OFFSHORE INVESTMENT OPPORTUNITIES FOR INDIANS

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Hardiksinh ChavdaPratik Kotak

Shivkumar NagarPratik Asnani

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FLOW OF PRESENTATION

INTRODUCTION TO OFFSHORE INVESTMENTS

GUIDELINES OF RBI FOR INDIVIDUAL INVESTORS

OFFSHORE INVESTMENTS : FACTS

OVERVIEW OF RFC ACCOUNT

OVERSEAS REAL ESTATE INVESTMENTS

IMPLICATIONS ON OVERSEAS DIVIDEND INCOME

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OFFSHORE INVESTEMENTS! A layman’s understanding

Stashing of money in some illegal foreign company Tax rate as low as NIL

What Is Offshore Investing?

“Offshore investing refers to a wide range of investment strategies that capitalize on advantages offered outside of an investor's home country.”

No shortage of Money Market Bond Equity assets

Offered by reputable companies that are Fiscally sound Time-tested Most importantly, LEGAL

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Guidelines of RBI for Investment AbroadAs per RBI’s Liberalized Remittance Scheme for Resident All resident individuals may freely remit up to USD 200,000/yearPermissible current or capital account transaction or a combinationIndividuals can acquire and hold Immovable property Shares or Debt instruments Any other assets outside IndiaNo prior approval of the Reserve Bank. Individuals can also open, maintain and hold foreign currencyaccounts with banks outside India.A resident individual can invest in Units of Mutual FundsVenture Funds Unrated debt securities Promissory notes, etc under this Scheme

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Guidelines of RBI for Investment AbroadThe resident can invest in such securities out of the bank account opened abroad under the Scheme.o No restriction on the frequency of remittance.o Should be within the limit of USD 200,000/-

Prohibitions: Indian parties are prohibited from makingInvestment in a foreign entity engaged in real estatebusiness or banking business.General PermissionGranted to residents for purchase/acquisition of securitiesand sale of shares/securities so acquired:Out of funds held in RFC account;o As bonus shares on existing holdings of foreign o currency shares, ando Out of their foreign currency resources outside India.

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OFFSHORE INVESTEMENTS : facts

oAdvantages Tax Reduction Asset Protection Confidentiality Diversification of Investments

oDisadvantages Market RiskPolitical RiskCurrency Risk

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RFC ACCOUNT!!

RFC AccountResident foreign currency account – if an NRI is returning India for ever, he can keep his foreign currency in RFC account and there areno restriction on use of funds in RFC account.

RFC (DOMESTIC) ACCOUNTA Resident who lives in India but receives foreign exchange payments / honorarium can open RFC (Domestic) account for retaining such payments.

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ACQUISITON OF IMMOVABLE PROPERTY

Foreign Exchange Management Regulation 2000

“It provides that no person resident in India shall acquire or transfer any immovable property situated outside India without special or general permission of Reserve Bank.”

“It further prescribes that a resident in India may acquire immovable property outside India out of Resident Foreign Currency Account maintained in accordance with Foreign Exchange Management ( Foreign Currency accounts by a person resident in India ) Regulations, 2000.”

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IMPLICATION OF DIVIDEND INCOME

Dividend income received on shares of a domestic Indian company which has paid or is liable to pay Dividend Distribution Tax u/s 115-0 is exempt in the hands of Indian shareholders under Section 10(34) of the Income-tax Act, 1961.

An Indian investor who receives dividends from a foreign company on his overseas investments would, therefore, not be covered by the exemption provided in section 10(34) because the overseas company would not have declared a dividend in India and paid tax on it under section 115-O.

Thus, dividend income from a foreign company will be fully taxable in India, on which advance tax would have to be paid. Whether such dividends would also be taxed in the country of which the company paying the dividend is a resident would depend on the laws of that country.

EXCEPTIONS: (DTAA) between India and the country in question

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