New Delhi – NRIs (a non-resident Indian is a citizen of India with an Indian passport who has temporarily emigrated abroad for six months of more for work, residence or any other purpose) can be a great source of funds infusion in India, and our government realizes this fact, too. A plethora of investment opportunities have been created for NRIs by simplifying rules and regulations at every stage for their expected investment ventures in India.

The falling Indian rupee is making Indian soil look all the more alluring for this group of investors. The more the rupee falls, the more money transfers happen in the non-resident external (NRE) accounts, which are bank accounts that are opened by depositing foreign currency.

Consequently, banking and other services are on a complete wooing spree with extra services to attract NRIs. Currently the situation is made to appear very lucrative to most of the NRIs who are looking to park their money in India in the form of deposits or real estate investments. Now, NRIs are being compelled to think that it is shopping time for them and they can make more money in the short term and buy properties or invest in the share market.

The government definitely would like to forget the pre-1991 economic crash which still haunts it. Throwing open the doors of the domestic economy to the world economy in the name of globalization, liberalization, and privatization made the picture look attractive for foreign investors. The government offers several facilities to lure non-resident Indians (NRIs), persons of Indian origin (PIO) and overseas corporate bodies (OCBs). Now they are permitted to open bank accounts in India with funds remitted from abroad, foreign exchange brought in from abroad, or funds legitimately due to them in India, with an authorized dealer.

The Reserve Bank has also granted general permission to NRIs to undertake direct investments in Indian companies. NRIs do not have to seek specific permission for approved activities under these schemes.

Even direct investment opportunities are available to NRIs so that they can invest in shares or convertible debentures of Indian companies, except for a few sectors. The investments that are not eligible under the automatic route enjoy full repatriation benefit. There are other investments opportunities, as they can invest in domestic mutual funds, bonds, shares and government securities.

Apart from tax deductions (including a standard deduction of 30 percent of net annual value and interest on borrowed capital), NRI status confers tax exemptions from other assets and investments, such as dividends received from domestic companies and income arising on any bank deposits.

Money exceeding Rs. 25,000 (US $625), even if received as a gift, is liable to be taxed to the recipient, except in cases of gifts received on occasions like weddings or inheritances.

The IT Act doesn’t tax remittances to India, so NRIs can send money to their own accounts in India without any fear of tax. What’s great is they can utilize the money for any purpose they like.

Tax exemptions for NRIs include:

Income from interest on National Saving Certificate VI/VII issue and notified bonds purchased in a foreign exchange
Income from interest on funds in NRE/FCNR accounts
Interest on notified securities or bonds and even premium on redemption of such securities
Interest paid by scheduled banks on RBI approved foreign currency deposits, to an NRE or NRO

However, the IT Act definitely serves a negative purpose by shooing away NRIs, because NRIs with disabilities are refused tax exemptions. It is more likely that NRIs come back to India in their old age or just before the setting of their old age. In old age, the probability of disability increases and people might have to spend a huge sum of money for their medical treatment.

In the world’s largest democracy, where disability exists, discrimination is bound to be present. NRIs with disabilities are not left out of its ambit. Unfortunately, NRIs don’t get any tax benefit if they suffer from a disability. Under Section 80U, a resident Indian can claim a deduction of up to Rs. 50,000 ($1= approximately Rs. 60) if he suffers from a disability. The deduction is Rs. 1 lakh (1 lakh=100,000) if the disability is severe.

NRIs are also not eligible for the deduction if they have a disabled dependent. Under Section 80DD, resident taxpayers can claim a deduction of Rs 50,000 for the treatment of a disabled dependent. Again, the deduction is higher at Rs 1 lakh in case of severe disability. However, these benefits are not extended to NRI taxpayers.

The discrimination extends to medical treatment as well. Under Section 80DDB, resident taxpayers can claim a deduction of up to Rs. 40,000 for the treatment of dependents with specified diseases. The deduction is higher at Rs. 60,000 in the case of senior citizens. However, NRIs are again not eligible for this tax benefit. They may be paying for the treatment of their dependents, but won’t get any tax deduction. Is it because NRIs are not contributing enough in the development of the economy or is it assumed that NRIs won’t ever need state support of any kind for their disability? If you ask them ‘why’, the reasons are only known to them.

I have my apprehensions whether any voice has ever been raised by NRIs in this regard, because discrimination is always intimidating and directly attacks self esteem. A group of people that can play an instrumental role in improving business and the overall economy has to be given equal treatment, otherwise they will not come back and invest in their motherland.


Please enter your comment!
Please enter your name here