NRIs can invest in domestic Indian mutual funds

-- Ramesh C Pahuja

Due to SEC (US regulator) diktats, funds that are US-based -- like Templeton, Fidelity and HSBC -- do not accept investments from NRIs. However, other domestic mutual funds do accept such investments and your son is free to invest in them.

I am an NRI for the last 8 or 9 years. It's only now that the bank seems to have woken up and is telling me that being an NRI, I cannot be a joint holder in my wife's Resident account. I know that being a Resident she cannot be a joint holder in my NRE account to due which she operates my NRE account with a POA. But I believe that it's not vice versa. All the deposits in my wife's Resident account, where I am a joint holder, are returns on my investments when I held Resident status and also the amount received from the sale of property.

-- Kamath

The bank is correct. You cannot have a resident account, joint or otherwise. In practice, several NRIs continue to hold their earlier joint or single resident accounts.

However, you can have a joint NRO account with your wife. Of course, she would be the second joint holder and you would be the primary holder. In which case, you can tell the bank to close the resident account and transfer all the funds to the joint NRO account.

Else, the only other option is to get your name deleted and include yourself as a nominee.

I am an NRI in the US for more than 6 years. I have a PAN number as a Resident Indian. Can I use the same PAN to make Non-Resident investment, or is it required to take new PAN as NRI ? Can I have two PAN numbers? I will be highly obliged if you can clarify this matter.

-- Vinda

1. Yes, you can use the same PAN.

2. It is illegal for an assessee to have two PANs.

Can you clarify whether transfer of funds -- arising out of sale of shares purchased when I was resident -- from NRO (Non Pins) bank account to NRO (Pins) bank account for investing in secondary market is taxable?

--- Vicky

Transfer by itself, from your one account to another, does not create any tax-liability.

I started working in Japan since November 2006. I understand that for income tax purposes, my status as a taxpayer is Resident Indian (182+ days in India). I understand from the DTAA between India and Japan that my income in Japan is taxable in India as my status is Resident Indian (Article 14/15, DTAA). I also understand that the taxes I have already paid in Japan can be deducted against my income tax payable in India (Article 23 of DTAA). Please let me know if I'm right on these counts.

Also, since my earnings are in Japanese yen, how do I calculate the rupee equivalent of my income for income tax purposes?

Is there any Chapter/Section of the Income Tax Act that discusses this issue?

--- Pramod

1. Yes, your understanding is perfect.

2. For the purpose of converting your earnings in JPY to INR, the rate as on 31st March may to be taken for all forex income on which tax is payable in India.

I was a Non-Resident Indian from October 31, 1982 to August 31, 1998. From what date my 'Resident but not ordinary resident' status will change to 'Resident and ordinary resident' status.

--- M I Sherill

A person is Resident (or NRI or RNOR) for the entire fiscal year.

There is a transitional status of RNOR between being an NRI and becoming a full-fledged Resident after returning to India permanently.

Resident but not Ordinarily Resident (RNOR) is a person who satisfies one of the following conditions:

a) he has been a non-resident in India in nine out of the ten previous years preceding that year, or

b) has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less.

An RNOR is not required pay tax in India on his forex income. Most of the NRIs will be caught by the requirement of stay in India for 729 days or less during the last 7 financial years.

Consequently, anyone who returns after 7 or more financial years of being an NRI will become RNOR for 2 years. Those returning after 6 years will become RNOR for 1 year only. This is subject to his stay in India during the previous 7 years for 729 days or less.

Those returning after being NRIs for 5 continuous years or less will become Residents immediately.

FA03 has changed the definition of RNOR. Before this amendment, a person with NRI status for two consecutive years could enjoy the RNOR status for 9 years after returning to India.