NRI Can Repay Housing loan Through NRE, NRO Account

Reply by Ms. Saroj Maniar, CA

I will be leaving for Singapore in January, 2014 to work with the same bank I am working with in India. What should I do with my bank account because the same account is used for many things such as electronic clearing services (ECS) for housing loan. What about my income tax return? Should I file it for the financial year 2013-14 before leaving India? Should I convert my existing bank account to a non-resident external (NRE) or / a non-resident ordinary (NRO) account and can the ECS continue?

- Ms. Vimal Pandya

For the purpose of determining your income tax liability, it is the definition of residential status under the Income Tax Act that you need to bear in mind. So, if you stay in India for 182 days or /  more during the financial year, you will be considered as a resident.

 

Saroj Maniar, CA

For the current financial year, it appears that your stay in India will exceed the limit since you are planning to move out in January, 2014 Hence, you will be treated as a resident and your global income will be liable to tax in India. However, from subsequent years you will be a non-resident if your stay in India is less than 182 days in that financial year.

As regards filing of income tax return, you are not required to file the return before leaving India.

You can file your return online via the income tax website. Hence, you do not need to be physically present in India for this purpose. With regards to your bank account, you will need to intimate to your bankers about the change in your residential status.

You need not open a separate bank account; your existing bank accounts can be converted into an NRO account. You can continue to receive direct credits like dividends into your redesignated account.

                                                                 

Similarly, ECS for the existing home loan can continue from the NRO account. Check with your bankers for any additional paperwork that may be required.

You may need to give a fresh ECS mandate if the bank account is converted into an NRO account. It is also possible to make the repayment of your home loan from the NRE account.

As a non-resident Indian (NRI), there is no restriction on obtaining a home loan for acquisition of residential property. The repayment of loan through equated monthly instalments can be made either through the NRO account or through the NRE account. The NRE account can be used to deposit or remit income that you earn abroad.

The money lying in this account is freely repatriable outside India at any point of time. This account can be used to make investments which on sale or maturity will be freely repatriable.

About Saroj Maniar 

An experienced Chartered Accountant, a rank holder in the Final Company Secretarial examination, she has been in practice for more than 20 years.

Mrs. Maniar’s area of specialisation is in the area of direct taxes representation & advisory. She has been actively involved in various professional activities conducted by the BCAS, and is a member of the Taxation Committee of BCAS. 

Mrs. Saroj Maniar has also been the Treasurer of Bombay International School. She has delivered talks on various professional subjects & has also contributed articles to The Economic Times, The Times of India, Mint and to Outlook Money.

E: mail: saroj@cnkindia.com

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