Returning NRI Tax Structure
Tax structures for people who return to India | Tax Structure for NRI’s who return to India
Returning to your homeland after years of being away is a blessing for many families. However, it is also quite a task to handle your finances, and that too in a foreign land.
As we’ve discussed in the article for Financial advice for NRIs returning to India, handling your finances along with the tedious shifting and moving process can get overwhelming, so in this article, we’ll help you ease out the understanding of the Taxation system in India if you’re returning.
- Assets outside India
Although the income earned outside India is not taxable in India, Income received by you or on your behalf, or income accrued in India by a NOR/NRI during a financial year is fully taxable according to the Income-tax slab.
Both ROR and NOR/ NRI income that accrues or arises outside India and is received outside India within a financial year and remitted to India during that financial year is not taxable.
- Taxation on Pensions
NRIs who return to India and receive pensions from former employers may be subject to taxation in India.
This is subject to the terms of any double tax treaty between India and the nation from where the pension is paid.
- RFC – Resident Foreign Currency Accounts
For foreign currency assets held outside India at the time of their return, Indian residents can open a Resident Foreign Currency (RFC) account.
This account may also be credited with foreign exchange payments received as a pension or benefits from employment outside India, gifts, or income from foreign currency life insurance policies.
Current, savings, and term deposit accounts are all options for RFC accounts. All limitations on the use of foreign currency balances, including any limits on investment outside India, do not apply to monies in RFC accounts.
Residents can reinvest sale profits of abroad assets into their RFC accounts.
Once the individual becomes a resident, the NRE and FCNR account converted to RFC accounts are now liable to taxation in India.
If you’re NRI planning to return to India, here’s a checklist for you to ensure you’re not missing out on any essentials,
Conclusion:
The taxation system in India is different and so is the monetary value of your financial standing.
Post your return, you must keep in touch with the Income Tax Department and follow the laws and regulations to ensure a smooth and hassle-free tax filing.
Make sure you inform your residency change status to companies whom you hold partnerships or assets with.
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