HSBC India subsidiary investigated by US government

It is not clear yet whether the US government has any specific individuals in mind or whether it has been alerted to possible general fraudulent activity and potential loss of US tax income by third parties. HSBC has promised to cooperate fully with the investigation and details of a number of individual accounts held by the HSBC India division will be forwarded to the US government.

NRI taxes

At this moment in time it is unclear whether the situation regarding HSBC India is in any way shape or form related to NRI tax breaks offered by the Indian government. These relate to non-resident Indians working overseas but maintaining a part of their financial wealth and income within India. We have seen the creation of a large NRI financial services sector across India and many NRI’s will be looking with concern at the US government’s recent action.

HSBC has already admitted it is facing “significant penalties” from the US authorities as alleged tax evasion and alleged tax avoidance once again come under the spotlight. At this moment in time there is no suggestion that any parties have in any way acted illegally although the investigation should allow the authorities to clear up the matter once and for all.

Taking financial advice

Aside from the ongoing investigation regarding HSBC and the US tax department, it is vital that any expats overseas take advice about their potential liabilities both in their new homeland and their former homeland. There are number of tax arrangements between governments around the world although whether your particular situation would come under such umbrellas will need to be clarified as soon as possible as it can have a detrimental impact upon your financial wealth.

As a growing number of NRI’s continue to move overseas and operate in countries in the far-flung corners of the world, issues of taxation, where and when it should be paid, will likely become more commonplace. The Indian government may well be forced to step into the breach if there is any overlap on current NRI tax rules and regulations because the situation will be need to be clarified as soon as possible.

Conclusion

Until we are fully aware of the situation regarding HSBC and the US tax department there is very little else we can add to this story. However, it does show that governments around the world are now more proactive with regards to alleged tax evasion and alleged tax avoidance and more than willing to take action when required.

As soon as the details of this ongoing investigation have been published we will release an update detailing exactly what has happened and any changes made which may affect NRIs in the future. It does seem unlikely that this development is in any way shape or form related to the NRI tax standing in the eyes of the Indian government as this has been in place for some time now.

Remiitances to be retained with new proposed immigration bill

Once the job has been confirmed and your visa has been stamped on your passport, the trek overseas for a future NRI may seem to be complete. In reality, it is just the start of the journey. There are a lot of preparations to be made and the following is but a short list of what needs to be done before boarding the plane overseas.

1. Appointment letter. This is a letter issued by the employer submitted to the embassy notifying them that NRI status is being obtained by the individual. This is important for first time travelers overseas as this would signify the approval of the overseas employment.
2. Conversion of accounts. All resident accounts of the individual moving overseas should be converted into NRO accounts. This would inform the bank of the change of status as well as the taxable status. Now, with the NRO account, the tax imposable on income is at 30.9%.
3. Joint accounts. When the individual NRI has a joint account with spouse or any other resident of India, then the account is converted into an NRO account, especially when the NRI individual is the primary account holder. On the other hand, if the spouse is the primary account holder, then the status of the account remains.
4. Bank Deposits. When the bank has deposits and then the account would be a NRO account, then the deposits would be deemed as NRO deposits. During the time before obtaining the NRI status, the interest rate remains and would not be modified until maturity. Upon designation as an NRI, the 30.9% tax rate becomes applicable.
5. PPF accounts. Before 2003, NRIs were disallowed to make contributions to PPF accounts or to any account that was opened prior to achieving NRI status. In 2003, this was modified to allow NRIs to deposit in PPF accounts until its maturity. If the account was opened as a resident Indian, obtaining NRI status does not remove the right to deposit in the account. The NRI can also use funds from the NRE or NRO accounts to make investments in the PPF.
6. Shareholdings and Demat. A NRI can trade and invest through the secondary trading market through a portfolio investment service account. This is mandatory for NRIs, even if their shares were bought even before acquiring that status. Sale or trading is also done through the PIS market.
7. NRE account holder. It is mandatory for a NRI to open a NRE account and designate a holder of the account to help in the daily management of the funds. Upon receipt of salaries overseas, one can then remit funds to the NRE account and the designated holder can manage your investments moving forward.

Following these steps can make the financial life of a new NRI much less hassle free in the long run.

US Homes Owned by Foreigners

Last Tuesday, the Senate Judiciary Committee approved a new immigration measure that would enact the greatest amount of sweeping changes in the current policies on immigration in the United States. The committee, after its approval without amendments, then submits the bill to the Senate floor, where debates are expected on the more controversial provisions contained in the proposed law.

The vote was at 13 yeas and 5 nays to the 900 page bill that would place nearly eleven million illegal immigrants on the path towards citizenship to what is estimated to take as long as thirteen years. Other aspects of the bill includes increased security along the southwestern border with Mexico as well as more stringent standards as to acceptance of immigrants and visa grants in the near future.

The vote was precipitated by the committee’s decision to accept the Republican thrust to relax the restrictions set on high technology companies that seek to employ highly skilled workers from countries such as India and China.

One of the highlights of the committee meeting was the withdrawal of the proposed amendment sponsored by the Senate Judiciary Committee Chairman Patrick Leahy (D-VT). The amendment was the grant of a right to sponsor same-sex partners for foreigners with the end goal of granting permanent legal status.

The reason for the withdrawal, according to the bipartisan committee, would be the torpedoing of the bill in its entirety when put to the floor. Democrats are inclined to provide equal treatment for either hetero or homosexual relations while Republicans oppose the grant of recognition or rights to same sex couples.

Republican stalwart Orrin Hatch (R-Ut) said the approved modifications to the current visa legislation on high skilled workers, which he had championed for the US technology industry, is the price of the support for the bill when the final vote was taken.

Another Republican, Senate Republican Leader Mitch McConnell has assured the committee that he will not block the proposed legislation when the measure is put to the floor for debate and interpellation. While he did not say how his vote would be, he told reporters after the vote that the changes instituted by Senator Hatch ‘made a substantial contribution to moving the issue forward.’

The core aspects of the proposed legislation was maintained even after five extended work session by the bipartisan committee, with discussions on security provisions, which were central to the conservative caucus as well as border state Congressional members have been fortified.

Finding work in Australia

Finding the right job for one’s qualifications and salary needs is a tedious and difficult process fraught with frustration and disappointment for immigrants moving to Australia. Many are forced to take up jobs that are either low paying or underemploying them. These conditions were found in a new study led by a psychology professor of Indian origin.

At the time of the survey conducted by the University of Western Sydney (UWS), over half of the participants were unemployed.

Seven percent of those surveyed were able to secure jobs prior to their arrival. On the other hand, nearly 42% reported they spent the first six months looking for a job while 27% reported spending nearly a year looking for one. The worst group had waited more than one year to find a job and they consisted of 26% of the participants of the survey.

The UWS study was entitled, “Apply, Apply Negative Reply: Understanding Job-Seeking Experiences of Culturally and Linguistically Diverse Job-Seekers in Australia”. The study was led by Renu Narchal of the School of Social Sciences and Psychology of the University of Western Sydney.

According to Narchal, “Of the participants of the survey, 58% had tertiary-level and 15% had post graduate qualifications. They came to this country with the perception that Australia needs skilled workers and are aplenty.”

Instead, they were met with a tough and competitive job market where their skills were undervalued, eventually constraining them to work in low paid jobs and where their skills and experience are not fully utilized, thus underemploying them.

The study consisted of thirty (30) participants who were interviewed about their experiences as a job seeker in Australia. The interviews highlighted a number of issues that are often faced by immigrant job seekers. These include their expectations when migrating to Australia, their perception of the job market in Australia and its culture. The interviews showed that in all three concepts, their experience is very different from the preconceived notions that they had.

Even during the immigration process, finding employment was the most stressful and challenging aspect on the health and well-being of an individual. There is also a perceived discrimination, either racial or cultural or both together with the lack of connections and local work experiences that hamper immigrants from securing the right employment for their needs and their skill set.

In a larger sense, this is an issue as India has become the largest source of immigrants to Australia between 2011 and 2012. According to Immigration Minister Chris Bowen, about 15.7% of the total program came from India. With work getting harder to come by for Indian immigrants, this would become an issue for the long run in Australia.

Supercapacitors in mobile phones.

One of the most innovative inventions has been made by an 18 year old Indian-American girl. Eesha Khare was able to invent a super-capacitor device that would be able to charge your mobile phone in less than 20 seconds.

Khare, who hails from Saratoga, CA was given the Young Scientist Award by the Intel Foundation for her work in developing a device that allows a battery to be fully charged within twenty to thirty seconds.

The device fits inside mobile phone batteries that serve to enhance the charging capacity of a battery. This is called a super-capacitor that is able to fit a large amount of electrical energy into a small area. Thus, when attached to a battery of a mobile phone, it is able to charge it quickly as well as retain the electrical charge for a far longer period.

For her work, Khare received the prize of US$50,000 for developing the supercapacitor. Her invention has also caught the eye of technical giant Google for her invention.

Khare says that her device would be able to last 10,000 charge-recycle cycles. This is ten times better than the 1,000 cycles that conventional rechargeable batteries are able to do in their lifetime.

“My cellphone battery always dies, “ laments Khare, when asked about what had inspired her to do her work on energy-storage technology. With supercapacitors, it allows her to learn more and work more for her favorite area, nanochemistry.

She said, “Really working at the nanoscale to make significant advances in many different fields.”

While the gadget has been tested only on a LED, it has a good chance of being successfully used in other electronic devices such as mobile phones.

Khare envisions that her device would fit inside mobile phones and other portable electronic devices that have become common in today’s world. She further added, “It is also flexible, so it can be used in rollup displays and clothing and fabric. It has a lot of different applications and advantages over batteries in that sense.”

Her story has been reported in NBC News, giving the NRI a sense of accomplishment for her achievement.

Emergency Certificates Issued for NRIs in Saudi Arabia

The government of India has commenced the verification and issuance of Emergency Certificates to its citizens to allow them passage from Saudi Arabia to return home as a result of the implementation of the Nitaqat. The Nitaqat is the new employment policy being instituted by the Gulf Kingdom.

The schedule was to deliver the first batch of Emergency Certificates to the Indian Embassy in Riyadh. There are 12, 000 certificates to be issued in the central embassy while another 3,000 is to be scheduled in the Eastern Province of Saudi Arabia.

In a statement, the Indian embassy in Riyadh said that the schedule for verification and delivery of the subsequent batches for Indian nationals who applied to other collection centers would be announced in due time.

The Nitaqat requires local Saudi Arabian companies to hire one Saudi national for every 10 migrant workers. There has been rumors and speculation that the new policy would limit the job opportunities for Indian workers in the country. Currently, there are two million Indians working in Saudi Arabia.

In the statement, “The embassy would like to reiterate that anyone who obtains ECs from the Embassy will have their passports cancelled. They would not be able to travel out of India on such passports.”

It further read, “The embassy of India in Riyadh and the consulate in Jeddah would revalidate their unutilized ECs issued during  2010 and 2011 for a period of three months as an exceptional measure to facilitate their departure to India utilizing the concessions announced by the Saudi  authorities. The immigration authorities in India have also been sensitized appropriately to ensure smooth entry of the revalidated EC holders to India.”

There is also a waiver as to the fees required to be paid for the Emergency Certificates for one time travel back to India. These are applicable to those EC applications done during the grace period of three months announced by the Saudi Arabian government. In order to avail of this scheme, applicants are required to submit further documentation.

Overall, the Embassy of India in Riyadh has released the names of Emergency Certification applicants whose passports are available with the Embassy. These EC recipients total 2,528 with another 169 individuals whose passports are now available at the Dammam VFS office.

What is the secret to successful NRI businesspeople?

While non-resident Indians have been living abroad for many years now, and indeed in many cases cover the length and breadth of the globe, the number of successful NRI businesspeople continues to grow. We have recently seen a leading NRI businessman promoted to the higher echelons of Diageo, we have seen Lakshmi Mittal build a steel empire which dominates the industry as well as Arun Sarin taking the top chair at Vodafone. But what is the secret to successful NRI businesspeople?

Work ethic

Many people have commented upon the difference in work ethic between non-resident Indians, who have their roots firmly in India, and their European and North American counterparts. Indeed a number of non-resident Indian businesspeople who are successful today often began at the bottom of the employment ladder and worked their way up with hard work and endeavour.

While it would be wrong to suggest that all Europeans and North Americans are in any way shape or form lazy or workshy, there does seem to be a very different work ethic amongst the NRI community. The fact that millions of NRIs are willing to move lock stock and barrel to the other side of the world to chase their dream, look after their families and build a career just about says everything.

In the long term

Something else which is also very evident amongst the NRI working community is the fact that they do not view these moves as a short-term situation. One example is Dubai, which went from the lows to the highs and back again, leaving many expats financially exposed and having to return to their former homelands. However, an already significant NRI community on the whole remained in Dubai during these difficult times and many are now harvesting the fruits of their endeavour as the Dubai economy begins to rise again.

Quote from NRICommunity.com : “Experts from Indian Real Estate sector speak in the symposium and offer free investment advice.”

The reality is that chasing rising economies is very tiring, very expensive and ultimately there will always be somewhere else to go. However, staying put in one country, one environment and one business arena very often pays long-term dividends and also looks very good on your business CV.

Financial rewards

The fact that we have recently seen record NRI deposits in India, now totalling $14 billion a year, is a perfect example of how successful the NRI community has been in its overseas adventures. The reality is that all of this overseas success, in whatever shape or form it may be, is proving to be very beneficial for the Indian community and the Indian economy as a whole.

This has been recognised by the Indian government which some time ago introduced an array of tax exemptions for NRI investments and NRI deposits in the country. This has created a significant inflow of funds into India and in many ways this in itself is a vote of confidence not only in the Indian economy but also the Indian authorities.

Conclusion

While it would be wrong to suggest that all North Americans and Europeans are in some way, shape or form workshy, the fact is that NRIs do in many cases seem to have a very different work ethic. Whether this is myth or reality remains to be seen but we have seen a number of prominent NRI businesspeople making it to the top of their industry having often started at a relatively low position. This is even more difficult at this moment in time when you bear in mind the troubled worldwide economic situation although again, another plus factor, the Indian economy still continues to fight the economic downturn.

NRIs facing judicial process in different means.

There are two stories in this post about the participation of NRIs in differing legal systems.

The first story occurs in Canada, with the leader of the Wildrose party requesting assistance from the Royal Canadian Mounted Police for the conduct of a criminal investigation into the activities of Edmonton-Mannin MLA Peter Sandhu. The charges were due to ethics violations and perjury against the member of the ruling Progressive Conservatives party.

According to Danielle Smith, the complainant, Sandhu testified in court that he was out of Canada when in fact he was present in Calgary at the said time. He was asked about his whereabouts in connection with a home building company who was being sued by creditors for non-payment of debts.

In a statement, Smith said, “With the significant discrepancies between evidence in the courts and the legislative assembly office, we believe it is of utmost importance to ensure that this matter is investigated thoroughly – to not only maintain the integrity of our legislative process, but to ensure the confidence of Albertans.”

On the other hand, an Indian American is now inching closer to becoming the first South Asian judge to be appointed to the DC Circuit Court, which is the second highest court in the United States.

Srikanth Srinivasan was nominated by US President Barack Obama, whom the President called as a ‘trailblazer’, and was born in Chandigarh, India. His nomination has been unanimously approved by the 18-member Judiciary Committee of the Senate. Once confirmed after one year from his first nomination, he would be occupying one of the seats on the DC Circuit Court.

He is currently the US deputy solicitor general and was a former clerk for Supreme Court Justice Sandra Day O’Connor. He successfully was part of both Democratic and Republican Administration and his bipartisan support from the legal community both in the public and private sectors.

Representative Ami Bera, the singular Indian solon in the US House of Representatives, said he was ‘pleased’ of the Senate Judiciary Committee’s decision. He hopes that the Senate leadership would bring the appointment to the Senate floor for a vote.

Once confirmed, he would be the first Asian American on the DC Circuit Court and the first Indian American to be confirmed for service as a federal circuit court judge.

NRI deposits rise to $14.18 billion

It is most certainly a sign the times when the Indian government reports an increase in NRI deposits from $11.92 billion in 2012 to a phenomenal $14.18 billion to the year-end March 2013. Despite the fact that the worldwide economy is struggling it seems that many non-resident Indians have sufficient funding available to increase their deposit exposure back home. The fact that they enjoy favourable tax exemptions is obviously a major attraction but there is no doubt that the NRI industry worldwide is increasing dramatically.

While many people may wonder exactly what this means for the Indian economy and the Indian financial system, it does have major repercussions. The fact that non-Indian residents are depositing so much money in non resident external rupee accounts allows receiving banks in India to offer increased financial services.

A win win situation

If we take the example of the State bank of India and the 8.75% interest rate quoted on traditional deposit accounts it is worth noting that the same interest rate is quoted on non-resident external rupee accounts (NRI accounts). However, the difference is that the principal and interest can be repatriated by NRI’s and the interest earned is exempt from Indian tax.

The Indian government, and indeed the Indian expat community, has created something of a unique situation in the world of international finance. By simply offering NRI’s exposure to the rupee, which is benefiting from a strong Indian economy, and various tax exemptions on their interest earnings (not to mention the repatriation of the principal deposit as well) this is pumping extra money into the Indian economy. Much of this extra funding will be used directly and indirectly within the Indian financial services industry and offers yet more support to an already strong property sector.

Quote from NRICommunity.com : “Indian people are known to be great entrepreneurs. Many have become success stories from humble beginnings. What is the secret for the successful businesses of NRIs overseas?”

The Indian economy

Over the last few years the Indian economy, together with that of China, has been taking the headlines around the world. While growth in China and growth in India is starting to soften, in light of the worldwide economic situation, there is no doubt that both economies are well positioned to become “superpowers” of the future.

Even though international investors have benefited from an opening of various Indian internal markets the truth is that the surface has only been scratched in many areas of business. Various government regulations regarding foreign investment in the country are also proving to be beneficial by ensuring that local companies and local employees also benefit. Whether or not we see a short-term softening of economic growth in India remains to be seen but there is no doubt that the NRI community still sees this country as a powerhouse going forward.

Conclusion

The ever-growing amount of money deposited back in India by NRI’s is mind-boggling and while the taxation situation is obviously of interest, it is yet another vote of confidence for the Indian economy. India has one of the largest populations in the world, the Indian economy has performed well but ultimately we have only but scratched the surface.

It seems almost inevitable that India will become one of the major powerhouses of the world and indeed the BRICS association, of which India is a founding member, continues to go from strength to strength. It will be interesting to see how the economy performs in the short to medium term and indeed whether India is able to fulfil the very ambitious targets which have been set by many people. At this moment in time it would seem more difficult for the Indian economy not to become a powerhouse of the worldwide economy but time will tell.

The Burj in lights.

In a recent survey conducted on UAE based NRIs,  it was found that at least 75% of them expect to be cared for in their old age by their children. This means there are problematic gaps in the future planning of NRIs in terms of finances and golden sunset preparations for NRIs.

According to the Standard Life NRI Wealth Study, “Only one in ten (10%) have invested in retirement plans for their golden years.” The main reason for such lack of planning is ‘family expectations.’

It added, “75% of respondents expected to be cared for in retirement by their children.”

The study conducted by the investment company also lists fear of risks and lack of professional advice as two major factors that result in the failure for NRIs to include retirement planning in their daily lives. The results were culled from the research data obtained from the savings, spending, investment and aspirational behavior of three hundred NRI respondents located in the UAE.

Chris Divito, CEO of Standard Life International Limited (DIFC Branch) said, “NRIs are seen to be a family oriented community who rely much on their children and family for their retirement years. This is simply amazing from a family bonding perspective, but it is always advisable to take professional financial advice when it comes to retirement planning.”

He added further, “With 75 per cent of respondents having three to five financial dependants, there is greater strain of finances and therefore a prudent approach to financial and retirement planning is highly recommended.”

The survey also found that nearly 90% of the NRI respondents have made long term investments in the recent past but now they prefer to make investments in illiquid assets such as jewelry (77%) and property (55%). There is interest in mutual funds (19%) and equities (15%), but this is low compared to the others according to the survey.

There is also a positive outlook to the National Pension Scheme of the Indian government, about 63% of respondents saying they like it but a majority have not subscribed to the pension fund. It added that 25% think that the NPS would not be able to provide sufficient income for their retirement.

Finally, a quarter of NRIs hope to return to India after retirement, while 24% would want to retire in another country, not India or their NRI domicile.