Investment and taxation expert Anil Harish, partner, DM Harish & Co, spoke on international investment opportunities for Indians at the Moneylife Foundation seminar. The event at Royal Bombay Yacht Club was a packed house.
Government regulation allows you to invest up to $200,000 under Liberalized Remittance Scheme (LRS) in foreign assets every year. The master circulars are issued by RBI with latest one dated July 2011 and valid for one year. The money can be used for opening bank accounts, acquiring and holding immovable property, shares, debt instruments/securities, making gifts, personal expenses, buying art and so on. It is definitely an opportunity as long as rules and tax implications of India and foreign country are understood and complied with.
Mr Harish said, "The procedure for remitting $200,000 abroad every financial year can be completed in 10 days and without prior approval of the Reserve Bank of India (RBI). The rules are different for a resident Indian, non-resident Indian (NRI) and Indian company. E.g. NRI can remit $1 million year. Indian government allows and disallows certain investments. E.g. Remittance cannot be used for buying lottery, prohibitive magazine, trading in foreign exchange abroad. Also, loans cannot be taken in the foreign country."
"Remittance is not allowed in countries like Bhutan, Nepal, Mauritius, and Pakistan as well as other non-cooperative countries and territories like British Virgin Islands. The income earned on investment can be retained and reinvested. It is not required to repatriate funds back to India. Loans can also be given abroad," he added.
The total foreign currency available in cash, traveller's cheques, travel cards, etc, per person per year is $10,000. Business trip can have $25,000. Education remittance and medical expenses remittance can be for $100,000. Attending patients can be for $25,000. A person settling abroad can remit $100,000 for expenses.
According to Mr Harish, "Other countries' legal requirements and taxation is an important aspect of investment abroad. E.g. The US has estate tax which will have to be paid. A foreign country may not have wealth tax, but you will still have to comply with Indian rules if the kind of investment is such that wealth tax is applicable (E.g. Aircraft, yacht, etc).
Foreign tax paid abroad on investments can be given a credit for tax implications in India, subject to different agreements like Double Tax Avoidance Agreement (DTAA) and Tax Information Exchange Agreement (TIEA). There are risks like foreign exchange rate, country and business risks." There will be tax filing abroad and in India to ensure there is no double taxation.
The following topics were presented—the past, present, allowed and disallowed usage of remittances by resident Indians abroad, procedure of remittance application, buying a property abroad, taxation, other allowed remittances (medical, education, etc), remittances by NRI, Indian companies, capital gains on sale of house in India, compliance with laws, double tax avoidance agreements, opportunities abroad and risks.
For more information visit our website : http://foundation.moneylife.in/
Register : http://moneylife.in/register/
Follow us on Facebook : https://www.facebook.com/moneylifedailyclinics/
Follow us on Twitter : https://twitter.com/MoneylifeF