I was born and raised in Dubai and currently reside in the UAE, where I run my own business. I still hold an Indian passport. I want to donate to an NGO in India, in which one of my relatives is a trustee. Do I have any tax or other reporting obligations in India?
-Name withheld on request
Foreign Contribution (Regulation) Act, 2010 (FCRA) is the legislation dealing with foreign contributions received by an Indian NGO. FCRA contains two key conditions to trigger compliance and requirements: (a) the donor must be classified as a ‘foreign source’ and (b) the nature of the funds received must qualify as a ‘foreign contribution’.
While the term ‘foreign source’ includes individuals, only those holding foreign citizenship are considered ‘foreign sources’ under FCRA. Since the UAE does not grant citizenship by birth to children of foreign nationals, and you are an NRI (i.e. an Indian citizen living abroad), you are not covered under the definition of ‘foreign source’. Therefore, any donation made by you to the Indian NGO will not trigger FCRA compliance or reporting requirements.
You may donate to the NGO through normal banking channels. If the NGO is registered under section 80G of the Income Tax Act, you will also be eligible to claim a tax deduction. The NGO will provide you with a valid donation receipt and a certificate of donation in Form 10BE for this purpose.
Also Read: How NRIs can overcome banking challenges and manage their finances back home
I have recently acquired Portuguese citizenship and given up my Indian passport. But I will continue to stay in India at least for the next 2-3 years. Because of this change in my citizenship, would it have any tax impact? Also, do I have to do any FEMA compliance for the same?
-Name withheld on request
Under the Indian income tax provisions, residential status is determined, inter alia, based on the period of stay in India and not on the basis of the citizenship. Though you have obtained Portuguese citizenship and continue to reside in India, you will still be classified as a resident and ordinarily resident (ROR).
Your change in citizenship does not impact your tax liability in India. Your global income continues to remain taxable, and you may claim foreign tax credits for any income that you earn outside India. Additionally, you must report the foreign income and disclose the details of any foreign assets in ‘Schedule FA’ when filing your Indian income tax return.
Under FEMA, a person is considered a resident in India if they stayed in India for more than 182 days during the preceding financial year, apart from the intention to stay in India. Since you continue to stay in India with no intention to settle abroad in the current financial year, you remain a ‘person resident in India’ under FEMA, despite acquiring foreign citizenship. Further, there is no requirement to convert your existing Indian bank accounts into NRO or open new NRE accounts. It is advisable to obtain an OCI card immediately since you have already given up your Indian citizenship and you wish to continue to stay in India. Other FEMA obligations as a resident will continue to remain the same for you.
Harshal Bhuta is partner at P. R. Bhuta & Co. CAs
