I obtained US citizenship in February and have been staying in India since 15 April. I’ve acquired an abroad citizenship of India (OCI) card. What will probably be my standing for financial institution accounts and earnings tax functions? I’m a retired senior citizen from India, and have solely curiosity earnings in India.
—Name withheld on request
The guidelines to find out residential standing underneath the trade management regulation is totally different from that underneath the earnings tax regulation. The residential standing underneath the trade management regulation impacts the standing of your financial institution accounts.
Under the earnings tax regulation, residential standing is set based mostly on bodily presence of a person in India throughout a monetary 12 months (FY) and the previous 10 FYs.
Residential standing wants contemporary willpower for annually. If the person satisfies any of the next fundamental situations, he/she’s going to qualify as a ‘resident’, in any other case she or he would qualify as a ‘non-resident’: Physical presence in India in the course of the related FY is 182 days or extra; bodily presence in India in the course of the related FY is 60 days or extra and 12 months or extra within the previous 4 FYs; a person, being a citizen of India, having complete earnings, apart from earnings from overseas sources, exceeding ₹15 lakh in the course of the related FY, if he isn’t liable to tax in some other nation or territory by cause of his domicile or residence or some other standards of comparable nature (deemed residency rule).
In respect of a citizen of India or an individual of Indian origin (PIO), who, being outdoors India, comes on a go to to India, the 60 days threshold in second fundamental situation is modified as follows: If complete earnings, apart from earnings from overseas sources, exceeds ₹15 lakh, the 60 days situation is substituted by 120 days; in some other case, the 60 days situation is substituted by 182 days.
A resident could both qualify as a resident and ordinarily resident (ROR) or resident however not ordinarily resident (RNOR). If any of the next extra situations are met, then the person would qualify as RNOR; if not, such an individual would qualify as ROR: Non-resident in India (as per the essential situations talked about earlier) in any two out of 10 FYs previous the related FY; bodily presence in India is 729 days or much less within the seven FYs previous the related FY; resident resulting from 120 days rule; or resident resulting from deemed residency rule.
An particular person qualifying as ROR is taxable on his worldwide earnings in India and is required to report all overseas belongings within the India earnings tax return (ITR). Also, the earnings earned from overseas belongings in the course of the related 12 months together with the character of earnings and head of earnings underneath which such earnings has been provided to tax within the India ITR must be reported in relation to every overseas asset.
An particular person qualifying as NR or RNOR has to pay tax on the next incomes: earnings accruing or arising in India; earnings deemed to accrue or come up in India; and earnings acquired or deemed to be acquired in India. In case of RNOR, earnings which accrues or arises outdoors India from enterprise managed or career arrange in India can be taxable in India.
Under the trade management regulation, when an individual leaves India for employment or for carrying on enterprise or for some other function indicating his intention to remain outdoors India for an unsure interval, he could also be thought of as a “individual resident outdoors India”.
In your case, you will need to decide your residential standing underneath the earnings tax regulation and trade management regulation.
Residential standing underneath the India earnings tax relies in your bodily presence in India. Interest earnings from financial institution accounts in India will probably be taxable in India. But it’s possible you’ll declare deduction as much as ₹50,000 underneath Section 80TTB accessible for senior residents aged 60 years or extra in the course of the related FY for those who qualify as “resident” underneath earnings tax regulation.
Sonu Iyer is tax accomplice and other people advisory companies chief, EY India.
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