I am an NRI and am planning to return to India next year. How will my foreign income and Indian investments be taxed once I become a resident again?
Amit Maheshwari Tax Partner, AKM Global: The taxability of your income depends on your residential status in India, which can be either Resident and Ordinarily Resident (ROR) or Resident but Not Ordinarily Resident (RNOR), as per Section 6 of the Income Tax Act, 1961. You may be an ROR if: (i) You were a resident in India for at least two of the 10 preceding financial years. (ii) You were physically present in India for 730 days or more in the seven preceding financial years. If these conditions are not met, you will be treated as an RNOR. If you qualify as an ROR, your global income, including the income earned or accrued outside India, is taxable in India. However, you may claim foreign tax credit for taxes paid overseas by filling Form 67 before filing your Indian tax return. Additionally, as an ROR, you must report foreign assets and financial interests in Schedule FA of the income tax return (ITR) regardless of whether they generate income or not. If you qualify as an RNOR, your foreign income (unless derived from a business controlled or profession set up in India) will not be taxable in India during the RNOR period. As for the Indian investments, income such as interest, dividends and capital gains from assets in India will continue to be taxed as per the Act’s provisions.
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