Banks seek lower tenure for non-resident deposits

http://www.thehindubusinessline.com/industry-and-economy/banking/banks-seek-lower-tenure-for-nonresident-deposits/article4905576.ece

To attract more dollars into the domestic market, bankers have requested the Reserve Bank of India to cut the minimum period of investment in Foreign Currency Non Resident (FCNR) and Non Resident External (NRE) account to six months from one year now.

FCNR deposits, which have a minimum tenure of one year and a maximum of five, can be opened by overseas Indians with banks in India.

NRE deposits are also opened with banks in India by non-resident Indians who can convert their dollar investments into rupee at the time of investment.

“We have requested that if the minimum investment period on FCNR and NRE deposits can be reduced to at least six months, it will help us bring some more dollars into the country,” said K.R. Kamath, Chairman and Managing Director, Punjab National Bank.

In the first two months of the current fiscal, FCNR(B) deposits in the banking system nudged up by just $207 million to $15.395 billion as at May-end 2013. FCNR deposits can be opened in US dollar, euro, British pound sterling, Canadian dollar. Australian dollar, Japanese yen, Swiss franc, New Zealand dollar, Danish krone, and Swedish krona.

NRI deposits rise 37% on high domestic interest rates

http://www.thehindubusinessline.com/industry-and-economy/banking/nri-deposits-rise-37-on-high-domestic-interest-rates/article4603194.ece

Non-resident Indians (NRIs) are keeping faith with the returns their banks back home are giving them.

In the first eleven months of FY13, NRI deposits in the banking system rose 37 per cent (by $13.379 billion against $9.733 billion in the year-ago period).

The NRI deposit accretion was solely in the non-resident (external) rupee account or NRE account. In the reporting period, NRE deposits soared by a whopping 161 per cent at $15.271 billion ($5.854 billion in the year-ago period).

NRIs may be pouring money into the NRE deposits because they fetch handsome returns (for example, SBI is offering 8.75 per cent interest on NRE deposits of 1-10 years).

Another reason why NRIs may be parking money in NRE deposits is that they may be taking a view that the rupee will appreciate down the line, thereby enabling them to make gains at the time when the deposit matures, said a senior public sector bank official.

For example, if NRIs place NRE deposits now then the dollars they remit will fetch them Rs 54.50 a dollar. However, if the rupee appreciates to (say) 50 to the dollar at the time of maturity of the deposit (say two years down the line) then the depositor makes a gain of Rs 4.50 a dollar. Besides, the possible exchange rate gain, he earns interest on the deposit.

The other two components of NRI deposits — Foreign Currency (Non-Resident) or FCNR Account and Non-Resident Ordinary (NRO) Rupee Account — have seen outflows.

NRO deposits saw an outflow of $1.732 billion (against an accretion of $3.926 billion). FCNR deposits declined $160 million (against a decline of $48 million).

Betting on exchange rates, NRIs lose money on India deposits

http://www.thehindubusinessline.com/industry-and-economy/banking/betting-on-exchange-rates-nris-lose-money-on-india-deposits/article4269719.ece

Non-resident Indians pumped in more money than ever before into the country’s banks this fiscal, betting on a depreciating rupee to boost returns. The cumulative value of deposits maintained by NRIs in the country’s banks soared to an all-time high of $67,018 million in September 2012.

But forex fluctuations have not worked in the favour of all NRIs. The cumulative value of deposits maintained by NRIs in Indian banks rose by $8.1 billion during the first six months of FY13. In contrast, actual fund inflows stood higher at $8.9 billion.

The discrepancy in the quantum of deposits vis-à-vis the amount actually maintained in the accounts was due to adverse currency fluctuation, which wiped out nearly $800 million of NRI money.

This does not mean that NRIs have always been on the receiving end of foreign exchange rate fluctuation. In July, NRIs infused $854 million of fresh funds in Indian banks. But the cumulative value of outstanding NRI deposits in Indian banks shot up by around $2 billion, a huge gain for the depositors on the back of foreign currency fluctuation. This came on the back of a 3.5 per cent drop in the rupee exchange rate against the dollar in July from an all-time high of over Rs 57 per dollar in June.

In this regard, the type of account in which NRIs deposited their money also plays a large role in whether they benefit from appreciations or depreciation of the Indian rupee against other foreign currencies. Three types of deposit accounts are available to NRIs: foreign currency non-resident (bank) accounts (FCNR), non-resident external rupee accounts (NRE-RA) and non-resident ordinary (NRO) accounts.

Depositors in NRE accounts would be betting on rupee appreciation against their foreign currency of choice, as their deposits would be maintained in rupees, so appreciation would garner more forex on conversion in their country of residence.

On the other hand, FCNR account-holders would be rooting for rupee depreciation. In case the converse situation occurs, this would result in forex losses for the NRI depositors. In the case of NRO accounts, the deposits would be maintained in rupees and as they are not repatriable, can only be redeemed in rupees.

An analysis of exchange rates during the year reveals that the rupee lost 1.1 per cent against the dollar during January-October 2012. But during April-October, it rose by 5.8 per cent. This highlights how the timing of a deposit, as well as the tenure, can mean all the difference between a significant gain or a sizeable loss on an NRI deposit.

In financial year 2012, NRIs showed a marked preference for NRE and NRO accounts over FCNRs, as the rupee has fallen sharply against the US dollar and other currencies. The quantum of fresh funds pumped into NRE accounts stood at $8.5 billion in 2011-12 and NRO fund inflows amounted to $4 billion. In contrast, FCNRs witnessed outflows of over $600 million.

The trend continued in April-October 2012, with NRE inflows amounting to $11.6 billion, compared to outflows of $138 million from FCNRs and $1.3 billion from NROs. This indicates that most NRIs still expect to see the rupee appreciate against the US dollar and other currencies from its current low levels.

In this regard, it should be noted that against fresh deposits of $10.1 billion during April-October 2012, the cumulative value of deposits maintained by NRIs in Indian banks only rose by $8.2 billion. This indicates that around $1.9 billion of deposits was wiped out during the period, giving NRIs a reason to re-evaluate their strategy.

Three things Indian Americans should prepare for before the tax year ends

http://economictimes.indiatimes.com/news/nri/nri-tax/three-things-indian-americans-should-prepare-for-before-the-tax-year-ends/articleshow/17664844.cms

As tax year 2012 draws to a close, it's time for US taxpayers to make the most of current provisions and also prepare for the tax filing season ahead. We tell you the top 3 things that Indian Americans should keep in mind now. 

Be prepared for expiry of Bush Tax Cuts 

The Bush Era tax cuts that were introduced after the financial crisis are set to expire in 2012. Some of these include: 

> The standard deduction for married couples will fall and the ceiling of the 15% bracket for married couples will fall 

> The 10% tax bracket will expire, reverting to 15% 

> The child tax credit will fall from $1,000 to $500 

> The tax rate on long-term capital gains earned by middle- and upper-income people would rise from 15% to 20% 

> The tax rate on qualified dividends earned by middle- and upper-income people would rise from 15% to ordinary wage tax rates 

> Tax brackets would change: the 25% tax rate would rise to 28%; 28% to 31%; 33% to 36% and 35% to 39.6% 

These are some of the major cuts in the offing. You can get more details here. 

Unless the Congress votes for extension, the low tax regime will be replaced by higher rates. If the stakes are high, you may want to consult a tax planner to review your position and find ways to minimize taxes. 

For instance, most experts agree that the current rate of 15% for capital gains is as good as it can get. "If someone has shares which could be disposed off before the end of the year for a gain and buy them again early next year, that would allow the gains to be taxed at the 2012 tax rate. The wash rule is applicable only for capital losses and not gains," explains Roy Vargis, an Illinois based CPA and promoter of IndianCPA.com. This might be a good time to review your Indian portfolio. Long term capital gains are tax free in India but taxed in the US for US residents, green card holders and citizens. If you have a large portfolio of Indian securities, you may want to employ this strategy to minimize your tax bill. 

For those placed in the IT consulting space, Vargis says that it may be ideal to receive incentives and bonuses before the year ends. "In several IT consulting companies, employees are given control over when they can receive their bonuses," he adds. 

Of the few other things to do, conversion to the Roth IRA might be a good one right now. If you have been putting off conversion to the Roth IRA, now might be a good time to act. If tax rates go up, you will benefit from conversion. If rates don't change, you have nothing to lose. 

NRI bank deposits double to $10.14 bn in Apr-Oct

http://www.financialexpress.com/news/nri-bank-deposits-double-to-10.14-bn-in-aproct/1043264

Dollar inflows from non-resident Indians into bank deposits have doubled during April-October this year to $10.14 billion as NRIs took advantage of higher returns and a weak rupee. During the corresponding period last year, inflows were at $4.88 billion.

During the period, non resident (external) rupee accounts saw an inflow of $11.61 billion, almost five times that of last year, data from the Reserve Bank of India showed.

Non-resident (ordinary) rupee accounts and Foreign currency non-resident accounts saw an outflow this year as against an inflow last year. Inflows had surged in April and May after the rupee depreciated sharply. The currency hit an all-time low of 57.32/$ in June. 

Non-resident (ordinary) rupee accounts saw an outflow of $255 million in October.

“Not only interest rates were higher than other countries, but even on the currency difference the return went up substantially,” said the treasury head of a public sector bank.

NRIs in US: Things to remember while giving gifts in India

Understand tax impact for Indian Americans who make gifts to persons in India.

Tax in India

Prior to 1998, gifts used to be taxed in the hands of the giver in the form of Gift Tax. However, in 1998, this Gift Tax was abolished. Subsequently in 2004, a new tax on gifts was introduced in the Income Tax Actaccording to which, tax would be levied, in certain cases, in the hands of the receiver.

According to this provision, any gifts in excess of Rs 50,000 received by an individual will be taxed in the hands of the receiver. The value of the gift would be added to the receiver's total income and tax would be calculated thereon. This includes cash gifts as well as gifts in kind. For gifts in kind, such as property, jewellery etc., the asset must necessarily arise in India and for valuation purposes, certain rules would apply:

In case of immovable property, the value will be based on the stamp duty value of the property 

In case of any other property such as shares and securities, jewellery, paintings, work of art etc., value would be based on the fair market value of such property

However, there are some exemptions to the tax on gifts:

Any gift received from a blood 'relative' is exempt even beyond the limit of Rs 50,000 ('relative' in this case is defined as spouse, brother or sister, spouse's brother or sister, parents and lineal ascendants of individual or his spouse, siblings of parents of individual or his spouse)

Gifts received on occasion of marriage are also exempt beyond the limit of Rs 50,000

Gifts received under Will or inheritance are exempt beyond the limit of Rs 50,000

In a nutshell, as an NRI, if you make gifts to people in India, the onus of paying tax in India would be on the recipients. Recipients in India who are 'relatives' would not have to pay any tax while non-relatives would have to pay tax on gifts in excess of Rs 50,000.

Tax in the US

In the US, tax on gifts is levied in the hands of the donor, so an Indian American making a gift to someone in India may attract tax in the US depending on the amount gifted. This includes cash gifts as well as property, irrespective of where the property is located. It also includes cash transfers made from the NRE or NRO account. Currently, gift tax exemption limits are fairly liberal and are as follows:

You can make gifts of up to $13,000 per gift to as many people as you like in a year without paying any gift tax. The only things to remember is that each recipient must not get more than $13,000 in the year. Also, this is an individual limit. So a couple can make gifts up to $26,000.

Example 1: You gift your mother $13,000 and your brother $13,000 in 2012. You pay no gift tax in the US.

Example 2: You gift your mother $50,000 and your brother $13,000 in 2012. $26,000 will be exempt from gift tax.

In case of gifts in excess of the $13,000 limit, you can still pay zero tax as long as you do not exceed the lifetime exemption limit. Currently, that is for 2012, up to $5,120,000 is allowed to be gifted/ bequeathed by a person during his lifetime without any tax implication. Any gifts made in excess of the $13,000 limit will be reduced from the $5,120,000 exemption limit. Anything in excess of this limit will be taxed at 35%.

http://economictimes.indiatimes.com/news/nri/nri-tax/nris-in-us-things-to-remember-while-gifting-persons-in-india/articleshow/17524098.cms

NRI deposits in banks surge six-fold in April-July

http://www.thehindubusinessline.com/industry-and-economy/banking/article3889520.ece

Attracted by high interest rates in their homeland, Non-Resident Indians (NRIs) are pouring money into bank deposits.

In the financial year so far (April-July), NRIs have parked almost six times more money in deposits compared with the year-ago period.

According to Reserve Bank of India data, NRIs made deposits aggregating $7.375 billion in banks, against $1.246 billion in the year-ago period.

A break-up shows that all inflows have been into the Non-Resident (External) Rupee Accounts (NR(E)RA) deposits.

However, two other NRI deposit schemes — Foreign Currency Non-Resident (Banks) or FCNR (B) and Non-Resident Ordinary Rupee Account or NRO — have seen outflows.

In the first four months of the current financial year, NR(E)RA deposits saw robust inflows of $8.389 billion against outflows of $641 million in the year-ago period. FCNR(B) deposits have seen an outflow of $625 million against inflows of $853 million in the year-ago period.

NRO deposits too have seen outflows of $389 million against an accretion of $1.034 billion in the year-ago period.

The attractiveness of NR(E)RA deposits lies in the fact that they fetch high interest rate (for example, State Bank of India offers 8.50 per cent on deposits between one year and 10 years).

Further, the accrued interest income and balances held in the account are exempt from income-tax and wealth tax. The other two deposits schemes — FCNR(B) and NRO — do not enjoy tax exemptions, said a banker. Loans up to Rs 1 crore can be extended against security of funds held in NRE Account either to the depositors or third parties.

“Due to higher interest rate and tax exemptions, NRIs are parking money in NR(E)RA deposits. The proceeds of FCNR(B) and NRO deposits are also finding their way into NR(E)RA deposits,” said a public sector bank official.

As at July-end, NRI deposits with banks stood $62.45 billion against $53.33 billion in the year-ago period.

Non-resident Indian deposit inflows drop sharply in July: RBI

http://economictimes.indiatimes.com/news/nri/forex-and-remittance/non-resident-indian-deposit-inflows-drop-sharply-in-july-rbi/articleshow/16369032.cms

Indians living overseas have parked less money with Indian banks in July, compared with the previous two months, as an initial euphoria over RBI's efforts to attract such deposits waned, bankers said. 

NRI deposit inflows fell to $822 million in July, from $1.7 billion in June and $2.8 billion in May, data from the Reserve Bank of India ( RBI) showed on Wednesday. 

For the fiscal year that started in April, the highest NRI deposit inflows were seen in May when the central bank announced measures to bolster foreign currency inflows after the rupee fell sharply. 

In May, the central bank relaxed the interest rate ceiling on foreign currency non-resident deposits and allowed banks to freely determine the interest rates on export credit in foreign currency. It also eased restrictions on the usage of foreign currency deposits. 

FCNR, NRE, NRO Deposits in a nutshell

The Foreign Currency (Non-Resident) Accounts (Banks) scheme covers deposits the following currencies:

Pound Sterling, US dollar, Canadian dollar, Australian dollar, Euro and Japanese Yen - which are accepted from non-resident individuals of Indian nationality or origin (Non-resident Indians).

FCNR(B) deposits can be made for a minimum of one year and a maximum of five years. Both principal and interest are payable in foreign currency.

Rupee loans can be taken in India against the security of FCNR(B) deposits. Foreign currency loans can also be taken at select branches of Indian banks abroad against the security of FCNR deposits.

Non-Resident (External) Rupee Account (NRE Account) can be opened/maintained in the form of savings, current, recurring or fixed deposit accounts. Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney.

Balances held in the NRE account are freely repatriable. Accrued interest income and balances held in NRE accounts are exempt from income-tax and wealth tax, respectively.

Non-Resident Ordinary Rupee Account (NRO Account) NRO can be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. These accounts are denominated in rupees.

NRIs/Persons of Indian Origin can remit from the balances held in their NRO account an amount not exceeding $1 million per financial year, subject to payment of applicable taxes.

Non-resident deposits: Banks barred from giving staff extra interest

http://www.thehindubusinessline.com/industry-and-economy/banking/article3657340.ece

Banks cannot give additional interest rate benefit of one per cent per annum to their own staff on deposits under FCNR (B), NRE and NRO accounts, according to the Reserve Bank of India.

In a notification, the RBI said, “On a review, it has now been decided that banks should not allow the benefit of additional interest rate on any type of deposits of non-residents.

“Accordingly, the discretion given to banks to allow the benefit of additional interest rate of one per cent per annum as available to bank’s own staff on deposits under FCNR(B)/ NRE/ NRO accounts stands withdrawn.”

Service Tax on NRI Remittances

http://www.financialexpress.com/news/service-tax-on-nris-remittances-chandy-clears-air/969869/0

Prime Minister Manmohan Singh has dismissed reports of any plan to bring under the service tax ambit foreign remittances by overseas Indians, Kerala Chief Minister Oommen Chandy said today.

Singh has also sought details from the Finance Ministry on the issue, said Chandy who raised objections before the Prime Minister over the reported move by the Government to levy the tax on the money of Indians working abroad.

"Prime Minister has dismissed reports that the Government is planning to charge 12.36 per cent on all foreign remittances to India," Chandy told reporters after meeting the Prime Minister here.

The Chief Minister took up the matter with the Prime Minister as the annual remittances from NRI population in Kerala is nearly Rs 50,000 crore and such a move by the Centre would hit the economy of the southern state.

source: www.financialexpress.com