Few points NRIs should be taken care before return to India
- by CA G.Rajasekar B.Com.,FCA F.I.I.I
INCOME TAX – NON RESIDENTS
The three category of persons are as follows:
a. NON-RESIDENT :
if the individual was in India for less than 365 days during the preceding 4 years and for less than 182 days during the year
if he was in India for less than 60 days during that year.
However the number of days stay in India has been reduced from 182 days to 120 days from Financial Year 2020 – 2021 onwards if their Total taxable Income in India exceeds Rs 15 lakhs.
b. NOT ORDINARLY RESIDENT:
if individual was non-resident for 9 out of 10 years
stayed not more than 730 days in 7 years he become not ordinarily resident.
c. RESIDENT :
others are resident.
2. INCOME TAX:
Not Ordinarily Resident (NOR)
3. INCOME EXEMPT FROM TAX :
- Interest on NRE or FCNR deposit & NRE SB accounts
- Interest on certain bonds of central Govt
- Income earned by way of bonus additions to life insurance policies taken outside India. Though it was not specifically mentioned in the act, it is allowed as it falls under the head of foreign income.
- Deductions available to residents such as Rs 1.5 lakhs for life insurance policies or ULIP or PPF or contributions to PF etc sec 80 C
- Heath insurance policys (Rs 25,000) – sec 80 D
- Donations – 50% sec 80 G & 100% for certain cases
And the list goes on.
The important thing is that the same are allowed only from the Indian income if you are non-resident
4. NRE & FCNR deposits:
- If both husband and wife are non-residents, you can divide and put so that when you become resident, percentage of tax will be low.
- It is better to have mix of 50% in NRE & 50% FCNR if your children are abroad. Further appreciation of foreign currencies are not taxable, but the rate of interest rate for FCNR is low.
- Try to put deposits in 4 or 5 banks. As per the deposit insurance scheme in India, Rs 5 lakh is only covered. balance will be distributed after realizing net sales
- Generally banks require employment visa on pp to renew NRE or FCNR deposits. Hence it is advisable to put for long period say 5 years or more based on your expected transfer in future to you children.
5. SBI NEW YORK
If you wish to open certificate of deposit (fd) with them you can do it now itself. They will open only when you are NRI. They might ask visa stamping on pp, salary certificate etc.
Though they offer interest around 0.75% only, CDs are protected by federal deposit insurance corporation upto USD 100,000/- per account.
6. TRANSFERS TO YOUR CHILDREN:
If you wish to transfer any money to your children you can do it. in that case USA residents (even work visa category persons) have to pay it on the income earned on such money(not on the money transferred) in USA ie called global income taxation.
My personal advice is not to transfer huge amounts to them. You can transfer certain amount and do it at a later date.
According to my knowledge there are no restrictions on transfer to your children at USA. However I read somewhere it should be limited to USD 250,000/- better to follow.
7. INCOME FROM HOUSE PROPERTY:
Net income from house property in India is taxable. However you can claim deductions under sec 80 as mentioned above.
8. INVESTMENT IN SHARES:
- better to liquidate if you have investments in shares in foreign country.
- you can continue to hold shares in Indian market. now the market is low you can invest certain percentage (say 10 or 15%) based on proper advice from your contacts. buy only in top 50 companies.
- Dividends are now taxable in India
It is better to update your records with banks before your return by showing the current stamping so that you need not do for say 2 years.
Do not tell banks that you returned for good and keep on saying that you might be looking for some job if you intend to go out. It is the practical issue.
10. FILLING OF RETURN:
If your taxable income is exceeding Rs 2,50,000/- then you need to file the return before 31st July for the period ending 31st March.
11. ADVANCE I.T.:
If your income is more than the taxable limit and the tax deducted at source (tds) is not sufficient then you have to pay advance it. Otherwise it will attract interest and penalty.
12. DOUBLE TAXATION AGREEMENTS:
It is not applicable to Kuwait and GCC, though such agreement is there since you are not paying any personal income tax in the gulf
13. INDEMNITY, LEAVE ENCASHMENT etc.:
All non residents are advised to return after staying 183 days in foreign country during the financial year ie from 1st April to 31st march to avoid taxation of the indemnity etc received.
The same is the case with salary etc received for this financial year ie from 1st April to 31st March or till your date of return.
14. AADHAR CARD:
If you do not have applied for the same immediately upon return as the same is required in all government or bank or share market transactions.
15. RATION CARD:
Try to get ration card also on return not for buying the items but as identity card.
The above are few points that should be taken care before your return to India. It is better to consult your auditor .
The above are based on the provisions of various acts in India in September, 2020 and changes could change the views. I do not accept any responsibility or obligation of whatsoever nature for the views expressed above.