I am an NRI in USA and planning to come back to India.?

Question

I have invested in USA in CD's , Savings account etc and want to keep them going even after return back to India. Now for USA income, I will have to file tax return every year to show only my interest earnings, although nothing will get taxed since all my earning will go under standard deduction. So do I have to show that interest income in Indian tax return too ?? Do you think this is the best way of saving taxes on invenstent interest or ther are other ways too ??

Answer 1

read about it : http://www.mukulindia.com/foreign_investment_india.htm

Answer 2

I think , you need to know following facts /laws

1. An NRI can get exemption from any tax on any income earned outside India for two years from the day he lands in India. During these two years your status will be Resident but not ordinarily resident .Previously, he could get exemption for 9 years. So any interest, or any other income earned in any country is NONTAXABLE for two years. After that all income, that is , GLOBAL INCOME is taxable in India. So enjoy your interest income earned on CD or Saving accounts in USA for two years only. After that, those income are taxable. However, there are specific relief under I T Act and DTAA which may come for your help.

2.You should also know the law called FEMA-Foreign Exchange Management Act - previously it was FERA. Following points need your attention

i) As is law today,you become a resident for FEMA with effect from the date of arrival in India.
ii)A returning NRI require approval from RBI to maintain bank accounts abroad.

iii)A returning NRI require approval from RBI to maintain bank accounts abroad.

iv)Income earned on overseas assets needs to be repatriated to India.
v)Immovable property acquired, held or owned while you were abroad can be continued to be so held and owned.
vi)Similarly movable assets maybe held/ disposed off without permission of RBI , better although but not necessary . to avoid any possibility of litigation; you should inform RBI of the same.

vii)Reinvestment abroad of sale proceeds of overseas assets is not permitted .However, you can do it through RFC account

What is RFC account:

RFC stands for Resident Foreign Currency account is free from all RESTRICTION-means you can invest abroad from this account.No approval is required if transaction is done through this accont.The funds in RFC accounts are free from all restrictions .
The minus point of such GOOD account, return on saving in that account is very very low compared to other type of saving instruments.


I have put this question on my recently started blog . You can also get other FAQ on NRI there , specially in May archieve
Chow!

Answer 3

I am not a CA or a Tax consultant, but to the best of my knowledge interest income earned in US on the deposits will not be taxable in India till the time you are not a Indian Resident for Tax Purposes. but you should still declare it in your Indian ITR.

Once you become Indian Resident, then you are required to pay tax on income earned abroad.

Full Text from Income Tax Site -

(1) Subject to25 the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which

(a) is received26 or is deemed to be received26 in India in such year by or on behalf of such person ; or

(b) accrues26 or arises26 or is deemed26 to accrue or arise to him in India during such year ; or

(c) accrues26 or arises26 to him outside India during such year :

Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-section (6)* of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India.

(2) Subject to26 the provisions of this Act, the total income26 of any previous year of a person who is a non-resident includes all income from whatever source derived which

(a) is received26 or is deemed to be received26 in India in such year by or on behalf of such person ; or

(b) accrues26 or arises26 or is deemed to accrue or arise to him in India during such year.

Answer 4

There are possible solution to have a US$ holding and legally not required to report income to the IRS. And then you are planning relocation into India. Please contact us
at with the Amount of US$ holding planned.Thanks.