Professional & Knowledgable Law Team

Friday, March 9, 2012

NRI returning to India? How to calculate your tax


The grass is not really greener on the other side as many Indians abroad are figuring it out the hard way. Faced with a gloomy economy and career prospects, some are packing their bags and heading back to test the job market.
Though finding a job would be easier in India, especially for those with good degrees and employment background, figuring out the tax liability — especially in the initial years — may be a daunting task. If you are returning to India for employment, there are some tax issues one has to consider before taking the final decision.
This is crucial because the taxability of overseas income (such as rental income from property outside India, capital gains, bank interest, dividends, etc.) for returning Indians largely depends on their residential status in India.  Planning the timing of one’s return is very important.
RESIDENTIAL STATUS
Residency rules play an important role in determining the income that is taxable in India. Indian residency is triggered in either of the following situations:
1. The individual is in India in that financial year for 182 or more days; or
2. The individual is in India in that financial year for 60 or more days and 365 days or more in the four financial years prior to that financial year.
If neither of the above conditions is satisfied, the individual would be treated as a Non-Resident (NR). Satisfying any of the above two conditions would qualify the individual as a resident. Indian tax laws provide a relief for a category of individuals who are ‘Not Ordinarily Resident’ (NOR).
One can become a NOR either if his/her stay in India in the 7 financial years immediately preceding that financial year is less than 729 days or if he/she was a Non-Resident for 9 of the 10 financial years immediately preceding that financial year. A Resident other than a NOR is generally referred to as an Ordinary Resident (‘ROR’).
In case an Indian citizen or a PIO visits India in any tax year, the above mentioned 60 days shall be replaced by 182 days. The proposed Direct Tax Code, however, does not give this preferential benefit to the NRIs or PIO visiting India.
SELLING YOUR PROPERTY ABROAD
As a returning Indian, try to sell your overseas property while you are still a NOR or NR. As a NOR or NR, if you sell any overseas assets and receive the sale proceeds outside India, you do not have to pay any taxes in India. If you need to buy a house in India out of the sale proceeds, you can first receive the sale proceeds in a foreign bank account and thereafter remit part or whole of the proceeds back to India without creating any Indian tax liability.
TAXABILITY AT A GLANCE
i. Income received or deemed to be received or accrues or arises in India during the previous year.
- ROR – Fully Taxable
- NOR/NR – Fully Taxable
ii. Income which accrues or arises outside India and received outside India in the previous year from any other source.
- ROR – Fully Taxable
- NOR/NR – Not Taxable
iii. Income which accrues or arises outside India and received outside India during the preceding previous years and remitted to India during the previous year.
- ROR – Not Taxable
- NOR/NR – Not Taxable

NRI man booked for cyber crime against wife

A matrimonial dispute between a Non-Resident Indian (NRI) from Ahmedabad and his wife, from Gurgaon in Haryana, hit cyberspace after the husband allegedly created a website by the name of his wife and posted photos and other evidence on it, alleging that he was tortured by her. Taking objection to this, the woman has registered a cyber-offence with Gurgaon police against her husband under the provisions of the Information Technology (IT) Act.
Based on the complaint, Gurgaon police had issued a look-out notice against the husband who was recently detained for a few hours at Ahmedabad International Airport and was let go with a condition not to leave India.
The NRI is Raj Trivedi from Ahmedabad and his wife is Bhavna Sachdev. They married in August 2009 after connecting on a matrimonial website. Trivedi is an NRI settled at Houston in the United States and he has been into the business of commodities.
According to Trivedi, after a short span of married life, they had started to have disputes which resulted in Bhavna lodging a criminal complaint of dowry, domestic violence and harassment against him, his parents and sister. He also added that a litigation related to the complaint is pending before Punjab & Haryana High Court as the court has sent it for mediation.
In the matrimonial dispute, Bhavna has accused Raj, his parents and his sister of dowry, domestic violence and harassment. Whereas, Raj has alleged that his wife is after his property by defrauding him.
After the dowry complaint registered against him, Raj had created a website by the name of his wife and posted all the 'evidence' in his possession against her on the website. Taking strong objection, Bhavna booked him under IT Act, on February 1.
Bhavna, in her complaint, has stated that the act of Raj has invaded her privacy and accused him of libel and defamation. She further stated that Raj has posted documents on those cases which are still running in court. “During this event he has repeatedly tortured and threatened me that he will try to defame me publicly by putting my picture/information on internet and now he has actually done this...,” she added in the complaint.
Following the complaint, the website has been made unavailable on the internet.
Raj, on his part for creating the website, said, “In the dowry complaint, the police was not treating me fairly, was harassing me and I was fearing for my life. And so, I posted that material on website to let my family members and friends know about the evidence in the case in case something happens to me. Also, I wanted to send out a warning message to people about the dangers of entering into a marriage through internet.”
When contacted by The Indian Express in connection with the case, Bhavna refused to comment saying it is not right for her to speak on a matter that is sub-judice.