Simple Tax Guidelines for NRI Returning to India

INTRODUCTION:

As an NRI in the UAE, your biggest motivation for living and working in UAE could very well be the tax-free and high disposable income. It can help you save more and invest for your future.

While it is essential to invest your savings, it is also necessary to know how the income from your investments will be taxed when you go back to India.

Like most countries, your tax liability in India is calculated based on your Residency status and source of Income.

The following are the three residency statuses as per Indian Tax laws;

Resident(RI) 

For Income tax purposes you will be treated as a resident if you satisfy one of the following conditions;

• If you reside in India for at least 182 days in a particular financial year
• Or, if you live in India for 60 days in a given financial year and at least 365 days during four years preceding financial years.

Non-Resident(NR) 

You will be treated as a Non-resident if you do not satisfy the above two conditions of a resident in a particular financial year

Resident But Not Ordinarily Resident(RNOR):

As a returning NRI you can qualify for the special residential status of RNOR if you satisfy one of the following two conditions;

• If you have been a Non-Resident (NRI) for nine out previous ten financial years.
• Or, if you have lived in India for less than 729 days in the previous seven financial years

You can enjoy this special tax status for up to 3 assessment years, based on your date of return to India. NRI who have spent at least 7 years abroad qualify to the RNOR status.

What are the benefits of RNOR Status?

While you are a Resident but Not Ordinarily Resident (RNOR) you are exempt from income tax on the following incomes;

• Interest, Dividend, Rent and Bonus earned on investments and properties held abroad and purchased while you were a Non-Resident (NR)
• Capital gains on the sale of property and assets outside India
• Annuities and or withdrawals from your offshore pension and retirement accounts

You may continue to enjoy the RNOR status and tax exemptions until your status automatically transitions into a Resident

While the above incomes are exempt, income earned as salary, remuneration, fees or profits is not exempt.

What is a Resident Foreign Currency Account(RFC)

(RFC) Resident Foreign Currency Account enables you to hold your money in foreign currencies like USD, GBP, EURO etc. It is very useful for NRIs who have returned to India to receive and park their wealth and income in this account on a repatriable basis.

Why open an RFC account?

• A safe place to park your wealth in foreign currency
• To receive income from assets held abroad.
• To make payments for your loans, investments or Life Insurance held outside India
• To fund the education fees for your children studying outside India
• If you decide to go abroad again(Become NRI), you can repatriate these funds or transfer them to NRE /FCNR accounts
• To make withdrawals in India in Rupees

Investment Opportunities in UAE 

As an expat Indian, you have ample and attractive investment opportunities in UAE, helping you take maximum advantage of the tax free income to accumulate wealth and achieve your financial objectives . 

The following are a small list of Investment opportunities in UAE in US Dollar denomination and other favourable currencies ;

• Open architecture platform for investing in International Mutual Funds, Index Funds, ETF's Stocks, Bonds & Structured Notes 
• Regular Saving plans with Leading International Insurance companies like MetLife, Zurich, FPI, Generali etc...
• Capital Guaranteed and Bonus linked Endowment plan and Annuity plans from LIC International

To know how to invest your disposable income and to understand the pros and cons of various investment platforms and plans, feel free to arrange a free 15 minutes discovery call.