Remittance of assets by non-residents refers to the transfer of ownership or repatriation of assets (such as money, property, or investments) from India to a foreign country. Non-residents include individuals, companies, and entities that are not residents of India under the Foreign Exchange Management Act (FEMA) and the Income Tax Act (ITA). Non-residents can remit funds or transfer assets abroad, subject to certain conditions and regulatory requirements laid out by the Reserve Bank of India (RBI) and FEMA.

The remittance of assets by non-residents may include the repatriation of funds, sale proceeds of property, dividends, investments, or income from foreign investments. Different regulations apply depending on the nature of the asset, the residential status of the individual/entity, and the method of transfer.

Regulations Governing Remittance of Assets by Non-Residents

The Reserve Bank of India (RBI), through FEMA, has provided guidelines for the remittance of assets abroad, primarily focusing on:

1. Permissible Remittances.
2. Limitations and Restrictions.
3. Procedures and Documentation.

1. Remittance of Funds by Non-Residents

Non-residents can remit funds abroad under the Liberalized Remittance Scheme (LRS) or other specific provisions for repatriation. The conditions for such remittances vary depending on the purpose of the transfer.

Types of Remittance

• Repatriation of Funds: Funds held in India by non-residents can be repatriated to their country of residence in accordance with FEMA provisions. Common examples include the repatriation of dividends, sale proceeds from investments, or balances in NRE (Non-Resident External) or NRO (Non-Resident Ordinary) accounts.
• Under the Liberalized Remittance Scheme (LRS):
  • LRS allows Indian residents (including individuals and entities) to remit up to USD 250,000 per financial year for permissible transactions such as investments, travel expenses, gifts, etc. However, non-residents are not allowed to remit under the LRS as it applies only to residents.
  • Non-residents can remit funds in accordance with specific guidelines related to their earnings, investments, and other sources.

2. Sale of Immovable Property by Non-Residents

Non-residents can also transfer or sell immovable property (such as real estate) in India and remit the sale proceeds abroad, subject to certain conditions:

Repatriation of Sale Proceeds of Property:

• Property Types: Non-residents can hold and transfer property in India, but only residential or commercial property is allowed to be repatriated. Agricultural land and farmhouses are not eligible for sale or repatriation by non-residents.
• Conditions for Repatriation:
  • The non-resident must have acquired the property in accordance with FEMA regulations, meaning it must have been bought by FDI or inheritance.
  • The sale proceeds may be repatriated abroad subject to the condition that:
    • The property was acquired with foreign funds (e.g., FDI or foreign currency).
    • The sale proceeds are transferred through an AD (Authorized Dealer) bank in India.
• Remittance Limit:
  • Non-residents can remit up to USD 1 million per financial year from the sale of immovable property under the RBI’s repatriation guidelines. This amount is subject to taxes being paid in India.

Documentation:

• Tax Clearance: Non-residents must obtain a Tax Clearance Certificate from the Indian Income Tax Department.
• Bank Declaration: Remittance must be processed through an authorized dealer (AD) bank in India, which requires a declaration regarding the source of the funds, proof of tax payment, and the nature of the transaction.

3. Repatriation of Funds from NRO Account

Non-residents maintaining NRO (Non-Resident Ordinary) accounts in India can remit funds abroad, but subject to certain limits and regulations:

Repatriation Rules for NRO Accounts:

• Repatriation Limit: The maximum repatriation limit for NRO accounts is USD 1 million per financial year for each individual, subject to payment of applicable taxes.
• Tax Deduction at Source (TDS): Taxes must be paid before remittance, and the amount to be repatriated should be net of applicable tax deductions (like TDS).

Conditions for Repatriation:

• The remittance can only be made to the account of the non-resident’s overseas bank account or in the currency of the country of residence.
• The bank will require a declaration confirming the source of funds and a tax clearance certificate.

4. Remittance of Income and Dividends by Non-Residents

Non-residents can remit income earned in India, such as:

• Income from Business and Profession: Non-residents earning income from business activities in India can remit profits abroad subject to applicable tax regulations.
• Dividends: Non-residents who receive dividends from Indian companies can remit the income abroad, subject to tax deduction at source (TDS) in India. The remittance of dividends is typically made through NRE or NRO accounts.

Tax Implications:

• TDS on Income: Income earned in India is subject to tax at source (TDS). Non-residents must file the appropriate tax returns in India to comply with taxation.
• Double Taxation Avoidance Agreements (DTAA): If applicable, non-residents can claim relief under DTAA to avoid being taxed twice (once in India and once in their country of residence).

5. Remittance of Gifts and Inheritance by Non-Residents

Non-residents can receive gifts or inherit assets from Indian residents and remit the value abroad, subject to specific guidelines:

• Gifts: Non-residents can receive gifts from Indian residents under the Liberalized Remittance Scheme (LRS), subject to limits.
• Inheritance: Non-residents can inherit immovable property, securities, or other assets in India, and remit the sale proceeds abroad. However, the tax treatment of inherited assets will depend on the specific nature of the assets and the relationship of the recipient with the deceased.

Inheritance of Immovable Property:

• Non-residents can inherit immovable property in India, subject to FEMA provisions. The inheritance must comply with the regulations governing the ownership and transfer of property by non-residents.
• Repatriation of Sale Proceeds: If the non-resident sells the inherited property, the sale proceeds can be repatriated subject to the same guidelines as for sale of property by non-residents.

6. Taxation on Remittance of Assets

• Capital Gains Tax: Non-residents may be subject to capital gains tax on the sale of assets (such as immovable property, stocks, or bonds) in India. The capital gains are subject to tax based on the type of asset and the holding period (short-term or long-term).
• Tax Deduction at Source (TDS): Before remitting funds abroad, TDS is deducted on income, dividends, and capital gains as per Indian tax laws.
• Double Taxation: If the non-resident is taxed in both India and their country of residence, they may be eligible for relief under Double Taxation Avoidance Agreements (DTAA), which India has with several countries.

Conclusion

The remittance of assets by non-residents is subject to the regulatory framework under FEMA, RBI guidelines, and Indian tax laws. Non-residents can remit funds for a variety of purposes, including the sale of immovable property, repatriation of income, gifts, and inheritance. To ensure compliance, non-residents must adhere to the limits and conditions set by the RBI, obtain necessary clearances from the tax authorities, and use authorized dealers for fund transfers. Additionally, the tax treatment of such remittances, including TDS and capital gains tax, must be understood to avoid any legal or financial issues.