Gold and Silver Allowed for NRIs

The Government has permitted NRI’s to legally import gold (Maximum 5 kgs. w.e.f. 1-1-97, duty of Rs. 220 per 10 grams increased to Rs. 250 from June, 1998 and Rs. 400 from 5^th January, 1999) and silver (100 Kgs. Per passenger, duty of Rs. 500 per Kg.). The NRI should be coming to India, after a period of not less than six months stay abroad and the duty has to be paid in convertible foreign exchange. Gold or Silver, in any form, including ornaments (excluding studded with stones or pearls) is allowed to be imported. Octroi duty will also be payable, outside the airports, as per the municipal rule.

When gold is sold in India, the profit is liable to tax as business income or capital gains, depending on the facts of each case i.e., the intention of the NRI. If his intention was to take advantage of the business opportunity and sell gold/ silver, it will be treated as business profit. If his intention was to hold it as a capital asset, it will be treated as capital gains.

Most NRIs want to take advantage of the business opportunity and buy gold/silver before coming to India and sell it soon. In such circumstances, it will be treated as business income. From the sale proceeds of the metal, the cost and expenses incurred for the sale can be deducted and profits worked out.

In a majority of the cases, the NRI would have purchased the precious metal just prior to his return to India and sold it within short time after his arrival in India, such a transaction would constitute an "adventure in the nature of trade" and the income from the sale would be taxable as business income. It is a well settled principle that income from a single transaction could also constitute business income. Hence the profit on sale of gold/silver would be treated as business income.

If the NRI has acquired the precious metal as a capital assets, the income will be treated as short-term or long-term capital gains depending on the period of holding.

NRI 'S concessions

NRIs, who return to India after 18^th April,. 1992 after having been "a person resident outside India" for a continuous period of at least one year, have been granted the following general permissions on their return to India:

(a) To maintain and operate, their foreign currency accounts with banks abroad. Funds held in these accounts can be used by resident account holders for making any payments to persons resident outside India. There will be no restrictions on utilisation of the balances in these accounts for any bona fide payments in foreign currency. The funds can also be utilised for making further investments in shares/ securities or immovable properties etc. abroad provided the cost of such investment and/or any subsequent payments required therefore are met exclusively out of foreign currency held in these accounts.

(b) To hold, transfer or dispose of their other foreign currency assets like shares, securities, life insurance policies, and immovable properties, abroad . In case of the NRI who wants to retain his link abroad through business, vocation or employment, then his investments or interest in business abroad can continue as usual even after his return to India.

(c) To enjoy absolute freedom for utilisation of their foreign currency assets, including freedom to gift or settle their foreign currency assets to anybody, anywhere.

(d) To earn and retain abroad pension and retirement benefits, after return to India.

(e) To earn, hold or dispose off or invest, in any manner they deem fit, incomes on their foreign currency assets.

(f) To make any payments to or make any further investments abroad, provided that the payments and the cost of such fresh investments and any subsequent payments required thereof, are met exclusively out of the foreign currency assets.

However, to earn the above facilities, it is necessary that foreign currency assets should have been acquired by the returning NRI lawfully without any contravention of FERA when he was living abroad and carrying on employment, business or vacation outside India.