets as security to raise short-term funds from banks or housing finance companies, or even pursue higher education abroad by raising short-term resources in India.

    While rental income can be repatriated, residential property up to two units is allowed for repatriation after a lock-in period of three years.

    For inherited properties there is no lock-in period and NRIs may repatriate up to USD one million per financial year out of the balance held in a NRO account, for bona fide purposes, subject to satisfying the authorised foreign exchange dealer bank with compliance certificate and payment of taxes, if any due.