India, U.S. Sign Tax Information Agreement for FATCA
Posted on October 01 2020
Residency is actually dependent on the presence of the individual in India for tax purposes. When an NRI returns back to India and will be taxed ultimately on the global income. However, with careful planning, an NRI can continue the time before they are termed resident and ordinarily resident (ROR) for tax purposes and becomes liable for tax on world-wide income.
Because RNORs are accorded the same tax relief as NRIs, income from abroad is not taxed in India when an individual is resident but not ordinarily resident. In fact, depending on the date of return, an individual can take advantage of RNOR status for up to three tax years. However, individuals should bear in mind that they will still be liable for tax on their Indian sourced income as a RNOR.
Tax on Conversion to Resident Foreign Currency Accounts
When a NRI returns to India, any NRE/FCNR bank accounts must be re-designated to RFC accounts. Interest on NRE and FCNR accounts is exempt in the hands NRIs and RNORs. However, once the individual becomes a ROR after a period of two-to-three years of permanent residency in India, interest on the RFC accounts becomes taxable.
NRIs and RNORs are exempt from the wealth tax on assets located outside India. Once a NRI/RNOR’s status changes to ROR, the wealth tax can be levied on world-wide income.
However, money and properties brought into India by a NRI who was generally residing in a foreign country and has returned back to India with the intention of settling down permanently as a resident, is generally excluded for wealth tax purposes for a period of seven successive assessment years, although certain restrictions apply. In addition, amounts held in a NRE account on the date of an individual’s returning back to India are deemed to be amounts brought into India on that date – they are also exempt from the wealth tax.
The wealth tax exemption does not extend to tax on income earned from properties
brought into India.
Taxation on Pensions
NRIs may be receiving pensions from the past employers after returning back to India which is liable for tax on that pension in India. This is liable to the provisions of any double taxation avoidance agreement between India and the country from which the NRI is receiving the pension.
Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.
With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.