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Budget 2015: Top takeaways for the common man
Additional deduction of Rs 50,000 will be allowed for contribution to the new pension scheme u/s 80 CCD increasing from Rs 1 lakh to Rs 1.5 lakh.
Similarly, we will also launch the Atal Pension Yojana, which will provide a defined pension, depending on the contribution, and its period. To encourage people to join this scheme, the government will contribute 50% of the beneficiaries’ premium limited to Rs. 1,000 each year, for five years, in the new accounts opened before 31st December, 2015
The new scheme will allow the depositors of gold to earn interest in their metal accounts and the jewelers to obtain loans in their metal account. Banks/ other dealers would also be able to monetize this gold.
The Mission will consolidate skill initiatives spread across several Ministries. Jaitley also proposed to set up an IIT in Karnataka, and upgrade Indian School of Mines, Dhanbad into a full fledged IIT. IIMs will be set in J&K and Andhara Pradesh, FM added.
Highlights: Budget 2015-16
Finance Minister Arun Jaitley on Saturday announced a budget aimed at high growth, saying the pace of cutting the fiscal deficit would slow as he seeks to boost investment and ensure that ordinary people benefit.
Here are the highlights of Jaitley’s budget for the fiscal year that begins on April 1.
* Fiscal deficit seen at 3.9 percent of GDP in 2015/16
* Will meet the challenging fiscal target of 4.1 percent of GDP
* Remain committed to meeting medium term fiscal deficit target of 3 percent of GDP
* Current account deficit below 1.3 percent of GDP
Jaitley says have to keep fiscal discipline in mind despite need for higher investment
* GDP growth seen at between 8 percent and 8.5 percent y/y
* Aiming double digit growth rate, achievable soon
* Expects consumer inflation to remain close to 5 percent by March, opening room for more monetary policy easing
* Monetary policy framework agreement with the RBI clearly states objective of keeping inflation below 6 percent
* “One of the achievements of my government has been to conquer inflation. This decline in my view represents a structural shift.”
* Revenue deficit seen at 2.8 percent of GDP
* Non tax revenue seen at 2.21 trillion rupees
* Agricultural incomes are under stress
* Net receipts under market stabilisation scheme estimated at 200 billion rupees
* Government targets 410 billion rupees ($6.7 billion) from stake sales in companies in 2015/16
* Total stake sale in 2015/16 seen at 695 billion rupees * Sets stake sale target for 2016/17 at 550 billion rupees * Revises down stake sale target for 2014/15 to 313.5 billion rupees
* Propose to merge commodities regulator with SEBI
* To bring a new bankruptcy code
* Jaitley says will move to amend the RBI act this year, and provide for a monetary policy committee
* To set up public debt management agency
* Proposes to introduce a public contract resolution of disputes bill
* To establish an autonomous bank board bureau to improve management of public sector banks
* To enact a comprehensive new law on black money
* Propose to create a universal social security system for all Indians
* To launch a national skills mission soon to enhance employability of rural youth
* To raise visa-on-arrival facility to 150 countries from 43
* Allocates 346.99 billion rupees for rural employment guarantee scheme
* Raises threshold for application of transfer pricing rules to 200 million rupees from current 50 million rupees
* Gross market borrowing seen at 6 trillion rupees
* Net market borrowing seen at 4.56 trillion rupees
GENERAL ANTI-AVOIDANCE RULES (GAAR)
* Government defers rollout of anti-tax avoidance rules GAAR by two years
* GAAR to apply prospectively from April 1, 2017
* Retrospective tax provisions will be avoided
* To abolish wealth tax
* Replaces wealth tax with additional 2 pct surcharge on super rich
* Proposes to cut to 25 percent corporate tax over next four years
* Corporate tax of 30 percent is uncompetitive
* Net gain from tax proposals seen at 150.68 billion rupees
* Jaitley proposes modification of permanent establishment norms so that the mere presence of a fund manager in India would not constitute a permanent establishment of the offshore fund, resulting in adverse tax consequences.
* Proposes to rationalise capital gains tax regime for real estate investment trusts
* Expects to implement goods and services tax by April 2016
* To reduce custom duty on 22 items * Basic custom duty on commercial vehicle doubled to 20 percent
* Proposes to increase service tax rate and education cess to 14 percent from 12.36 percent
* Plans to introduce direct tax regime that is internationally competitive on rates without exemptions
* Exemptions for individual tax payers to continue
* To enact tough penalties for tax evasion in new bill
* Tax dept to clarify indirect transfer of assets and dividend paid by foreign firms
* Import tax on iron and steel increased to 15 percent from 10 percent
* Import tax on metallurgical coke increased to 5 percent from 2.5 percent
* Investment in infrastructure will go up by 700 bln rupees in 2015/16 over last year
* Plans to set up national investment infrastructure fund
* Proposes tax-free infrastructure bonds for projects in roads, rail and irrigation projects
* Proposes 5 “ultra mega” power projects for 4,000 MW each
* Second unit of Kudankulam nuclear power station to be commissioned
* Will need to build additional 100,000 km of road
* Ports in public sector will be encouraged to corporatise under Companies Act
* Plan expenditure estimated at about 4.65 trillion rupees
* Non-plan expenditure seen at about 13.12 trillion rupees
* Allocates 2.46 trillion rupees for defence spending
* Allocates 331.5 billion rupees for health sector
* Government to provide 79.4 billion rupees capital infusion to state-run banks
* Propose to do away with different types of foreign investment caps and replace them with composite caps
* To allow foreign investment in alternative investment funds
* Public investment needed to catalyse investment
* To develop a sovereign gold bond
* To introduce gold monetisation scheme to allow depositors to earn interest
* To introduce Indian-made gold coin to reduce demand for foreign gold coins
* Raises excise duty on cigarettes by 25 percent for cigarettes of length not exceeding 65 mm
* Raises excise duty by 15 percent for cigarettes of other lengths
* Food subsidy seen at 1.24 trillion rupees
* Fertiliser subsidy seen at 729.69 billion rupees
* Fuel subsidy seen at 300 billion rupees
* Major subsidies estimated at 2.27 trillion rupees
* We are committed to subsidy rationalisation based on cutting leakages
* “We inherited a sentiment of doom and gloom. The investment community had almost written us off. We have come a long way since then.”
* “We have turned around the economy, dramatically restoring macroeconomic stability and creating the conditions for sustainable poverty elimination, job creation, durable double digit economic growth.”
* “While being mindful of the challenges … this gives us reason to feel optimistic.”
* 2015 Budget will further reignite our growth engine, signalling the dawn of a prosperous future.
* Budget is investment friendly & removes all doubts on tax issues. It assures investors that we have a stable, predictable & fair tax system.
NRI alert: New online system to address your grievances is here
Now, Non-Resident Indians (NRIs) can log on to the Internet and file complaints concerning consular services.
Officially launched just two days ago, Madad (meaning help in Hindi) is aimed at streamlining the grievance system.
The system is crucial in helping the overseas community, highlighted Anurag Bhushan, Consul General of India in Dubai. “It is a system that helps logging and tracking complaints, and seeks feedback of the different services. The processing of the complaint is systematized and can be monitored at every level,” he said.
“Prior to the launch, the system was being run on a trial, and it has since logged 30-35 grievances so far,” Soumya Nair, Consul Press, Information and Culture, Emirates24|7.
A joint initiative of India’s Ministry of External Affairs and the Ministry of Overseas Indian Affairs, Madad allows overseas Indians to register and follow up on their issues.
After Dubai and Abu Dhabi, the system will be launched in four other GCC missions – Bahrain, Kuwait, Oman and Qatar.
So far, communication lines were opened on multiple social media platforms, but CGI in Dubai is hopeful that the new online system will be the way forward.
Soumya maintains that Madad will address issues like “labour, property, compensation, marital dispute, court cases, missing person cases and repatriation of bodies.” However, passport and visa services will not be included.
She explained that Madad will bring more transparency and accountability to the system. “It will also save time, and direct the complainant to the right department.”
Often, people are unaware on whom to approach regarding a certain issue, and a lot of time is lost trying to identify the right department. This system is expected to eliminate that confusion.
Detailing how the system works, Soumya said, “Once a complaint is lodged, it will be directed to the right authority. Each authority is given a specific response time, and if the issue is not addressed then it is escalated to the next level. And, if it doesn’t get solved, then it keeps moving up till action is taken.”
“If an issue is left unattended, then it will appear as ‘pending’ in the dashboard of the CGI in Dubai.”
The system is colour-coded with Red used for pending cases, green for performing well and amber for cases standing on the borderline of allotted time for the official.
“If the complainant is unhappy with the way an issue has been handled, then he/she can reopen the case,” she added.
““If a person is not Internet savvy, then another person can step in and help with all their details.”
Soumya informed that CGI in Dubai will only see grievances in Dubai.
“We encourage more people to log on to the system, as this is streamlined and saves time. People can track their complaint at every level, and even file a feedback on how their issue was handled.”
How to file a complaint
1. Open the link to Madad portal, which is available as Passport Seva Online (www.passportindia.gov.in)
2. First time users need to create an account by entering name, phone, email and a password.
3. Your account should be verified by clicking on a link sent to your email id.
4. After confirming, you can log in using the username and password.
5. You can file your own complaint in behalf of someone else.
6. The entire history of your grievance would be maintained online and you can check the status and updates by logging in later.
#Budget2015 NRIs have a wish list
“Veni Vidi Vici!” he came, he saw and he conquered like Julius Caesar. That could best sum up Modi’s whirlwind tours of USA and Australia which could be said as the main course and New Zealand, Fiji as the dessert and side-dish, in a feast for his overseas supporters and the shutterbugs back home, not to mention the media channels who were busy discussing the global direction with the coming together of India and the USA.
While the overseas Gujarati community at large is undeniably the backbone of Modi’s support base, the in general mood of the expatriates has been expectant. Now coming to the budget part it is a well-known fact that Modi government’s first budget was a quickie with no time in particular for policy planning and also due to the various electoral compulsions in lieu of the impending state elections that had to be won, taking advantage of the huge momentum that was generated.
The upcoming budget is Modi’s best shot at any structured reforms that might set the tone for the story of growth of his stint as a Prime Minister. There are no electoral compulsions in the very near future that might shackle his legroom in this aspect.
Coming to the nitty-gritty of the finance and economics world, to start with the general outlook of the western economic powerhouses, analysts and the governments at large has been best summed by the newly appointed US envoy to India Richard Verma. The key points put forthright by him at the ISB (Indian School of Business) event are sustain lower fiscal deficits to reach the target of 3.6% set earlier, protect intellectual rights (has been the theme song of the western conglomerates for a while now), spur growth by a mix of private corporate investment and public spending in infrastructure, create new avenues that provide manufacturing jobs and recruit the newly skilled and temporary workers entering the job markets. Better management of public sector units, targeted divestment in public companies etc. etc.
This of course can be done by changing the draconian land acquisition bill that was passed by the earlier Congress government in haste as a measure of populism to gain political capital.
One of the biggest worries for NRI’s is the tax slabs at which the interest is levied on any remittances sent home (India) currently.
As per the Reserve Bank of India (RBI) regulation the Government of India allows an NRI to remit funds up to USD 1 million($) per financial year abroad using a Non Resident Ordinary Rupee (NRO) account.
If the remittance consists of interest from the NRO deposit, the bank is required to deduct tax at source on the interest at the rate of 30%. If an NRI living in the US or UK or any other country that has a Double Taxation Avoidance Agreements (DTAA) with India, then the NRI is eligible for a reduced TDS rate of 15%. The bank will require the NRI to submit a Tax Residency Certificate from the country of residence, besides several other documents so as to avail of this reduced rate.
On the other hand a Non Resident Rupee (NRE) account while not taxable at the source by the Indian government cannot be opened in partnership with an Indian resident.
There should be a uniform tax slab rate for all the countries especially to prevent the odd scenario of DTAAs that India has signed with countries which do not have personal tax. The basis of a DTAA is that a particular income is taxed in both countries. However in such instances where the foreign country may not levy personal tax on its residents, and India has a DTAA with those countries, it allows NRIs of those countries to avail a reduced rate of TDS. This a grey area and favors a few countries.
This subsequently might be left to the banks discretion for handling. This mountain of paperwork required by the bank including self-declarations and other supporting documents puts the NRI’s at disadvantage, especially the small to medium level PIO’s (Person of Indian Origin) who are interested in some kind of financial venture back home but would not dare given this complex process.
The whole confusion between the NRI/NRO accounts and the tax rates (NRO) need to be streamlined and a uniform rate to be applied or specified (if needed on a per country basis) that can be periodically revised by the RBI. This would bring in valuable foreign investments in the form of small to medium level NRI’s/PIO’s who want to invest in India, albeit on a smaller scale. The restrictions on joint operation with Indian residents is also to be revisited as the “absence of NRI” is the biggest impediment that prevents him or her from any collaboration with their home country. A government website can be opened that specifically targets such small level NRI investors and addresses all information, paperwork (through online portals and forms) etc.
Land for small scale NRI’s/PIO’s to set up small to mid-sized industries
Second and most important policy change which is also linked to the land acquisition bill is the revisiting of the whole concept of “Special Economic Zones (SEZ)”. Certain allocations are to be made again for small to medium level NRI’s who want to help kick start growth by establishing smaller level units/industries to which they can contribute monetarily and skill wise.
For example a welder in a Gulf country might have a novel way of creating specialty fittings that might have demand in the overall global market by streamlining his knowhow of advanced or more available technologies in his country of occupation.
Single Window Clearance Portal for NRI’s/PIO’s to set up small to mid-sized companies
The proficiency of such small level NRI’s/PIO’s should be streamlined by offering them land allocations (although on a smaller scale) using the much talked about but still elusive “Single window clearance” system. The above mentioned portal that targets NRI’s/PIO’s can be used for the said purposes to help them prevent wasting the valuable currency they bring in to red tape and corruption. Any equipment they need to import can also be facilitated through this clearance window in the portal/website. This will help create new companies (not zombies) that are steady in growth and are backed by a solid technical knowhow of the current advances in the global aspect. New Indian workforce entering the market can also be trained in such latest state of the art skills, whether it is pertaining to small scale manufacturing or services, telecommunications or hardware.
It is an open secret that in the name of land pooling for SEZ’s several thousands of acres of land across India has been misused, handed over to powerful interests through middlemen and land sharks. Huge tracts of such unused land is still lying vacant in the hands of real estate moguls that can be reclaimed and set to correct purposes.
Thirdly and most importantly “the absence of an NRI factor!” is so important of a broad factor that it certainly deserves the final say. This is something that should not be working against the interests of NRIs, especially those who have family and cultural moorings still intact with India and who are willing to contribute to their homeland in one way or another, mostly in partnership with their families and friends who still reside back home. The whole concept of NRO tax slabs, and the differences in terms of the stakeholders of operation for an NRE/NRO needs to be revisited. A single window clearance system for small scale NRI/PIO’s through a central portal that also helps them procure land (deals with local state and national laws), register companies and handle any process to be adopted so as to import technology/knowhow, into India will definitely negate the biggest impediment to an NRI from contributing to India, which is their absence.
When will be find “Made in India’s” in a Walmart in the USA?
The story of China whose products decorate more than 90% of the manufactured goods here in the US was in the making since the early 1980’s when Deng Xiaoping set the stage for PCO’s (Person of Chinese Origin) to come from across the world besides Hong Kong and Taiwan to bring in their expertise and setup shop, to avail of the extremely cheap labor available in mainland China. India can definitely emulate the dragon in this regards, especially given the Indian people’s potential. The “Make in India” campaign started by Modi can take steps in this directions and branch out as “Make in India, NRI’s!”
As for the central message that an NRI/PIO want to hear from Modi’s most important budget of his term can be best summed by what he said during a “Star War” like appearance at an event in central park New York “May the force be with you!” All said and done Mr. Modi if not sabers at least equip us with sticks!
Ravi Chaudhary appointed as Executive Director at Federal Aviation Administration
ICICI Bank Ltd Launches ‘Video Banking’ for NRIs
India’s largest private sector bank, announced the launch of ‘Video Banking’ for all its NRI (Non Resident Indian) customers. Using this service, the customers can now connect with a customer care representative over a video call, round-the-clock, on all days from anywhere using their smartphone. Customers need to authenticate themselves to use this service.
An ICICI Bank spokesperson said, “ICICI Bank has been leveraging technology to provide convenient and accessible services to our 1.5 million NRI customers across 150 countries. We are pleased to commence the ‘Video Banking’ service, which brings alive the experience of walking into a branch for the customers from any corner of the world. It gives access to personalized face-to-face interaction, even when the customer is not in India. This creates an opportunity for us to engage with the customer to serve their needs better.”
With ‘Video Banking’, customers can perform all the transactions that can be done through ICICI Bank’s ‘Phone Banking’ services like bill payments, booking a fixed deposit and much more.
About ICICI Bank Ltd: ICICI Bank Limited (NYSE: IBN) is India’s largest private sector bank with consolidated total assets of US$ 124.76 billion on March 31, 2014. ICICI Bank’s subsidiaries include India’s leading private sector insurance companies and among its largest securities brokerage firms, mutual funds and private equity firms. ICICI Bank’s presence currently spans 18 countries, including India.
About ICICI Bank NRI Services, India: ICICI Bank is one of the most preferred banks for NRIs in the world. It reaches out to NRIs in over 150 countries. Serving more than 1.5 million NRIs over the last decade, it continues to be the trusted choice of Indians abroad. The bank with its rich experience and expertise deploys technology to deliver the best in banking experience to its NRI customers. The bank offers solutions to NRI customers with a focus on:
- Comprehensive product suite addressing specific financial needs of the NRI
- Round the clock availability through various channels to ensure convenience for the NRI
- Usage of cutting edge technology to deliver efficiency and ease
Union Budget 2015: Govt soon to take a decision on relaxing FDI norms for NRIs
Spouses of H-1B visa holders to get work permits in US
The US today announced that it will provide work permits to spouses of H-1B visa holders beginning May 26, a move that is expected to benefit thousands of talented and professional Indian spouses who come to America but are unable to work.
The US Citizenship and Immigration Services (USCIS) will begin accepting applications for work visas from H-1B spouses on May 26.
Once USCIS approves the ‘Form I-765′ and the H-4 dependent spouse receives an Employment Authorisation Card, he or she may begin working in the United States.
USCIS estimates the number of individuals eligible to apply for employment authorisation under this rule could be as high as 179,600 in the first year and 55,000 annually in subsequent years. The move has been welcomed by Indian- Americans.
The conditions include that the principal H1B worker has an approved ‘I-140′ or is currently on an extended H1B status beyond the 6-year limitation based upon an I-140 petition application pending for at least 365 days (one calendar year)
Recent State Department figures show that approximately 76 per cent of those who received H-4 status in 2013 were from South Asian countries.
Govt launches portal ”Madad” to redress grievances of NRIs
Indian citizens living abroad will now be able to file consular grievances online as the government today launched an e-portal to address such complaints promptly with a high degree of “accountability”.
The portal ‘Madad’ (Help) was launched at the MEA headquarters here by External Affairs Minister Sushma Swaraj, who said the grievance monitoring facility would enhance “accessibility” for people and fix greater “accountability and responsibility” on officials.
“The portal seeks to significantly reform the linear process adopted to post grievances from the originator of the grievance to the concerned Embassy or Consulate of India abroad and cut down the time required for grievances to be sent from Delhi to our Missions abroad and to get them to take necessary action,” Swaraj said.
Among the chief characteristics of ‘Madad’ are to speed up forwarding and handling of complaints, improve tracking and redressal and escalate unresolved cases.
“After registering, the complainant can log in and file his or her complaints, and the entire history of that grievance would be maintained online. The authorities would be assigned responsibility through a colour-coded dashboard that would change colour if the response in not given in a stipulated time,” a senior official of the MEA said.
Swaraj said such “healthy intra-department competition” would act as a deterrent for officials to not let work slide and they would therefore respond with greater accountability now, which would ultimately benefit people.
The official said that maximum priority would be given to cases related to bringing back “mortal remains” of any national.
“The colour code system will follow red-amber-green pattern, ie, missions performing well in redressing grievances would be in ‘green’, while say those keeping inordinately pending cases would show as ‘red’.
“Also, when the colour code changes, it will escalate the case to higher authorities and the entire history can later be accessed by the complainant in a summary or detailed format,” the official added.
All the stakeholders, in this consular grievance monitoring, are tightly linked to the portal, including Missions and Posts abroad and MEA’s Branch Secretariats in Chennai, Guwahati, Hyderabad and Kolkata, he added.
“The plan is also to have a call centre linked to the Ministry of Overseas Indian Affairs. Besides, we are also currently working on a mobile application to let people use the system on the go,” he said.
Swaraj, who is also the Minister of Overseas Indian Affairs (MoIA), said, she brought a team together from the two ministries to effect the plan.
“MEA and MoIA have been separate and I realised that sometimes, the scope of the problem in such matters lied with MoIA but the solution lied with the MEA. And, since I hold both the ministries, I brought them together and the team worked beyond my expectations,” she said.
The Union minister said the project was started as pilot project in some of the missions abroad, including in Oman, where “I had recently visited.”
The pilot project for the system was started with 7 countries, the 6 Gulf Cooperation Council (GCC) countries including UAE, Saudi Arabia, Oman, among others, and Malaysia.
The portal link is available on the website — www.passportindia.gov.in.
Swaraj further said that the logo and tagline for ‘Madad’ was selected through an online competition on www.mygov.in.
The logo represents image of two persons holding hands, side by side, forming, the letter ‘M’ of the ‘Madad’, written in blue, and the tagline is ‘Because You Are Us’.
“And, instead of awarding Rs 1 lakh to one winner, we have selected logo of one candidate and tagline of another, and they will evenly share the prize money,” she said.
The portal has been designed by Tata Consultancy Services in collaboration with the government.
Members of Parliament Arjun Ram Meghwal and Arun Kumar were also present on the occasion.
NRI returning to India – Experience sharing, tips for financial planning
Stan D’Souza is a finance professional who previously held senior positions in a bank and multinational companies of repute. “I used to manage company finances well, but when it comes to our personal financial management I think we all tend to be a bit relaxed and procrastinate due to pressure of work. I wish I had done better planning before coming back for good which would have resulted into better return on investments,” he says. Presently he is doing consultancy work in the risk management and compliance related field, while helping his wife to run her wedding gown business (Bridal Brigade) which, he says, is more colourful than the dryness of finance field.
It is that moment in life when you have decided to come back and settle in India after spending considerable years abroad. You are excited, nervous and unsure of what is in store for you.
After living for over twenty years in Dubai, when I finally came back to settle in Bangalore, my initial experience was far from pleasant. From an orderly life with wide roads, controlled traffic, cleanliness, and rule of law, I was suddenly feeling out of sync. Of course coming to India on holidays cannot be compared with settling for good, which poses different challenges. As months pass by, being ‘a born Indian’ you learn to live in this organized chaos again, slowly but steadily. Inevitably you transform to be a part of the system and in some sense start enjoying it.
I would like to share some experiences and ideas to enable others to be better prepared for this transition, both from settling issues and financial wellbeing perspective. It is said ‘failing to plan is planning to fail’. This is true in every aspect of life. Many a time the decision to come back is thrust upon you so prematurely that you will feeltime is your biggest enemy.
Ease of settling:
If you think having a couple of crores of rupees will help you live here ‘happily ever after’ with the same life style, you are in for a surprise. The rents are not cheap, continuously rising, and so is the cost of basic necessities. The prices of groceries and household items are similar to that of Dubai multiplied by the exchange rate; sometimes much more. If you have your own house, you would be better off. However if you do not have one, buying a new one would deflate a big part of your savings.
We take electricity and water issues, for granted in the Gulf and even in the western countries. Here it is a daily struggle. You need to have a power backup with UPS. Corporation water is highly inadequate especially in new areas. You end up paying lots to buy tanker water, the price of which varies depending upon the season.
Traffic in Bangalore is a nightmare and time consuming. At times one is too close to comfort with the next person in the traffic. But you will get used to it. The good news is one cannot drive fast. There is some unwritten order in this chaos and people respect it. Having your own car is ideal; a smaller car is better if you intend to drive regularly in the traffic and in small lanes.
With everyone’s sons and daughters aspiring for higher studies, skilled labour is a scare commodity. Maintenance work is expensive and there is no time commitment. You are at their mercy and in majority of the cases the quality of the workmanship is poor. It is advisable, that you bring quality home tools as the workers expect you to have them.But over time you will develop contacts and a network of fairly good workers. It would be beneficial to bring your essential household furniture from abroad (a full container would work cheaper with less damage to the items). This proved to be cost effective for me and the quality of the furniture was superior to what was readily available in the local market.
The best part of Bangalore is the weather – it is very pleasant for most part of the year (sans some dust at main roads).I enjoy my fish here (better than Dubai!). I have found a good fish vendor in Johnson market, one Aslam Bhai, gives me very good fish which he gets from Mangalore. (Not that Aslam Bhai… Dubai ka chashma Cheen ki chaddiwala). You get fresh pork unlike frozen one in Dubai. Fresh seasonal Fruits, vegetables are available in plenty. You make friends here easily.
Mind your finances:
The issues that I would like to discuss here are relevant not just for those who return for good, but for people who live abroad and dream that life goes on and on. Advance planning is equally important here too if you want to live happily after returning to India. Here are a couple of points I would like to draw your attention to. I wish I too had thought in these lines before.
1. Taxation: As a NRI if your India origin taxable income is more than Rs.2.5 lacs (Indian incomes like rents received, interest on NRO accounts etc.) you need to file your tax return. If you stay in India beyond 180 days you would be considered ‘resident’ for Income tax purpose. All your interest on NRI Bank deposits is taxable from day one of your becoming a resident. FCNR can be converted into RFC Accounts and can be held for two years without tax. Thereafter it becomes resident income and taxable.You need to declare your foreign assets in your tax return. Now with mandatory PAN card, one cannot escape and there are penal provisions for not filing tax returns.Hence tax planning is something you need to consider before you come for good.
2. NRIs who do not plan to return soon: If you have sizeable NRO deposits for which TDS is deducted and you file returns, you can convert them to NRE deposit and not pay any tax or have TDS deducted. I am sure many are not aware of this provision. RBI permits up to USD 1 million to be transferred into NRE deposits from NRO funds. What you need to prove is that the NRO amount was from foreign remittances. The process is simple. You need to submit a certificate in this regard from a Chartered Accountant to your Bank and the Banks would do the rest. The interest rates in India are expected to come down continuously going forward and hence, this option could be used to avail higher NRE interest rate for a longer maturity. Please do the cost benefit analysis taking into consideration tax savings also.
3. Financial Planning is something very important which should not be postponed. It is like a budget with a long term view where your life’s goals are be matched to your financial needs at different stages of your life. Whatever investment you would do should be as per this plan, rather than momentary decisions based on advices from sellers of investments with vested interests. Many fail to do this either because of paucity of time, lack of knowledge and end up in miserable investments. There are lots of good financial Advisors and you need to test them for their ideas and choose one. On my return I tried couple of RMs from Banks and some independent financial advisors. My experience is an independent adviser of repute would be good as his/her proposition includes wider net of investment options than Bankers who are focused on products related to their Banks only. The former are also cost effective. I am lucky that I met someone with over 10 years’ experience, a person of Mangalorean origin, having five offices in three cities, who is not pushy and he gave me lot of options. Once I did my financial plan, I started initially with small investments through his investment wing. Now over a year I am really happy.
4. Investing: Cardinal rule in any prudent investing is ‘do not keep all your eggs in one basket’. Hence diversify. Keep adequate insurance, both life and medical.
Bank deposits are what I think most NRIs invest in. But once you are back, Bank fixed deposits (FD) are not tax efficient. There is no inflation related tax benefits allowed for Bank deposits. There are other avenues like mutual funds (MF) both equity and debt as underlying assets. For equity mutual funds, after one year there is no tax on capital gains. For debt mutual funds, you get indexation benefit (inflation deduction) on capital gains beyond 3 years. Thus very much tax efficient compared to Bank FD. Now debt mutual funds are safer andyield returns higher than Bank FD net of tax. Equity mutual funds are more volatile based on the Stock market. The best way to invest in equity MFs is through SIP route. Here every month or every week depending on how comfortable you are, a certain amount is systematically invested in these mutual funds. This will average out the risk. Indian economy is poised to grow very well in years to come and equity investments would yield better returns on the long run with no capital gains tax.
5. Tax free bonds: Once you are back and if you are lucky, sometimes you get opportunities to invest in tax free bonds, which are 15 years of maturity and with 8 to 9% tax free interest. This is as good as getting 11.5% on Bank deposits. You could also invest up to Rs.1.5 lakhs per year in Public provident Fund. This is again tax free, but need to be held for a longer period. The Tax free bonds are very safe with good ratings and are tradable on the Stock exchange.
6. Real estate is something many NRIs are interested in. This is definitely a good investment. Compared to flats, holding land will yield more returns in the long run, but it is associated with lot of management issues especially in Bangalore with many unpleasant incidents. You definitely need somebody locally to look after your investments.
7. PMS: One thing I would recommend would be to have a PMS account (Portfolio Management Account) with wealth managers of repute. Here your wealth managerhandles your investment on your behalf with your Power of Attorney. Of course the investments are discussed with you as per plan and you will have a separate Bank and a Demat account in your name. There will be online visibility of the investments made on your behalf. Moreover, there are stringent rules by SEBI (Securities Exchange Board of India) which is a watchdog with quasi-judiciary powers. Of late SEBI has come down heavily on many companies who flouted their rules. I am personally investing through PMS, and am comfortable with the growth of my investments.