The Three Question Thursday: NRI Financial Insights

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Financial decision-making as an NRI is a puzzle. From handling property sale proceeds to investing judiciously in the short term and being tax compliant, every step needs to be taken with caution and knowledge. Let’s go through the key facts you require.

Question 1 : I just sold my ancestral property in my home town and the received the proceeds in my NRO account Can I transfer the sale proceeds from NRO to NRE a/c?

Sale of ancestral property is a milestone occasion, and transfer of proceeds from your NRO account to NRE account can be achieved with the proper approach.

• RBI Limit: Reserve Bank of India allows a transfer of up to USD 1 million for a financial year.
• Tax Clearance: Clear all taxes on the funds in NRO account before initiating the transfer.
• Required Documents: Present evidence of sale or inheritance of property, along with Form 15CA (tax compliance declaration) and Form 15CB (Certificate of a Chartered Accountant).

By following such a measure, you can repatriate your money successfully without contravening RBI regulations.

Question 2 : I have my wedding in 7 months I have accumulated corpus required for it but I don’t want to keep it in my bank account please suggest specific mutual fund schemes suitable for short-term investments

Planning a wedding in the next seven months and concerned about parking your corpus? Short-term mutual funds are your solution. They are stable, liquid, and provide good returns.

Best Mutual Fund Choices:

• Liquid Funds: Invest in money market instruments and government securities for low risk and easy fund liquidity.
• Money Market Funds: Invest in treasury bills and commercial papers for stability.
• Ultra Short-Term Funds: Conservative investor’s gamble with a time horizon of 3-6 months that returns regular dividends.
• Short-Term Debt Funds: Fixed income security with a short tenure that avoids interest rate risk.
• Short-Term Bond Funds: Balanced portfolio of bonds and an equal risk-reward ratio.

They maintain your money safe and yield small returns on your day out.

Question 3 : When transferring from NRO To NRE, how much much tax will be applicable on transfer amount. I m not talking about TDS.

Reality: The tax obligation is in the interest earned in the NRO account prior to transfer.

Key Points to Remember:

• Income Tax on Accrued Interest: Interest on NRO account is taxed according to your income bracket.
• No Direct Tax on Transfer: Provided proper taxes are paid, the transfer is not taxed.
• Compliance Forms: Report Form 15CA and, if necessary, Form 15CB for tax compliance.

Payment of these taxes guarantees a problem-free and hassle-free transfer.

Conclusion

Mastering NRI financial planning is in knowing the guidelines and making informed decisions. It’s whether it is a sale of flat fund transfer, parking your wedding corpus in a mutual fund or tax compliance, that there is the correct approach.

For one-on-one advice, Prime Wealth is willing to take you through the labyrinth of NRI finance.

FAQs

1. Can I transfer funds from my NRO to NRE account without paying tax?
   Ans- No, you must pay applicable taxes on the income earned in the NRO account before transferring funds.
2. What is the maximum amount I can transfer from NRO to NRE in a financial year?
   Ans- Up to USD 1 million per financial year, as per RBI guidelines.
3. Do I need a Chartered Accountant’s certificate for the transfer?
   Ans- Yes, Form 15CB (issued by a CA) and Form 15CA are required for tax compliance.
4. What kind of short-term mutual fund is best for a wedding corpus?
   Ans- Liquid funds and ultra short-term funds are ideal for short-term goals like weddings.
5. Is there any lock-in period for short-term mutual funds?
   Ans- No, they offer high liquidity and can be redeemed anytime.
6. Can I reinvest the proceeds from the sale of property in India to save tax?
   Ans- Yes, investing in capital gains bonds under Section 54EC can help you save tax.
7. Are NRO account interest earnings taxable in India?
   Ans- Yes, interest earned is taxable as per your income slab.
8. How long does it take to process an NRO to NRE transfer?
   Ans- It typically takes 5-7 working days, depending on documentation and bank processing time.
9. Can I use my NRE funds to invest in Indian stock markets?
   Ans- Yes, through a Portfolio Investment Scheme (PIS) account.
10. Do I need to be physically present in India for the NRO to NRE transfer?
    Ans- No, the process can be managed online or through your representative.

Disclaimer: The information provided here is for educational and informational purposes only and should not be construed as financial, legal, or tax advice. Consult with a qualified professional before making any investment decisions. We do not accept any liability for errors or omissions in this information nor any direct, indirect, or consequential losses arising from its use.