One of the most important considerations before making a move is that of taxation. As you are planning to settle in India, it is very important to know about the tax laws that would apply to you. Some of the most important ones are as follows-
1. Residency StatusForeign investment and taxation of NRIs returning to India are governed by the ITA (Income Tax Act) and FEMA (Foreign Exchange Management Act). Under ITA, the residency status and taxation depend on the number of days an NRI spends in India.
Based on this, it is decided whether an NRI is an RNOR (Resident but Not Ordinarily Resident) or ROR (Resident and Ordinarily Resident) for the taxation purpose. On the other hand, FEMA focuses on the intent of the NRI. If an NRI is returning to India and plans to settle here, FEMA treats him/her as a resident Indian.
2. Tax Treatment of Foreign AssetsUnder ITA, NRIs settling in India are allowed to save taxes for up to 3 years on their global income if they have RNOR status. Even the FCNR and NRE accounts of such RNORs are tax-free. The assets and money brought to India by such NRIs are exempt from any wealth tax for up to 7 assessment years.
Under FEMA, NRIs who return to India can own, hold, invest, or transfer their assets not located in India. But this is only applicable if the assets were acquired when the NRI was outside India. FEMA also allows NRIs to make transactions and even earn foreign income through EEFCA (Exchange Earners Foreign Currency Account) and RFC (Resident Foreign Currency) accounts.
3. NRI Bank AccountsWhen an NRI is in a foreign country, he/she can hold investments, assets, and even bank accounts in India. Most NRIs generally prefer opening NRE (Non-Resident External), or FCNR (Foreign Currency Non-Resident) accounts for this purpose.
But when an NRI returns to India with an intent to settle, he/she should redesignate such accounts to RFC accounts. The residency status change should also be informed to companies where an NRI holds shares, partnerships, or other interests.
Be Tax-Aware When Moving to IndiaTax-planning is one of the most important considerations for NRIs wanting to return to India for good.
Keep the points mentioned above in mind while planning your taxes so that you can make use of all the different provisions and facilities available for returning NRIs.
Click here to visit our personalized online advisor that gives you the financial expertise you need.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
Disadvantages of Early Retirement - What Happens When You're Not Working?
Early retirement seems to be good, many people enjoy life without working especially with extra earnings. But they are not aware about the cons. Lets explore the disadvantages of retiring early to save your retirement life.
5 Benefits of Health Insurance that Makes it a Must Have Cover
Here are the 5 benefits of health insurance that makes it a must to cover
When Should You Withdraw Money from a Mutual Fund?
In case of a sudden change in fund strategy or an underperformance scheme for more than 3-4 years, it makes sense to withdraw money.
How To Apply For Personal Loan
Applying for a personal loan has become extremely easy these days. With the increase in applicants, banks and other financial institutions have made the process very simple.