Funds transferred to NRI account are not taxable

I have lived in the UK for the past ten years and have taken up British citizenship. I have some investments here in mutual funds as also some offshore funds.

Now, I intend to come and stay in India for the foreseeable future. Also, I would be liquidating my investments here and transferring the same to India and some of that money may also be made for local investments in stocks and funds.

What will be my status when I go to India —- NRI or Resident? For taxation purposes, how will the remittance that I make to India be taxed considering my status? If I were to decide to move back to the UK, will I be able to repatriate my investments back or would it be locked in India? —V Shroff

If you come to India after October 2, 2010, in the 2010-11 financial year, you would continue to be an NRI for the financial year, which runs from April to March. Any money transferred to the NRE or NRO account will be a capital receipt and hence not taxed.

You will get resident status only in FY11-12. When you move back to the US, you can continue to hold these Indian investments. Later on, if you wish to liquidate the investments and remit the funds abroad, the limit is quite liberal at $1 million per financial year.

My father (now deceased) had gifted me some shares. They are in a demat account. I receive the annual dividend, which is deposited in an NRO account and reported as income in my Indian income-tax filing. I have a permanent account number. I want to sell these shares, but I was told that I have to provide proof of Indian residency, address, ration card, etc. I am a foreign national. Can I sell these shares and how? — Ranjan

Perhaps the bank is not aware of the fact that you are an NRI. You cannot provide proof of Indian residency since you are an NRI. You will have to approach the bank and determine what exactly they need from you. Also, as an NRI, you cannot have a normal demat account; your demat account can be opened under the PINS permission. Perhaps this is the issue due to which there is some miscommunication. Ultimately, you would need to understand the requirements from the banker.

The writer is director, Wonderland Consultants, a tax and financial planning firm. He can be reached at sandeep.shanbhag@gmail.com