Tax implications for NRI's returning to India
By siliconindia   |   Saturday, 28 May 2011, 00:27 IST
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Tax implications for NRI's returning to India
Bangalore: It is a well know fact, that most of the Indians are returning to their homeland to explore new avenues, but coming back is not the only thing on their minds, they need solutions for their taxes as well. Basically, most of them want to know what implications will their Non Resident Indian (NRI) status would have on their tax liability in India. Under Indian tax provisions, the residential status in India is based on the physical presence of the person in India during the tax year and if the person is not physically present in India for more than 60 days then he is considered to be Non-Resident of India (NRI). The tax year is calculated from April 1 to March 31. However, when a citizen of India or a person of Indian origin who is outside India visits India in any year, he would be regarded as Non-Resident if his total stay is less than 182 days in the relevant tax year. The individual can also file is his existence as Not Ordinarily Resident (NOR) which will be based on his stay in India in the past years. But the glitch in NOR is he/she should be a non-resident in India in nine out of the ten years preceding the previous years. Taxability is completely dependent on whether an individual qualifies as a Resident, NOR or Non-Resident. A Nor or Non-resident is taxed on the income he earns in India. An NRI can reap his tax benefits until he claims that he is a Non-Resident, but once he/she pronounces his residential status he will avail no benefits and will be considered as a full time resident of India and will have to follow the regular tax format. There are some special provisions under Indian tax laws wherein NRIs can opt for special tax rates for specific investment incomes or capital gains from foreign exchange assets (eg: Shares in Indian company purchased in convertible foreign exchange). Of course NRI's do not come empty handed, they will be carrying some wealth tag behind them. But they don't have to panic, as assets located outside India owned by NRI's shall not come under wealth tax bracket. NRI's are also allowed to file exemption for the assets brought by them to India or assets acquired by such money. Up to seven years from the day of they return to India, they are exempted for they assets.

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