Returning Indians

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ReturningIndiansAll that youneed to know

Confederation of Indian Industry

Knowledge Partner


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3/76Returning Indians All that you need to know | 3

Table of contents

Message 5

Preface 6

Executive summary 8

Introduction: all the basics, covered 10Scope and coverage 10Classication of returning Indians 10

Purpose of movement 11Preparing for the move what you need to know before moving in 12

India Landscape 12Lifestyle 12Social security 20Insurance schemes 21Investment avenues 22Taxation system in India 23Forms of self-employment/business 31Banking in India 32Remittances outside India 33Rules specic to NRI/PIO 34Case Studies 41

Key aspects once you make your decision Welcome to India 45Work permit and visa 45Movable asset rules 46Trailing tax and social security issues 47Case studies - Tax 48Case studies Social Security 49

Schemes for Overseas Indians 50Central Government initiatives 50Government of Assam 55Government of Bihar 55Government of Gujarat 56Government of Karnataka 57

Government of Kerala 58Government of Odisha 59Government of Rajasthan 60Appendix 61

Frequently asked questions 62A. TAX 62B. FEMA 64C. SOCIAL SECURITY 66D. IMMIGRATION 67

Useful websites 69

About Ministry of Overseas Indian Affairs 70

About Confederation of Indian Industry 71

About Deloitte 72About OIFC 73

Key contacts 74


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Message

Dear Friends,

Greetings to all of you!

I am pleased to know that the Overseas IndianFacilitation Centre (OIFC) has taken the initiative to bringout a publication, which would illustrate the policies,procedures, case studies and the opportunity areas ofinvestments into India from the perspective of ReturningIndians.

During my interactions with my Overseas Indian friendson various occasions, some of whom are consideringmoving back to India, I have felt that uprooting a familyis a very complex decision. Many questions haunt theirminds which city to move to, what job to take, thedecision to start a business, schooling for kids and more.

I hope this new publication Returning Indians - Allthat you need to know will address the questions of

Returning Indians and prove to be a useful repositoryof practical information.

Vayalar RaviMinister of Overseas Indian Affairs


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Preface

Greetings!On the occasion of the Tenth Pravasi Bhartiya DivasConvention 2012, it gives us great pleasure in bringingout Returning Indians - All that you need to know, aone point reference book for those seeking to return toIndia.

The Ministry of Overseas Indian Affairs (MOIA) is thenodal Ministry for all matters relating to overseas Indiansand also handles all aspects of emigration and the returnof emigrants.

Returning Indians are sometimes intimidated by theirnew surroundings and require credible support for theirbasic queries such as what they can bring back to India;pension and social security concerns; taxation matters;what bank accounts they can operate and more.

The Overseas Indian Facilitation Centre (OIFC) setup by the MOIA in 2007, in partnership with the

Confederation of Indian Industry (CII), is a specialpurpose vehicle of the MOIA which provides facilitationservices to overseas Indians, especially for theireconomic engagement with India.

With credibility extended under the umbrella of theGovernment and an institutional industry chamber,coupled with the support of a network of subject-matter experts, Indian states, Indian missions and Indiandiaspora associations, the Centre addresses the queriesand concerns of returning Indians, making it easy forthem to return to India.

I hope that returning Indians will nd this referencebook a useful guide in their quest for information aboutthe regulatory and practical dimensions in India.

We are grateful to Honble Minister of Overseas IndianAffairs Shri. Vayalar Ravi, for his encouragement andguidance in bringing out this book. We also place onrecord our appreciation for the contribution madeby Deloitte Touche Tohmatsu India Pvt Ltd, OIFCsknowledge partner, for this publication.

Parvez DewanSecretary, MOIA and Chairman, OIFC



Preface

Greetings to all of you!

Recession and uncertainties in the regions with largeconcentration of Indian diaspora population andemerging opportunities in India together have created agrowing possibility of reverse migration.

Increasingly, Indians abroad see the move to India, atthis point in time, as a way to have the best of bothworlds. With rapid growth and development, the basicamenities that they are used to in overseas l ike access toworld-class healthcare, international schools, availabilityof global brands, high quality housing are now availablein India. Work experience in India is valued, as havingrelevant exposure in a growing and developing countryadds weightage to your resume. Adding to this, theproximity you can have with your family, relatives andfriends are winning propositions.

Confederation of Indian Industry (CII) has beenprivileged to incubate and support the Overseas IndianFacilitation Center (OIFC), in a Public Private Partnershipmode, with the Ministry of Overseas Indian Affairs(MOIA). The OIFC has been playing a proactive andpivotal role in expanding the economic engagement ofoverseas Indians with India.

I hope OIFCs upcoming publication Returning Indians- All that you need to know, with Deloitte ToucheTohmatsu India Pvt Ltd as its Knowledge Partner, will bea useful guide for those Indians who seek to return toIndia.

Chandrajit BanerjeeDirector General, CII and Co-Chairman, OIFC


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With a 1.21 billion population one can safely say thatthere is a bit of India everywhere in the world! India hasa considerable population overseas, especially in theUSA, the UK, the Middle-East, Australia and Canada.Over the years, Indians have established themselvesin their adopted countries and have earned respectthrough their hard work, dedication, achievements andcontributions to society.

In recent years, however, an interesting trend hasemerged. The oft-heralded term of brain-drain,used to describe talented Indians migrating overseashas seen a balancing force in many overseas Indiansopting to return home. Indias growth story, boomingopportunities along with focused liberalizationmeasures adopted by the Government have resultedin a large number of foreign corporates setting upoperations in India.

The decision to move to India may be an emotional

one inspired by the need to return to ones roots ora rational one, determined by career opportunities.In both circumstances, it is absolutely essential to becompletely aware of the facets of the new environmentthat one is moving to. Returning Indians has beendeveloped keeping all aspects that would impact anIndian wanting to return home. From the rules andregulations to softer aspects like culture, ReturningIndians is the single publication that a returning Indiancan refer to for guidance.

The publication has been divided into four broad heads

for simplicity and convenience. The rst part servesas a general introduction and focuses on the scope

and coverage of the publication along with denitionsfor NRI, OCI and a comparative analysis of the same.The second section is sub-divided into two broadchapters. The rst chapter is an overview of the Indianlandscape which includes lifestyle, investment avenues,taxation and banking systems. The second chapter inthe second section focuses on rules specic to NRIs/ PIOs. A signicant and often common area of concernrelates to the social security system in India. The US,UK and many European nations, for example, have verydeveloped social security systems in place and Indianstypically have queries about the corresponding system,rules and regulations here. These have been explainedand examined in this chapter.

Finally made the decision to come back to India?The third section gives a preview of the signicantsteps that need to be taken before you can travel toIndia. This section will cater to your requirements onceyou have decided to return to India and zeroed in on

your destination city. If you have spent considerabletime overseas, you may have trailing issues relating totax and social security even after you return to India.This section analyses possible issues that you may facetogether with detailed illustrations.

The fourth and last major section of the publication is abrief narrative of the schemes and measures undertakenby the Central and OIFC partner State Governmentsfor the welfare and growth of the overseas Indiancommunity.

We hope that you will nd all the information givenuseful and insightful.

Executive summary



Indians abroad see the moveto India, at this point intime, as a way to have thebest of both worlds. Withrapid growth anddevelopment, the basicamenities that they are usedto overseas like access toworld-class healthcare,

international schools,availability of global brands,high quality housing arenow available in India.


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Introduction: all the basics, covered

This introduction will dovetail into all the basic details.We will discuss: our motivations to develop this publication, extent of coverage, who the intended target audience is classication categories for returning Indians

Scope and coverageReturning Indians has been developed to provideinformation on the amenities in India, the applicableregulations and their impact, procedures/processes tobe complied with and initiatives of the Government forOverseas Indians. Indias growth story and availability ofmyriad opportunities has encouraged an increasing numberof Indians settled abroad to make India home, once again.There are also an increasing number of multi-national

companies who want to set-up shop in India and ensurethat they leverage the tremendous opportunities in agrowing economy. In all of this, the Government has playeda strong role in adopting a liberal and open policy.

This publication seeks to provide assistance andguidance on the various aspects that will impact youwho are returning from across the globe from culturalto regulatory, from medical to social security and more.

Classication of returning IndiansA returning Indian can be classied into four broadbuckets under immigration laws. The key featuresand requirements of the categories as specied underimmigration laws are tabulated below 1:

Particulars Non residentIndian [NRI]

Person of Indian Origin[PIO]

PIO card holder Overseas Citizen of India [OCI]

Denition An Indian

citizenordinarilyresidingoutside Indiaand holdingIndian passport

A person who or whose

any of ancestors wasan Indian national andwho is presently holdinganother countrysoverseas citizenship/ nationality

A person registered as a PIO card holder under

MHAs scheme

A person registered as Overseas Citizen of India under

section 7A of the Citizenship Act, 1955

Eligibility Any person who at any time has held an Indianpassport or who/either of whose parents orgrandparents were born in or were permanentlyresident in India as dened in Government ofIndia Act, 1935 and other territories forming partof India thereafter provided neither was at anytime citizen of Afghanistan, Bhutan, China, Nepal,Pakistan and Sri Lanka or spouse of Indian citizen

or PIO

A foreign national who was eligible To become citizen of India on 26.01.1950 or anytime

thereafter; or belonged to a territory that becamepart of India after 15.08.1947 and his/her childrenand grand children

Whose country of nationality allows dual citizenshipunder local laws

Excluding persons who were citizens of Pakistan of

Bangladesh at any timeExclusion None None PIOs of all countries except Afghanistan, Bhutan,China, Nepal, Pakistan and Sri Lanka

PIOs of all countries except Pakistan and Bangladesh

Procedureforregistration

Noneprescribed

None prescribed Eligible person can apply in prescribed formwith enclosures to the Indian Mission/Post in thecountry where he/she is ordinarily resident2

Eligible person can apply to the Indian Mission/Post inthe country of citizenship or where he/she is ordinarilyresident3

Fees forapplication

Not applicable Not applicable ` 15,000 or equivalent in local currency for adultsand ` 7,500 or equivalent in local currency forchildren below 18 years of age

US$ 275 or equivalent in local currency. US$ 25 orequivalent in local currency for PIO card holders

Permittedactivities

All activities arepermitted

As specied in the visa All activities except mountaineering, missionary,research work and existing prohibited/restrictedareas which require specic permit

All activities except mountaineering, missionary,research work and existing prohibited/restricted areaswhich require specic permit

Indiancitizenship

Already anIndian citizen

As per Citizenship Act;has to reside in India forminimum 7 years beforeapplying for citizenship

As per Citizenship Act; has to reside in India forminimum 7 years before applying for citizenship

Can obtain citizenship after 5 years from the date ofOCI registration provided stays in India for one yearbefore applying for citizenship

1 www.mha.nic.in

2 If the person is in India onlong term visa of more thanone year, he can apply tothe specied FRRO or theJoint Secretary (Foreigners)MHA

3 If the applicant is in India,he/she can apply to thespecied FRRO or to theUnder Secretary, OCICell, Citizenship Section ,Foreigners Division, MHA



Purpose of movementThere are many reasons that could inuence yourdecision to move to India.

Why would a person move to another location?Why and when would one think of returning to hishomeland?

Generally, the more rational decision for movementincludes career growth, increased remuneration,business opportunities and a better standard of living.India has come a long way since independence in termsof industrial development, infrastructural advancementsand new avenues for growth and investment. This hasresulted in increased employment opportunities besidesopportunities for setting up ones own venture.

On the emotional side, there are factors like the desireto be with ones family, to re-connect with ones roots

and culture which encourage Indians to return.

Increasingly, Indians abroad see the move to India, atthis point in time, as a way to have the best of bothworlds. With rapid growth and development, the basicamenities that they are used to at overseas location likeaccess to world-class healthcare, international schools,global brands, high quality housing are now availablein India. Work experience in India is valued, as havingrelevant exposure in a growing and developing countrywhich adds a lot of weight to your resume. Further, theproximity to relatives, friends and family members willmake it a winning proposition.

The decision to move to Indiamay be an emotional one inspiredby the need to return to onesroots or a rational one, determinedby career opportunities.Returning Indian has beendeveloped keeping all aspects thatwould impact an Indian wantingto return home.


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Preparing for the move what youneed to know before moving in

India Landscape

LifestyleYou would need to make many adjustments whilerelocating to another location. Key concerns at thetime of relocation would revolve around your family.Accommodation, schooling, housing, medical facilitiesavailable are typically the most important priorities whenyou are planning to relocate. This section focuses on theavailable infrastructure facilities, the prevailing culturalnorms and other developments in India today.

Location assessmentThe decision on which city in India you want to settledown in would depend on various factors, includingproximity to family, career opportunities, the weather ina particular city, the infrastructure, educational needs ofthe children, etc. While some factors may be personal,others would be dictated by purely practical reasons suchas the location of the work place. Considering that there

are many Indian cities that have become cosmopolitan,deciding on a city that best suits your needs shouldnot be too challenging. There is a signicant amountof information that is easily available. This along with

awareness of the developments in India overseas wouldhelp you make the right choice for you!

HousingAfter taking a decision on the city to relocate, the nextchallenge is identifying suitable accommodation. Amajor decision that you would have to take is whetherto purchase a house, or to stay in a rented property. Ifyou are returning to India for employment, there is ahigh probability that the employer might take care ofyour housing facilities.

The Indian cities are expanding breadthwise andhousing projects are increasing by the minute. Withproperty developers vying with each other to provide amyriad of facilities and benets, you have a wide optionto choose from while deciding on accommodation.From integrated townships to condominiums tobungalows, Indian cities have them all. If the type ofaccommodation is wide ranging, the building styles

incorporating Italian/French and other European designsdoesnt lag behind either. You can make a choice evenbefore landing in India just at the click of a button sincethe real estate sector is omnipresent in the cyber space.



Certain rules and regulations govern the process ofpurchase of immovable property, which is explainedfurther in this publication.

Renting in the initial years may be a good option, whilebuying can be contemplated at a later stage.

SchoolingIndia has always been known for its sound educationsystem, and many of you would want your children tobe exposed to the sort of educational environment thatyou/your parents grew up in. The rigorous academicgrounding, inculcation of values and focus on hard workis what makes the Indian education system so highlyvalued the world over.

Overall, schooling in India involves 12 years, followingthe "10+2 pattern. Indian education system comprisesof the following stages- pre-nursery (popularly referredto as pre-school), Nursery, Primary, Secondary (class

9-10), Higher Secondary (class 11-12), Graduation andPost-Graduation. Some students go into a differentstream after Secondary school for 3 Years, opting fortechnical education.

Indian schools can broadly be classied into privateand public schools. Private schools are run by privateindividuals or trusts, while Public schools are run entirelyby the Government. Private schools in turn are d ividedinto two types: recognized schools and unrecognizedschools.

Government schools include the central schools, thestate Government schools, and municipality schools.There are a large number of Government-fundedschools in India. According to a recent estimate,80% of all schools are Government schools, makingthe Government the major provider of education inIndia. These schools often offer free education, food,uniform, etc. to students. They are afliated either tothe Central Board of Secondary Education (CBSE) or theState Boards. Another category of Government-fundedschools are the Kendriya Vidyalayas. The KendriyaVidyalayas were set up to cater to the educationalneeds of children of transferable Central Governmentemployees by providing a common programme ofeducation across locations.

In addition to Government schools, there are a largenumber of private schools in India. Most private

schools are afliated to the CBSE or the Indian SchoolCerticate Examinations (ISCE). While the ISCE and CBSEprogrammes are well-recognized and respected, therecent years have seen a huge surge in schools offeringthe International Baccalaureate (IB) programme which isreputed to follow a more exible programme and catersto the needs of the mobile population.

With the recent passing of the Right to EducationAct, education has become a fundamental right of allchildren in the age group of 6-14 years.

Private pre-schools in India have become an importantaspect for overall development of a child. Thepre-schools prepare toddlers for kindergarten andelementary schools, and also help them interact with aworld outside their homes. Supporting the pre-schoolstage, the Government launched the Integrated ChildDevelopment Services (ICDS) Scheme, in 1975. The ICDStoday represents one of the worlds largest and mostunique programmes for early childhood development.ICDS focuses on providing pre-school education andnutrition, especially to the girl child.

Acknowledging the importance of skilled manpowerrequirement for the economic development of thecountry, the Government of India has accorded greatimportance to vocational education and training. Underthe twelfth ve year plan, vocational education has


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received a boost with more funds being allocated for thepurpose. Vocational education in India aims to developskilled manpower through various courses to meet therequirements of mainly the unorganised sector and toinstill self-employment skills. Vocational education isimparted through Industrial Training Institutes (ITIs),which are Government-run training organisations, andIndustrial Training Centres (ITCs) which are privately-runequivalents. In addition, polytechnics provideundergraduate and postgraduate diploma courses inengineering (or technical) and other vocations.

The renowned Indian Institute of Technology (IIT) andthe Indian Institute of Management (IIM) personies theglory of the Indian education system. IITs produce worldclass engineers and technocrats in India who serve therequirements of the industries the world over. There arefteen IITs at present, located in Bhubaneswar, Mumbai,Delhi, Gandhinagar, Guwahati, Hyderabad, Indore,Kanpur, Kharagpur, Chennai, Mandi, Patna, Punjab,

Rajasthan and Roorkee.

IIMs are India's premier management institute. Theywere set up with the objective of providing world-classmanagement education, and to assist the industrythrough research and consulting services. There areabout thirteen IIMs located in Ahmedabad, Bangalore,Kolkata, Kozhikode, Lucknow, Indore, Shillong, Ranchi,Rohtak, Raipur, Trichy, Udaipur and Kashipur.

India hence offers a vast choice of schools, collegesand professional courses. All the major schools andeducational institutes in India have their own website;one can research these on the internet before moving toIndia, and make an informed choice beforehand, basedon ones requirements.

Timing for moving is also an imperative aspect. Thetypical academic year in Indian schools is from Juneto March. If you are planning to return in the middleof an academic year, you could make enquiries withthe educational institutions to ensure that your childs

education is not impacted.

Bangalore Chennai Delhi Kolkata Mumbai

The International School Mallya Aditi International

School AirForce School National Public School Ryan International

School Bishop Cotton School Vidya Niketan School Oasis International

School Swaminarayan

International School Canadian International

School BGS International

Residential School B E L School

American InternationalSchool

Padma Seshadri BalaBhavan School

DAV Senior SecondarySchool

Vidya Mandir SeniorSecondary School

Chettinad Vidyashram Lady Andal

Venkatasubba RaoMatriculation HigherSecondary School

Good Shepherd HighSchool

P.S. Senior SecondarySchool

Chinmaya Vidyalaya

Bhavans RajajiVidyashram

National Public School St. Johns Senior

Secondary School

Shri Ram School The Mother's

International School Carmel Convent School Modern School Lotus Valley International Loreto Convent Delhi Public School Kothari International

School GD Goenka World

School Amity International

School Blue Bells Tagore International Mount St. Marys

St. Xaviers CollegiateSchool

La Martiniere School St. James School Loreto House Don Bosco School M P Birla Foundation Hr.

Sec School Calcutta Boys School The Heritage School Salt Lake School Auxilium Convent Assembly of God Church

The Cathedral and JohnConnon School

Bombay InternationalSchool

J.B. Petiti High School Ecole Mondiale World

School Podar World School Bombay Scottish School Jamna Bai Narsee School Arya Vidya Mandir Don Bosco High School SVKM International

School NES International School Singapore International

School Dhirubhai Ambani

International School American School of

Bombay

Illustrative list of recognized schoolsA list of some recognized schools in the major cities is given below:



Medical FacilitiesThe medical facilities in India are rated as one of thebest in the world. The increasing paying capacity ofIndians and health awareness has triggered exponentialgrowth of very high quality healthcare service. Thisgrowth can be understood from the very fact that evenfor complex treatments like Cardio, India has emergedas a major destination for low-cost medical care at topinternational standards.Medical tourism is becominghighly popular.

We have appended the list of hospitals in the majorcities of India for your reference.

Every Indian city has Government and private hospitals.Treatment in Government hospitals is accessible to all.These hospitals provide free service to the poor, whilecharging low rates from others, as compared to privatehospitals. Government hospitals give quality treatmentat affordable prices, and these hospitals have been

consistently ranked amongst the top hospitals in India,in terms of quality, especially the prestigious All IndiaInstitute of Medical Sciences (AIIMS)4.

India has amongst the best super specialityhospitals spread out over the entire country, bothgovernment-run as well as privately managed. Amongstthe most renowned are All India Institute of MedicalSciences (AIIMS), Delhi and Post Graduate Institute ofMedical Education and Research, Chandigarh in theGovernment sector, as well the privately-run Apollohospitals (with branches all over the country), Christian

Medical College, Vellore, Breach Candy hospital,Mumbai, Medanta, the Medicity, Delhi and many more.

Alternative medicines can often work in conjunction

with conventional allopathic medicines, and Indianshave been relying for centuries on treatments likeAyurveda, Homeopathy, Nature Cure treatment,yoga, Unani and many more. These medicines haveincreasingly found global acceptance. For manyreturning Indians who may seek a change from modernhealth care cures, India will offer vast options in theeld of alternative medicines. These medicines havewithstood the test of time, and offer a gentle, natural,non-aggressive path to health a path most likelyfollowed by the NRIs parents and ancestors! Onecan obtain more information from the website of the

Department of AYUSH dealing in traditional Indianmedicine.

Illustrative list of prominent hospitals in India

Bangalore Chennai Delhi Kolkata Mumbai

Manipal Hospital Apollo Hospital Narayana Hridayalaya St Johns Medical

College & Hospital Fortis Hospital

Mallya Hospital Lakeside Medical Centre

Apollo Hospitals MIOT Hospitals Fortis Malar Hospital Vijaya Hospital Sooriya Hospital Agarwal Eye Hospital

Sankara Nethrayala Frontier Lifeline Hospital

All India Institute ofMedical Sciences

Apollo Hospitals Escorts Heart Institute &

Research Centre Max Super Speciality

Hospital Batra Hospital and

Medical Research Centre Sir Ganga Ram Hospital

Ruby General Hospital Fortis Hospitals & Kidney

Institute Peerless Hospital &

B.K.Roy Research Centre Apollo Gleneagles

Hospital Desun Hospital & Heart

Institute The Calcutta Medical

Research Institute

Jaslok Hospital andResearch Centre

Bombay Hospital Hinduja Hospital and

Medical Research Centre Fortis Hospitals

Tata Memorial Hospital Lilavati Hospital Breach Candy Hospital

4 The WEEK/Hansa 2011ranking


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Culture - India vis--vis the worldIndia is now viewed as a land of opportunities andOverseas Indians are nding the need to connect withtheir motherland even more. The desire to return toIndia is cherished by a growing number of Indianssettled abroad and the numbers returning to theirmotherland is growing every year.

This relocation gives rise to the challenges ofre-adjusting oneself to cultural changes in thehomeland. The children, who may have been born andbrought up outside India, may face a bigger challenge.Having become accustomed to a certain lifestyle abroad,adapting to a new culture - to the way people dress,dine, work and dwell in a new environment, may taketime and effort.

However, with globalization, adapting to newgeographies has become a reasonably simpler process.Indians returning after a long gap will nd remarkable

changes in every sphere of life in India. In the recentpast, a signicant number of Indians have travelledand lived overseas, and with this increased mobilityhas come exposure to foreign cultures and way oflife. In addition to this, access and use of the internetin India has increased phenomenally. The new-age,widely-travelled, technologically savvy Indian is notonly tolerant to foreign ideas, but is keen to try out andexperiment with different cuisines, clothes, cinema,languages etc.

Dress

The culture, religion, languages spoken and attire ofthe people of India are as diverse as the landscape ofthis vast country. Due to its diversity, India does nothave just one dress, which can be called as the National

Dress or Indian Dress. Each of the 28 states has its ownunique way of dressing. Indian costumes are vibrant,comfortable and adaptable, according to the climate ofthat particular region.

As anywhere else in the world, the kind of dress youwear in India would depend primarily on the occasionfor which it is worn. The attire would be differentdepending on whether it is a social function, a marriage,a religious function, a business meeting, etc.

If you are an Indian returning from the West, you wouldbe accustomed to Western attire and may be anxiousabout dressing appropriately in India, keeping Indiansensibilities in mind. With globalization, western attiresare becoming increasingly popular and common inIndia, especially amongst the younger generation.You will be pleasantly surprised to nd that most ofthe international brands of clothing which you areaccustomed to wear in your host country are easily

available at the next door shopping mall! However, itis important to remember that your clothing should berespectful of the local culture.

LanguageThe principal ofcial language of the Republic of India isHindi, while English is the secondary ofcial language.In addition, India accommodates a large number ofregional languages as well.

You, and more importantly your children, may not beused to English the way it is spoken in India, and may

initially face a challenge in adapting to the accent and tothe relatively formal use of the language in India. Culturalsensitivities may also need to be kept in mind, includingthe appropriate way to address your seniors at the

India is now viewed as a land of opportunities, andoverseas Indians are nding the need to connect with theirmotherland even more. The desire to return to India ischerished by a growing number of Indians settled abroad,and the numbers returning to their motherland isgrowing every year



workplace and your elders at home. A large number ofmultinational companies operate in India, and the workculture in these companies, including the language, maybe one you are familiar and comfortable with.

Many schools in India require the children to learn asecond regional language, besides English. This maypose a challenge to the Overseas Indian child whowould not be familiar with any such language.

Indians show keen interest in learning foreign languageslike French, German, Spanish, Japanese, etc. Thoughthese languages are not commonly spoken in India,with the increase in trade with countries wherethese languages are spoken, the desire to learn theselanguages has increased, since this would open doors toglobal job opportunities.

FestivalsIndia celebrates a large number of festivals all across the

country, throughout the year. Each of the Indian stateshas its own set of festivals with their unique ways ofcelebration. Each festival is backed by a unique story/legend behind its evolution, stories which have beenpassed down from generation to generation. The talesare equally fascinating and as varied as the celebrationitself. Festivals in India are occasions to celebrate withfamily and close friends.

In addition to religious festivals, India is also home tosome of the most renowned cultural festivals across thelength and breadth of the country. From the Khajuraho

dance festival to the Bikaner festival, from Pushkarfestival to the Konark festival India can well and trulybe lifetimes of rich and diverse experiences combinedtogether.

Many of you will agree that one of the greatest joys ofcoming back to India is the opportunity to once againparticipate in the revelry and joy of these festivals, withones own.

FoodWith changing lifestyles, a clear shift to the nuclearfamily system and busy work schedules, the eatinghabits of Indians, especially in the metros, has clearlychanged. World class malls, multiplexes and shoppingarcades with multinational fast food chain of restaurantsare common and extremely popular.

You will have the best of both worlds the food youhave become accustomed to in the country you haveleft behind and the home cooked Indian food you soloved while growing up in India.

Additionally, there are numerous international hotelchains in India the Taj group, the Oberoi group, LeMeridian group, etc. They offer world-class servicethat can be expected in any leading hotel in the world,coupled with warm Indian hospitality.

TrafcAs an Indian returning to your homeland after a hiatus, youmay not be used to the volume of trafc on the roads hereand may take a little while to get used to it. The volumeof trafc on the Indian roads has increased exponentiallyin the last couple of decades though the Government istaking steps to widen roads and providing alternate routesto ease the trafc congestion. The Bandra Worli sea link, anarchitectural phenomenon is one such welfare measure to

help Mumbaikars reduce their travel times.

The Government initiative to partner with the privatesector in developing and maintaining highways has metwith stupendous success as is evident from the EastCoast Corridor. The introduction of metro rail and airconditioned buses in the major cities has also providedan alternative to commuting driving.

Public transport rail, buses, metros, etc. - remains theprimary mode of transport for most of the population,and India's public transport systems are among the most

heavily used in the world. The Government has recentlyannounced the National Common Mobility Card whichwill facilitate cashless travel in public transport systemlike railways, metro rail, buses, taxi, besides toll taxesand parking.

Rail transport is a commonly used mode of long-distance transportation in India. Almost all railoperations in India are handled by a state-ownedorganisation, i.e., the Indian Railways, Ministry ofRailways. The rail network in India is one of the largestnetworks in the world. Many cities also have their owndedicated suburban networks to cater to commuters.India also has rail links with Pakistan, Nepal andBangladesh. India has some of the lowest train faresin the world and rail travel is heavily subsidised. Today,railway tickets can be booked through the internet andvia mobile phones.


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Buses form a very important module of public transportin Indian cities, and serve as a cheap and convenientmode of transport for all classes of society. Bus servicesare typically run by State Government owned transportcorporations. In the recent past, various facilities havebeen introduced like air-conditioned buses and low-oorbuses for the differently abled. Another new initiative isthe Bus Rapid Transit (BRT) system which already exists inPune, Delhi and Ahmedabad with new ones coming upin Visakhapatnam, Hyderabad and Bangalore. Buses go along way in helping decongest the busy Indian roads.

The rst modern rapid transit in India was the KolkataMetro, with operations starting in 1984. The ChennaiMass Rapid Transit System was introduced in 1997. TheDelhi Metro in the capital city of New Delhi is the thirdconventional metro which began operations in 2002. TheDelhi Metro Rail Corporation (DMRC) project changedthe lives of the commuters in the National Capital Region(NCR) of Delhi, covering every area of the Delhi NCR:

Delhi, Gurgaon, Noida and Ghaziabad. It is one of thelargest metro networks in the world.The Namma Metroin Bangalore is India's fourth operational rapid transitbeginning operations in 2011. The main objectives ofa mass rapid transport system - which are to reducetrafc on road, make passengers life easy, save their timeand cost are met admirably in each of the four cities.Currently, rapid transit systems are under construction orin planning stage in several major cities of India.

The Government has opened up the Indian skies to theprivate sector resulting in diverse players competing

with each other to offer the passengers the best inrates, infrastructure and facilities. The airports in themajor cities have been revamped and can compare withthe best in the world. No wonder the A380s can soonbe seen touching down on the Indian runways.

Access to brands/shoppingWhile you may get trafc on the way, chances are thatif you have the money, you can be driving (or rather,be driven!) in latest model available of a very high-endbrand of car and reach a mall where you will ndoptions to all the international brands from a Mango,Aldo, Marks & Spencer to a Guess, Next and JimmyChoo. And when you are tired and hungry, you can tuckinto a Pizza Hut, a KFC or a McDonalds. The beauty ofit is the Indian twist, where you can have a vegetarian

Paneer Burger! Theres also the array of ice-creamparlours offering smoothies, sorbets, ice-creams and ourvery own Kul for one to savour.

Seeing familiar and recognised brands and having accessto sanitised environments also adds to your comfortzone.

The Performing ArtsWelcome back to a rich world of music, dance, art,theatre and culture! Indian art and culture is one of theoldest in the world, and one you can be justiably proudof. Given below are very brief outlines of Indian music,dance and other performing arts.

MusicIndian classical music may be categorized into twotypes - Carnatic (south Indian) and Hindustani (northIndian). Carnatic and Hindustani music have features incommon, but their rendition and articulation are usually

distinctive.

DanceDance has always played an important role in India asan integral part of worship, a career option, a pastimeand as a part of theatre. Some of the well-known Indiandance forms are - Bharatnatyam, Kathakali, Manipuri,Kathak, Odissi, Kuchipudi and Sattriya. These danceforms date back to many centuries and speak volumesof the countrys rich cultural heritage.

There are numerous institutions in India that provide

training (both basic and advanced) in the various artforms.

Theatre and lmsIndian theatre has a history going back to more than5000 years. Indian folk theatre has an ancient and richtradition, and is distinct to the states from where itoriginated - Jatra in Bengal, Orissa and Bihar, Tamasha inMaharashtra, Nautanki in Uttar Pradesh and so on. Ramlilais another important form of folk theatre in India, basedon the mythological story of an epic battle between LordRama and the Demon Ravana, and is staged in the monthof Dussera throughout India. The festival symbolizesthe triumph of good over evil. Puppetry is another veryancient form of theatre in India. The modern theatre inIndia is also ourising.



While theatre has been a very popular art form in Indiain the past, it is struggling since the arrival of televisionand movies. More lms are made in India than any othercountry, and lms and lm music typically forms a largeand very important part of an Indian persons life.

India is home to some of the most exquisite handicraftsin the world. These handicrafts are showcased in variousgovernment-owned state emporiums like Lepakshi(Andhra Pradesh), Manjusha (Bengal), Rajasthali(Rajasthan), Gangotri (UP), Poompuhar, Khadi Kraft(Tamil Nadu) and many others.

Cultural centers Sangeet Natak Akademi National School of Drama Sri Ram Center of Performing Arts Lalit Kala Academy Gandharva Mahavidyalaya Prithvi Theater

Kalakshetra

Exciting times aheadIndia is taking giant strides in technologicaladvancements and striving to be up there with thebest in the world. The Government is tapping thetalent pools from public/private sectors towards thisend. The Unique Identication Number [UID] is onesuch ambitious initiative that will go a long way ininformation gathering and e-governance. If you are fromthe USA, you could relate this UID to the social securitynumber that is the key to the world of benets.

India has always been known for the depth of itsscientic talent and the activities of the Indian SpaceResearch Agency and Defence Research Organizationslend weight to this claim. Also, Indian informationtechnology specialists have designed and developed therst indigenous tablet Aakaash that is said to be thecheapest in the world.

India also has a big presence in the area of sports. Ifyou are an avid sports fan, you will nd that India hassome of the nest arenas/academies today like the BudhInternational Circuit (for Formula 1 racing), the PulelaGopichand Academy, the MRF Pace Foundation etc.

ConclusionMany of you, especially, those who have been awayfor many years, will nd enormous changes for thebetter in the quality of life in India. Many facilities areof international standards, and Indian metros are fastacquiring the status of cosmopolitan international cities.Yet, while Indians have welcomed and accepted theseglobal changes, the uniqueness in attires, festival, foodetc. has been ercely guarded and maintained to cherishthe Indian culture.

While taking changes in their stride, Indians seemto have abided by Rabindranath Tagores famousphilosophy (which was also admired and followed byMahatma Gandhi):

"I would let the winds of the world blow through thedoors and windows of my house - but I will not beblown away."


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5 Section 29(2) of the PFScheme

20

Social securitySocial security provides support to citizens in times ofneed unemployment, illness, disability, death andold age. The social security scheme in India covers thework-force in the organised sector and the employerseither solely or jointly contribute with employees forthe social security schemes. The Ministry of Labour andEmployment has a social security division which mainlyfocuses on framing policies for social security for theworkers of organized sector.

Unemployment, medical and health insuranceThe issue of unemployment is taken care of through theNational Rural Employment Guarantee Act (NREGA) forrural area. The concern of medical help and insuranceis taken care of by Employees State Insurance (ESI) foremployees earning salary lower than the prescribedlimit. The Workmens Compensation Act providescompensation for industrial accidents and occupationaldiseases resulting in disability and death.

Provident and Pension FundThe retirals are taken care of by the provident fundand pension fund contributions.

The governing legislation for contribution and collectionof social security is The Employees Provident Fund andMiscellaneous Provisions Act (PF Act).

Under PF, a lump sum amount is available to the employeeon retirement or on other contingencies arising to theemployee. It is a dened contribution plan funded by

monthly contributions by the employer and the employeeto the fund. The fund currently earns an interest at 9.5%p.a. on the closing balance. Withdrawal of accumulationswill be tax free after 5 years of contribution. In caseof early withdrawal, contribution made by employerand deduction availed in the past years will be taxable.An employee can also avail loan facility against theaccumulated balances for identied purposes.

The pension funds make monthly sums available to theemployees on retirement. Such annuity payments arefunded by monthly contributions made by the employerand the Central Government. The pension amount woulddepend on the quantum and the period of contributionmade by the employer. Monthly pension will be taxable atthe progressive tax rates in the year of receipt.

Since both the employer and employee need tocontribute towards PF, we shall examine these in

detail below-The PF Act is applicable to all establishments employing20 or more employees during the year and thecompliance of provisions of PF Act are mandatory forall employees earning a basic pay of ` 6,500 or lessp.m. Where the basic pay is higher than ` 6,500, theemployees can opt out of the scheme under certaincircumstances.

ContributionUnder the PF scheme, the employer would have tocontribute 12% of monthly pay towards social security

contributions. The employee would have to make amatching contribution, though he would have an optionto contribute more than 12% 5.

The contributions for a domestic employee would be asfollows:

Employers contribution Employees contribution

Pension Fund 8.33% ofmonthly pay subject toa maximum of ` 541 or

` 6,500 per annum

Pension Fund NIL

Provident Fund 12% of

monthly pay less pensioncontribution

Provident Fund 12% of

monthly pay

Total 12% Total 12%

The social security scheme inIndia covers the work-force inthe organized sector and theemployers either solely orjointly with the employeescontribute to the social securityschemes.



Monthly pay is a broad term and covers: basic wages (all emoluments paid or payable in

cash while on duty or on leave/holiday); dearness allowance; retaining allowance; and

cash value of any food concessions.

However, house rent allowance, overtime allowance,bonus, commission or any other similar allowance orpresents are excluded from the denition of monthlypay for PF contribution.

Tax benet of contributionsThe employers contribution upto 12% of monthlypay is not liable to be taxed in the employees hands.The employees contribution would be entitled tobe deducted from their total taxable income upto amaximum of ` 100,000 p.a.

Gratuity

Gratuity is a gratuitous payment made by the employerto his employees on resignation from employment,death, retirement, termination etc. and is mandated bylaw. The quantum of gratuity payment will depend onthe salary and tenure of employment. It is an importantform of social security, though not strictly a retiralbenet. Gratuity is mandatory if the employee hasrendered ve years of continuous employment with anemployer and is covered under the Payment of GratuityAct. However, the condition of ve years continuousservice is not necessary for termination due to death or

disablement. Gratuity receipts are taxable as salary andwill be exempt to a maximum of ` 1,000,000.

Insurance schemesBased on the varied life styles of the individual, theinsurance needs differ from person to person. Insuranceis divided into two major categories: Life Insurance andGeneral insurance. There are a number of private andpublic companies that provide insurance services andmost of the policies can be taken online.

The typical types of insurance policies are:

Life InsuranceIn this policy, the insurance company pays in case of thedemise of the policy holder or at the time of maturity. ALife Insurance plan ensures that the family is nanciallysecure even in the unfortunate event of the demise ofthe bread earner.

Health InsuranceHealth insurance consists of a package of various typesof insurance related to health.

Insurance companies offer many products with differentpolicies and prices depending on the needs of the user.It is important to determine what ones requirementsare, and what health insurance benets one is lookingfor in the plan. For instance, use of regular medicationsthe coverage already provided by ones employer,family history of diseases, are all deciding factors in


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determining the premium amount one will pay.Pre-existing diseases can affect your health insuranceclaim. It is necessary to examine the terms of the policycarefully, so that the claims are not denied later on.

Property InsuranceThis insurance helps you to prevent the losses againsttheft, re, burglary or any natural calamity like

earthquake, oods etc. resulting in damage to property

Auto InsuranceThe costs of getting a vehicle repaired in the eventof damage, or replacing in case it is stolen, can beenormous. A comprehensive auto cover to give oneall-round protection is a must, especially keeping in mindthat the rate of accidents on Indian roads is higher thanaverage. Auto insurance also covers third party insurance.

Travel insuranceA Travel Insurance Policy gives an individual

comprehensive cover for himself and his family whiletravelling. A Travel Insurance Policy must go beyond justhealth insurance and provides the insured person witha wide range of travel-related covers to make his tripstress-free. Loss of personal belongings while travelling,medical coverage, delays in travel are all part of thetravel insurance policy.

Investment avenues

Savings instrumentsTodays savings is tomorrows investment is an oftrepeated saying. The Government is taking various stepsto inculcate and promote the habit of savings amongstthe people. Towards this end, the Government hasprovided tax incentives/reliefs for savings made. Themost popular savings among the salaried class in Indiais the PF detailed above. Returning Indians coming to

India on employment will be covered by this dependingon whether they hold an Indian passport. Besides,individuals drawing basic salary in excess of ` 6,500 mayopt out of the PF scheme. The other kinds of popularsavings instruments are:

Bank xed depositsFixed deposits with banks can be opened for varyingtime periods and quantums. The deposits may becumulative or non-cumulative. The interest rates arerelated to the tenure of the deposit and taxable in thehands of the investor.

Public Provident Fund [PPF]PPF account (with post ofces/banks) is a simple and easyto maintain investment that facilitates recurring savings.The investor can contribute on a monthly basis or oncea year up to ` 100,000 to this account. The account hastenure of 15 years that may be extended and be opened atany branch of the SBI or its subsidiaries, at any post ofce

or at the branches of specially nominated nationalisedbanks. One can also withdraw from his/her account up tospecied limits and subject to conditions. Both the interestaccruing annually as well as the withdrawal of the balanceon maturity are tax free.

Life InsuranceThe life insurance schemes are detailed earlier in thischapter. They act as tax saving instruments as well assecurity measures. The amount received from the insureron death of the insured is tax free. In other instances,the sum received is not taxable provided the premium

payable during the policy term does not exceed 20% ofthe capital sum assured.

Equity Linked Savings Scheme [ELSS]Equity Linked Savings Scheme gives you an opportunityto take advantage of the equity market all the whileenjoying tax benets. These schemes have a lock inperiod during which withdrawal is not permitted.This is a risk and reward scheme that is dependent onstock market movement. The returns from ELSS are taxexempt.

Post Ofce Savings SchemesIndividuals may also choose from the savings optionsprovided by post ofces. These include a regular savingsaccount, monthly income schemes, National SavingsScheme, National Savings Certicate [NSC], etc. TheGovernment of India uses the deposits made with post

Todays savings is tomorrowsinvestment is an oft repeated saying.The Government is taking various

steps to inculcate and promote thehabit of savings amongst the people.



ofces for developmental works. Post ofces also followmore or less same rules and procedures as banks whenan individual opens an account with them.

NSC is a savings scheme of the Government and isavailable at post ofces in varying denominations as lowas ` 100. NSCs mature after 5 years and earn interest atprescribed rates. This interest accrues on an annual basisbut is paid on maturity. Also, the interest is taxable forthe investor though it qualies for deduction within theoverall limit of ` 100,000.

Monthly income schemes provide xed monthly incomesat the specied rates depending on the sum investedupfront. The interest received on monthly incomeschemes is taxable while interest on post ofce savingsaccount is exempt upto prescribed limits.

Investments with post ofces are safer since therepayment on maturity is guaranteed by the Government.

Other investmentsIndividuals can also invest in equity shares/debenturesand mutual funds through the stock exchanges. For thispurpose, the individual must have a trading account witha depository participant and can then buy and sell online.

These investments carry the associated risk of riseand fall in stock index though the returns may beproportionately higher.

Taxation system in India

Statutory framework The Income-tax Act, 1961 (Act) lays down the framework for taxation of income. The Central Board of DirectTaxes (CBDT) is the governing body for income-tax andis a part of Department of Revenue in the Ministry ofFinance. An individual can resort to the provisions ofthe Act or Double Taxation Avoidance Agreements(DTAA/tax treaty) whichever is benecial. To avail suchbenecial provisions, the individual should be a taxresident of either India or the treaty partner.

Tax Year The Indian scal year runs from 1 April to 31 March. Thetaxable period is referred as previous year/scal year/taxyear/nancial year. Income earned during the taxableperiod is declared in a tax return in the year followingthe said tax year.

Tax residenceTaxation in India depends on the residential status of aperson determined in accordance with the provisions ofthe Act. In the case of an individual, this is determinedbased on the number of days of stay in India in aparticular scal year. In the case of companies, thecountry of incorporation and place of managementdetermines the residential status.

We will move on to the specics of individual taxation inthe ensuing pages.

Individual tax

Permanent Account Number (PAN)PAN is a 10 digit unique alphanumeric number allottedto tax payers. This is a unique number allotted to anindividual only once. If you have obtained a PAN at anypoint of time, you can continue to use the same numberfor any interaction with the tax authorities in India.

PAN is used as a reference to track income, taxes andnancial transactions of a tax payer. An individual canhold only one PAN and obtaining or possessing morethan one PAN is a penal offence. It is compulsory toquote PAN in investment/nancial transactions.

Applying for PANPAN application can be made either online or bysubmitting a physical form. The tax authorities haveprescribed specic forms for Indians and foreignnationals. While an Indian citizen should apply for PAN in

Form 49A, Form 49AA is to be used by foreign nationals.The PAN application form requires details such as name,

Need for PAN

Quote PAN

Paying taxes

Entering into nancialtransaction notied by

the government

Filing of tax returns

Correspondences withtax department


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fathers name, date of birth, correspondence address,telephone/mobile number and e-mail address. The formshave been amended in October, 2011 to include a KnowYour Client (KYC) section.

Besides the completed form, documentary evidencesshould be enclosed with the application. There is alsoa stipulated fee ( ` 94 for an Indian address/ ` 944 foroverseas address) that is to be paid either by way of cash/ demand draft/cheque at the time of applying for PAN.

On submission of the application form and supportingdocuments, the authorities allot PAN in 3-4 days if therequirements are met. Further, it takes 15 days on anaverage from the date of application to receive thePAN card. An applicant receives intimation once PAN isallotted at the e-mail address specied in the applicationform. The applicant may at any time, track the PANstatus by logging on to www.tin-nsdl.com by specifyingthe acknowledgement number provided at the time of

ling the application.

PAN in case of change in address/loss of existingPAN Card PAN issued once can be used for life and will notget altered due to change of address or loss of card.However, a request may be made for correction/changesto the details provided at the time of initial applicationor for obtaining a duplicate card (through online/ physical form) quoting the PAN allotted earlier. Thisapplication is to be made in the change form togetherwith supporting documents. The fee for any changes

remains the same as that of the original application.

Can PAN card be delivered overseas?PAN card will be delivered to the overseas addressmentioned in the application form provided suitabledocumentary proof for the overseas address is furnishedat the time of application.

Steps for applying PANDocumentary requirementsThe documentary evidences would differ for anIndian citizen and foreign national. The following arethe documentation requirements prescribed by theauthorities vide notication dated 17th October 2011.In case any of the documentary proofs are available inforeign language, the same may have to be translatedin English and duly attested by the Indian embassy/ HighCommission/ Consulate though such requirement is notmandated by the Income tax department.

Documentary requirements for PAN application inForm 49A by a Citizen of India

Proof of Identity Proof of Address

Copy of- school leaving certicate; or matriculation certicate; or degree of a recognized educational

institution; or depository account; or credit card; or bank account; or water bill; or ration card; or property tax assessment order; or passport; or voter identity card ; or driving licence; or certicate of identity signed by a

member of Parliament or Member

of Legislative Assembly or MunicipalCouncillor or a Gazetted Ofcer, asthe case may be.

Copy of- electricity bill; or telephone bill; or

depository account; or credit card; or bank account; or ration card; or employer certicate; or passport; or voter identity card; or property tax assessment order; or driving licence; or rent receipt; or certicate of address signed by a

Member of Parliament or Memberof Legislative Assembly or MunicipalCouncillor or a Gazetted Ofcer, asthe case may be.

Fill form 49A/ 49AAThe form can bedownloaded fromwww.tin-nsdl.com

Sign and afxpassport sizephotographSignature should not

run outside the boxprovided and shouldbe in BLACK ink

Pay feesFees can be remittedthrough cheque /demand draft or through

credit card. Fee wouldvary according to thecommunication address.

Submit documents Proof of Identity Proof of Address



Documentary requirements for PAN application in Form 49AA by a foreign national

Proof of Identity Proof of Address

Copy of- Passport; or PIO card issued by the

Government of India; or OCI Card issued by Government

of India; or Other national or citizen-

ship Identication Number orTaxpayer Identication Numberduly attested by "Apostille" (inrespect of countries which aresignatories to the Hague ApostilleConvention of 1961) or by Indianembassy or High Commission orConsulate in the country wherethe applicant is located.

Copy of- Passport; or PIO card issued by the Government of India; or OCI Card issued by Government of India; or Other national or citizenship Identication Number or Taxpayer Identication

Number duly attested by "Apostille" (in respect of countries which are signato-ries to the Hague Apostille Convention of 1961) or by Indian embassy or HighCommission or Consulate in the country where the applicant is located; or

Bank account statement in country of residence; or Non-resident External bank account statement in India; or Certicate of residence in India or Residential permit issued by the State Police

Authority; or The registration certicate issued by the Foreigner's Registration Ofce showing

Indian address; or Visa granted and copy of appointment letter or contract from Indian Company

and Certicate (in Original) of Indian Address issued by the employer.

Residential StatusAn individual is liable to tax in India based on his tax residency during a scal year. Depending on the stay in India ina particular scal year, an individual will be classied as a resident or non-resident. The tax residential status has norelevance to the residential status as per Foreign Exchange Management Act (FEMA) which is a separate legislation. Fora returning Indian, the tax residential status will not be impacted based on his status (OCI/PIO) or citizenship.

Determination of residential status

Stay in India 182 days in the tax year

Yes

Yes

Yes

Yes

Resident

Non- Resident for 9 out of 10previous tax years

Stay in India 729 days in

preceding 7 tax years

Resident and ordinarilyresident (ROR)

Not ordinarily resident (NOR) Non-resident (NR)

Stay in India 60 days* in the tax yearand

Stay in India 365 days in the preceding 4 taxyears

No

NoNo

No


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Tax landscapeAn individual will be categorized as a ROR, NOR or NR based on the stay pattern in the particular tax year and thehistory of stay and income will be taxed accordingly.

Tax status Income sourced in India Income received in India * Income received outside India

ROR Yes Yes Yes

NOR Yes Yes No

NR Yes Yes No

* Income received in rst instance outside India and subsequently remitted/ transferred to India is not to be treatedas 'income received in India'.

Sources of IncomeThe Act classies taxable income and the relatedprovisions into ve broad heads detailed as under:1. Salaries2. Income from House property3. Prot and gains of business or profession4. Capital Gains5. Income from other sources

SalariesSalary income refers to compensation received from

the employer or former employer for services renderedby an employee. Salary related to services renderedin India is taxable in India regardless of the place ofreceipt. Employed individuals are subject to income-taxon the cash salary and non-cash benets receivedfrom employment. Regardless of the nomenclature, allcomponents of salary are taxable and the Act providesspecic deduction in case of certain components.

Salary payments are subject to monthly tax withholdingby employer. After the end of tax year, an employershould issue a remuneration and tax deductioncerticate in Form No.16 and Form 12 BA. Thiscerticate serves as a proof of the income earned by anindividual and the taxes withheld on a monthly basis.

Flashpoints for returning individuals Salary earned overseas is subject to tax unless

exempted by the Act or the tax treaty For NOR and NR, overseas salary pertaining to

services rendered outside India will not be taxable inIndia In cases of double taxation, tax credit can be claimed

in India/the resident country as per the provisions ofthe Act or tax treaty

Basic salary Overtime salary Location premiums Bonus

Salary

Travel allowance Medical reimbursement House rent allowance

Allowances /Reimburesment

Rent free accomodation Interest free loan Car facility Stock awards

Perquisites

Components of Salary



Income from House PropertyRental income received by an owner of property is subject to tax under this head. Based on the occupancy, houseproperty can be classied as either self-occupied or let out.

Self-occupied property vis--vis let out property

Particulars Self-occupied property Let out property

Propertycovered

Occupied by the owner for residential purposeand has not been actually let out

A normal residence which cannot be occupiedbecause it is away from the place of work

Let out during the whole or any part of the tax year

Gross income NIL Generally, actual rent received will be considered as gross income

Deductions Mortgagte/Loan interest up to ` 150,000 Municipal taxes paid by the owner Standard deduction at 30% Actual mortgage/Loan interest without any ceiling limit

Flashpoints for returning individuals RORs will be taxed on house properties located outside India NRs and NORs will be taxed on the rental income received from the overseas property if the rental income is

received in India in the rst instance Income from Prot or Gains From Business or ProfessionBusiness income and income derived from professional services are taxable net of deductible expenses. All self-employed individuals/professionals will be taxable at slab rates. Partnership and LLP forms of business will beseparately taxed and hence the share of individuals from such business will be exempt from tax.

Scheme of business income taxation

Income or turnoverexceeding the ceilinglimit in the current taxyear or immediatelypreceding 3 tax years:

Individuals carryingout the prescribedprofessional activitieswith gross receiptsexceeding ` 150,000

Others - Incomeexceeding ` 120,000or the total turnoveror gross receiptsexceeding ` 10 lakhs

Maintenance of books

Compulsory if thetotal turnover exceeds

` 60 lakhs in case ofbusiness and ` 15 lakhsin case of profession(includes law,medicine, accountancy,architecture,technical consultancy,interior decoration,information technologyprofessionals etc

Audit of accounts

Any person whosetotal turnover / grossreceipts doesn'texceed ` 60 lakhs hasan option to declare8% of total turnoveror gross receiptsas income frombusiness irrespectiveof the actual income.However this optionis not available for aperson carrying onprofession.

Presumptive Income

VAT registration:VAT is state levy atthe point of sale ofgoods. Every traderor manufacturer whois engaged in sellingof goods needs VATregistration accordingto the respective stateVAT laws.

Service Tax RegistrationA service provider hasto obtain service tax

registration and remitservice tax as per servicetax rules.

VAT and Service taxregistration


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Capital GainsGenerally, gains derived from transfer of capital assets are taxable in the year of disposal. The computationmethodology and tax rates differ based on the period of holding of such assets. The period of holding of the asset isreckoned from the date of acquisition to the date immediately preceding its transfer.

Key features of capital gains taxation

In the case of long term capital assets, the cost ofacquisition may be converted to reect the currentprices. This process known as indexation is carried outusing dened cost ination indices.

Flashpoints for returning individuals Gains derived from assets held outside India may be

considered exempt by applying the provisions of taxtreaty as applicable.

NRs being Indian citizens and PIOs are taxable at

a special rate of 20% for income from investmentassets and long-term capital gain from foreignexchange assets. However, no correspondingdeduction/indexation benet would be availableon such investment income and capital gains. Thisspecial rate would continue to apply for the returningindividuals even in the years they become a resident.An individual can also opt out of the applicability ofthe special provision while ling the tax return.

Income from Other SourcesAll residual income such as investment income (interest/ dividend), winnings and gifts are taxable under thishead after deduction of expenses incurred in relationto earning such income. Gifts received in the form ofcash or kind above ` 50,000 are taxable except whenit is received from relatives or on occasion of marriage

or other circumstances dened in the Act. Presently,dividend received from an Indian Company or fromunits of mutual fund is exempt from tax in the handsof individuals from payment of tax. However, foreigndividends are not exempt and are to be offered for taxin the individual hands.

Tax computation

Personal deductions

On aggregation of income from all sources, an individualis entitled to claim the below deductions which arecapped at specied limits: Insurance premiums Social security contributions to Provident Fund, Public

Provident Fund etc. Principal repayment for a mortgage property Purchase of notied mutual funds Tuition fees for children Donations Medical expenditure Interest on loan for higher education Treatment/maintenance of dependents

Computation of tax:An individual is taxed at progressive rates on the nettaxable income.

Assets held for more than 36 months are referredto as long term capital assets and those held for notmore than 36 months are referred to as short termcapital assets.

Long term capital gains attracts a special rate of 20%on the gains while short term capital gains are taxedat applicable slab rates.

Shares, listed securities or units of UTI, Mutual fundsand zero coupon bonds are classied as long termassets if the period of holding exceeds 12 months.

Gains from equity shares or units of equity orientedfund listed in a recognized stock exchange in Indiaand subject to Securities Transaction Tax: Long-term capital gains are exempt Short-term capital gains are taxable at 15%

Gains can be exempt if investment is made in specied assets (Example: Residential house)



Applicable tax rates for the tax year 2011-12

Income Slab ` Rate %

Up to 180,000* Nil

180,000 500,000 10

500,001 800,000 20

800,001 or above 30

*Exemption limit for resident women below 60 yearsof age is ` 190,000, for senior citizens above 60 yearsbut below 80 years is ` 250,000 and for senior citizensabove 80 years is ` 500,000

Additionally, education cess is payable at the rate of 3percent of the total tax liability.

Tax payment Tax on income earned is payable through the followingmechanisms

Advance Tax

Estimation of personalincome/income not subject towithholding/income subject tolower withholding

Determination of tax liability onthe above

Payment of tax in threeinstallments

Due dates 15th September,December and March of everyscal year

Self-AssessmentTax

Final tax payment by individual

To be paid before ling the returnof income

Interest levy for default/defermentin payment of taxes

Tax Filing Process ow chart

Individuals having income morethan the exempt threshold View the Annual Tax Statement(Form 26AS) which summarizesthe taxes deducted/depositedon to your PAN

Individuals deriving only salaryand interest income up to

` 500,000

Individuals whose books ofaccounts are to be audited -on or before 30th September

Other individuals - Tax returnhas to be led on or before31st July every year

Belated ling attracts interestand penalties

Current year loss may notbe permitted to be carriedforward

Who has to le? Exemption from ling Due date for ling Consequences of belated ling


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Wealth Tax

Scope of wealth tax:Wealth tax is payable by an individual whose net wealth is in excess of the threshold limit as on 31 March of therelevant tax year. For tax year 2011-12, individuals having net wealth in excess of ` 3,000,000 as on 31 March 2012will be liable for wealth tax at the rate of 1% on net wealth exceed ing ` 3,000,000.

Weath Tax inclusions and exclusions

Incidence of wealth taxand location of asset

Assets covered Assets to be excluded

ROR who is a citizen ofIndia is taxable for globalnet wealth

Foreign nationals/NRIs willbe taxable for the assetslocated in India

Buildings- residentialhouse, commercialbuilding, guest house,farm house situated within25kms from municipalitylimits

Motor cars Jewellery, bullion and other

articles made of gold, silveror other precious metals

Yachts, boats and aircrafts Urban Land Cash in hand in excess of

` 50,000

Residential house let out for 300 days or morein a tax year

House occupied for own business or profession Assets held as stock-in-trade in business. Cash up to ` 50,000 Shares and securities of listed/unlisted

companies Cash in bank accounts

Special exemption for NRIsand PIOs repatriating forpermanent settlement

Besides the above assets, the following assets willbe exempt for seven tax years from the year ofrepatriation of an individual: Money and value of assets brought by him to

India Assets acquired out of monies brought to India Assets purchased out of NRI account

Any corresponding debt relating to the assets can beclaimed as a deduction for arriving at the net wealth.The value of assets should be disclosed through a

separate return that is to be led on or before 31 July ofthe year following the tax year (i.e. 31 July, 2012 for thetax year 2011-12). The tax due on the return should bepaid before ling of the return.

Specic exemption available for NRs returning toIndia for permanent residence:For NRs being Indian citizen or PIO returning to Indiawith an intention to stay permanently, assets bought toIndia or assets acquired out such assets bought to Indiaor out of NRI account shall be exempted from wealthtax for the period of 7 nancial years starting from theyear of return.

Direct Taxes CodeWith a view of bringing a simplied and well-structuredTax law, Direct Taxes Code Bill (DTC) was introducedin the Parliament in August 2010 after considering the

recommendations suggested by people from differentsections of society. This proposed code, is expected tocome into force from 1st April 2012 as a replacement to

the Income-tax Act, 1961.

Key proposals:

Personal taxation An individual will be classied either as a resident

or non-resident. The concept of NOR is removed.However, the conditions for NOR have been retainedto determine the taxability of overseas income of anindividual.

Progressive tax rates would apply for income above ` 200,000. Income above ` 1,000,000 will be taxedat 30%.

Wealth tax is proposed to be levied at 1% for wealthin excess of ` 10,000,000. The scope of taxableassets is proposed to be widened.

Rental income will be taxed based on actual rentreceived/ receivable. Taxation of rental income on



notional basis is proposed to be abolished. Standarddeduction for repairs and maintenance is to bereduced from 30% to 20%.

No special or concessional tax rate for the income ofNRs from transfer of specied assets.

Listed equity shares or units of equity oriented fundwhich are subject to STT and held for a period of oneyear or less will be taxed at an effective rate of 5%,10% or 15% based on the slab rate of individuals.

Forms of self-employment/businessIndia is one of the fastest growing economies of theworld. The countrys robust economic growth is drivenlargely by domestic demand and a rapidly wideningconsumer base. With rising disposable income; Indiaprovides one of the largest markets for manufacturedgoods and services today. For a returning Indian it is veryimportant to understand the principal forms of doingbusiness/ self-employment in India and choosing theright kind of business or corporate entity which best

suits his purposes. The principal forms of doing businessin India are: Proprietary concernIt is an archaic form of business entity and also theeasiest form to set up and most common entity in India.There is no separate legal entity status to a proprietaryconcern and is not governed by a specic law. However,the laws that apply to an individual such as Income-taxAct, 1961, foreign exchange regulations, etc. would alsoapply to the proprietary concerns.

No registration is required for a sole proprietorship. Toform a proprietary concern you simply have to open abank account with the name & style of the proprietaryconcern. However, trade related licenses that aremandatory have to be obtained. The concern dissolveson the death of the sole proprietor.

Partnership rmA partnership is an agreement between persons to shareprots of a business carried on by any or all of themacting for all. The relationship between the partners isdened through the partnership deed. Each partner isliable to indemnify the rm for any loss caused to it byhis/her fraud in the conduct of the business of the rm.Each partner is liable jointly with all other partners andalso severally for all acts of the rm done while he/sheis a partner. Partnership is governed by the provisions ofthe Indian Partnership Act, 1932.

A partnership rm requires minimum 2 partners and themaximum number of partners is 20. Registration of aPartnership rm is not compulsory, though it is usuallydone as registration brings many advantages to the rm.For registering a partnership rm an application in theprescribed form is required to be led along with certaindocuments with the Registrar. Other trade relatedlicenses that are mandatory also have to be obtained. Atax audit is compulsory under the Indian tax laws basedon prescribed turnover/income.

Limited Liability Partnership (LLP)A Limited Liability Partnership (LLP) is a body corporate,a legal entity separate from its partners and hasperpetual succession. A LLP can be formed by 2 or morepersons. The relationship between the partners of a LLC/LLP is dened through the LLP agreement. An ind ividualor a body corporate can be a partner in a LLP. An LLPis required to have at least 2 designated partners (DPs)who are individuals responsible for compliance with the

provisions of the LLP Act and at least one of DP shouldbe resident in India (i.e. present in India for at least182 days in the preceding year). The DPs must obtaina Digital Signature Certicate (DSC) from the certifyingauthority for electronic lings and Director IdenticationNumber (DIN) from MCA, Government of India6. As aseparate legal entity, an LLP is liable to the full extentof its assets, whereas the liability of LLP partners islimited to their agreed contribution to the LLP. LLPsare governed by the Limited Liability Partnership Act,2008 and administered by the MCA through the ROC,Company Law Board and Ofcial Liquidator.

A partnership rm, private company or unlisted publiccompany can be converted into an LLP.

India is one of the fastest growingeconomies of the world. Withrising disposable income, India

provides one of the largestmarkets for manufactured goodsand services today.

6 DPIN is now equal to a DIN


32/7632

A LLP is mandatorily required to be registered with theRegistrar of Companies. Memorandum and Articles ofAssociation should also be registered with ROC. Audit iscompulsory for LLP with turnover exceeding ` 4 millionor contribution exceeding ` 2.5 million in a nancial year.Annual Statement of Accounts and Solvency & annualreturn needs to be led every year.

CompanyCompanies incorporated in India are governed bythe Companies Act, 1956. Companies are broadlyclassied as private limited companies and public limitedcompanies. Companies may have limited liability (limitedby shares or guarantee) or unlimited liability. Companieslimited by shares are a common form of business entity.Public limited companies can be closely held, unlisted orlisted on a stock exchange.

A private company is one that, by virtue of its articlesof association prohibits any invitation to the public to

subscribe for any of its shares or debentures; prohibitsany invitation or acceptance of deposits from personsother than members, directors or their relatives; restrictsthe number of members to 50 (other than employees)and restricts the transfer of shares. A private companycan be formed with a minimum of two shareholdersand paid up capital of ` 100,000. A private companyrequires two directors who must be individuals.

A Public company is one that is not a private company.Minimum number of members of a public companyis 7 and requires 3 directors who must be individual.

The minimum paid up capital of a public company is ` 500,000.

Process of forming a private company would involve thefollowing steps Obtain Directors Identication Number (DIN) for

proposed Directors of the new Company Obtain Digital Signature Certicate (DSC) for

proposed Directors of the Company Filing the proposed name of company for approval

to the Registrar of Companies (ROC); Get theMemorandum and Articles of Association vetted bythe ROC and printed

Present the required documents along with theregistration fee and requisite stamp duty to theRegistrar of Companies to get the certicate ofincorporation

Obtain a company seal

Apply to National Securities Depository Ltd. to obtaina Permanent Account Number (PAN)

Obtain a Tax Account Number (TAN) for incometaxes deducted at source

Register under Shops and Establishment Act, ifapplicable

Register for value added tax (VAT) before the SalesTax Ofcer of the ward in which the company islocated, if applicable

Register for Profession tax, if applicable Register with Employees' Provident Fund

Organization, if applicable Register with ESIC (medical insurance), if applicable

A company is mandatorily required to be registered withthe Registrar of Companies (ROC). Memorandum andArticles of Association should also be registered with ROC.Audit is compulsory for a company. Annual Accounts andAnnual return need to be led with the ROC.

Banking in IndiaIf you are returning to India for the purposes ofemployment or vocation, you would be consideredresident as per FEMA provided you satisfy the 182 daysstay condition in the previous year. In such case, youwould be permitted to open regular bank accounts inIndia as are available to resident citizens. These are

Savings bank account This is a common accountwhich can be opened by a person in any bank.Most banks will offer a nominal rate of interest ofaround 3 - 4.5%. A minimum balance is required to

be maintained to operate this account. Most Indiancompanies have a tie-up with the banks where asalary account is maintained to enable e-transfer ofremuneration

Current account - The depositor is at liberty tooperate the current account any number of timesin a day unlike savings accounts where only limitednumber of transactions are allowed. This accountis opened by people who are engaged in trades,businesses and professions.

Fixed deposits (time deposits) - Fixed depositaccounts are xed in terms of maturity period, rateof interest payable and the amount of deposit.However, with increasing competition in the bankingsector, xed deposit accounts are also offering a lotof exibility to give you extra benets.

Recurring deposits As the name suggests these arexed term deposits where the account holder would



choose to deposit a xed sum of money every monthwhich will be added to the deposit amount. The rateof interest would be slightly lower or equal to that ofa simple xed deposit.

Most banks would offer services like e-transfer of funds,auto bill pay, online payments, debit and credit cardsetc. to its account holder. You could choose a depositwith a nationalised bank, a co-operative bank or aprivate bank. While nationalised banks would provideyou with a greater comfort in terms of security, theco-operative and private banks may offer a higher rateof interest and wide ranging services.

Remittances outside IndiaA person resident in India is permitted to hold, own,transfer or invest in foreign currency, foreign securityor any immovable property situated outside India ifthe same was acquired when he was resident outsideIndia or inherited from a person who was resident

outside India. A resident individual can obtain/remitforeign exchange within specied limits for one or morepurposes without RBI approval under the FEMA (CurrentAccount Transaction Rules. An illustrative list of suchtransactions is as under-

NRI/PIOs can remit through authorised dealers uptoUSD 1 million out the balances in their NRO acccount

net of India tax withholding and subject to other condi-tions. Remittances are also permissible net of taxes ofsale proceeds of assets acquired out of foreign exchangeearnings or by way of inheritance/gift.

Fresh investments outside India for a personresident in India

Liberalised Remittance Scheme (LRS) for residentindividualsResident individuals (including minors) are allowedto freely remit up to USD 200,000 per nancial year(without prior approval) for any permitted current andcapital account transactions, including acquisitionof property and investments outside India. Theremittances can be made in any freely convertibleforeign currency equivalent to USD 200,000 in anancial year. The facility under LRS is in addition tothose already available for private travel, businesstravel, studies, medical treatment, etc., as described

under FEMA (Current Account Transactions) Rules. TheLRS can also be used for these purposes. However,remittances for gift and donation cannot be madeseparately and have to be made under LRS only.Accordingly, resident individuals can remit towardsgifts and donations up to USD 200,000 per nancialyear under LRS.

S. No Purpose Limit

1.

Foreign travel (other than

Nepal & Bhutan) Personal Business

USD 10,000 (per visit)

Documents

Returning Indians