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Benjamin Franklin, who was credited with drafting the Declaration of Independence and the American constitution, said there were only two things certain in life: death and taxes. His utterances made in 1700s hold true even this day. Non-resident Indians are required to pay an income tax on income of more than 250,000 Indian rupees that is earned in India. Siddesh Mayenkar of Gulf News spoke to Naveen Sharma, immediate past chairman of Institute of Chartered Accountants of India Dubai Chapter on a host of tax issues concerning the Indian population in overseas land. Here’s our comprehensive guide on everything that NRIs wanted to know about TAXES back home.
#incometax #nri #india
See more videos at https://gulfnews.com/videos
Read more Gulf News stories here: https://bit.ly/2HLJ2km
Benjamin Franklin, who was credited with drafting the Declaration of Independence and the American constitution, said there were only two things certain in life: death and taxes. His utterances made in 1700s hold true even this day. Non-resident Indians are required to pay an income tax on income of more than 250,000 Indian rupees that is earned in India. Siddesh Mayenkar of Gulf News spoke to Naveen Sharma, immediate past chairman of Institute of Chartered Accountants of India Dubai Chapter on a host of tax issues concerning the Indian population in overseas land. Here’s our comprehensive guide on everything that NRIs wanted to know about TAXES back home.
#incometax #nri #india
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NewsTranscript
00:00Hello and welcome to Gulf News special interview. We have Mr. Naveen Sharma. He's the immediate past
00:06chairman of ICAI Dubai. Also, he is the head of accounting and advisory services of IBPC in Dubai.
00:15He's also a director at Shiroya Group. There are many concerns for NRIs once they land here in
00:20Dubai or elsewhere in the world. You know, the first major problem that they have in terms of
00:24their tax liability. We are going to talk to Mr. Sharma and to get his perspective and his advice
00:31about what should NRIs do to see to it that they don't get a necessary tax notice from the income
00:37tax department. One of the things that NRIs read about is basically getting a tax notice back home.
00:42So, you know, as they say that NRIs need not possibly pay tax or even file for tax returns.
00:49What's your advice for NRIs here in Dubai, elsewhere in the world?
00:52There are three important laws we have to take into consideration. One is, although
01:01everybody is talking about income tax. Second, we have to think about FEMA,
01:06Foreign Exchange Management Act. And third is the custom. If you are leaving India for good,
01:10for the employment, from the day one, you are non-resident. What it means to us? It means that
01:17only non-resident can open NRI accounts. You can have foreign currency accounts. Indians do not
01:25have that flexibility. So even if you are five days old, you can go to the bank, present your
01:31papers and open the bank account. So that comes under FEMA. Second, whether we can invest as an
01:38NRI or we cannot invest depends upon your FEMA status, which is Foreign Exchange Management Act.
01:44You can invest in mutual fund. So while you are here, your status is first governed by the FEMA.
01:50And once you cancel your residency in the UAE and you go back to India from the day one,
01:56you cannot have your accounts. You become resident. So the FEMA determines whether
02:02you can have the account with the banks or you can invest in India or not as an NRI.
02:07If you are here, you can open the bank account. Let's go. You have worked 10 years, 15 years,
02:1320 years and all income which is outside India is not taxable. So the fundamental rule is,
02:21if you are non-resident, then your income is not taxable. If you are not in India,
02:27more than 182 days in a year, you are non-resident. If you are 365 days and more in India in the last
02:37four years and 60 days and more in India, in that situation, you are also non-resident.
02:45So there are two criteria. One is the current financial year, which is 182 days. And last year,
02:5260 days and 365 days. So first we have to check our status, whether we are resident or non-resident.
03:00So once you check this status, then it comes, your foreign income is non-taxable.
03:08But important question is, if you are wealthy, you have rental income, you have shares income,
03:13you have immovable property income, you have a running business which is coming to you,
03:18income coming from India will be taxable? Yes. First 250,000 or 2.5 lakhs is tax-free.
03:27If you have income of say 200,000 Indian rupees, need not to worry because income tax starts from
03:332.5 lakhs and above. So if you are non-resident and your income is less than 250,000, need not
03:41to worry. You need not to file any return. You need not to have the PAN account. You need not
03:46to have any tax filing. You can have a peace of mind. If your income is more than 250,000 Indian
03:52rupees, then you have to file your return, whether you are resident or non-resident.
03:57Then your rate of tax is 5%. Between 5 lakhs to 10 lakhs, it is 20%. And above 10 lakhs,
04:03if you are wealthy, you should contribute to your country by paying 30%. And of course,
04:09the surcharge is also applicable as you know in other countries. So once you are here,
04:16how to open the bank account is governed by the FEMA. Whether your income is taxable,
04:21non-taxable depends upon whether you are NRI or non-NRI as per income tax.
04:26And then you can file your return. Filing your return is very important. You should consult your
04:33tax advisor, chartered accountant or somebody. You can file the return online. There is a lot
04:38happened in India over the last 10-15 years and you can find your return online. There are tax
04:44practitioners here who will file your return. And where to file the return depends upon your address.
04:51If you are from Cochin, you should file the return in Cochin. If you are from Mumbai,
04:56you should file your return in Mumbai. And likewise, so now say you live for 15 years
05:02and after 15 years you are going for good. So when we return back, planning is involved.
05:07As you are a resident of UAE, you have your house, you have income and now you are going good for
05:15India. So as far as whether you can have and keep your NRI accounts depends upon your status.
05:24So if you are going back from the day one, you are a resident of India, if you are going good.
05:29So it means that your foreign currency accounts will convert to resident account.
05:34So people have the misconception when they will go back, they have 10 years, 5 years, 2 years,
05:40so they need not to pay the tax. But once you are going, as per FEMA, you have to,
05:45your resident status change. Now from non-resident, you become a resident of India
05:49and you cannot have your NRI, NRO and other accounts. There are some provisions which govern
05:56how long you can have, what is taxable, not taxable. Now as per income tax, it's very interesting.
06:02As per income tax, depends upon the days. Once when you are shifting your home back,
06:08first thing is your transfer of residence. You have household, you have car, you have electronics.
06:14If you are going back to India after 2 years, you can avail, you can take a lot of goods
06:20because you are not taking goods for commercial use. You are taking back for your own use.
06:26So whatever you have, there are 3 laws, 3 subsections are there.
06:31One is about your household. The time limit is 30 days. Once you land back in India,
06:38within 30 days, you can import back without paying any duty because you are shifting your
06:44residence. Second comes your electronics. And if you are using the electronics, Rs 1.5 lakhs is
06:51completely free. If you have a car, Ferrari or supercar or your own car, you can take back that
06:57car. But there is a catch. In UAE and Dubai, we use left hand car and in India right. So custom
07:07law prohibits us to use or import left hand car. Now comes your bank account in the UAE.
07:14As you are shifting back from NRI to resident, you have to be very careful in UAE. People
07:21sometimes ignore the UAE. You have your bank account, your salary account, your business
07:26account. All these accounts you need to close. You need not to only close but you have to take
07:33no liability letter from the bank. Indian government is also thinking once you will
07:38come back, you need some time. You have foreign income. You must have purchased properties.
07:44There is rental income. So as a fundamental first rule, if you are resident of India,
07:50living in India, your global income is taxable. Income from India and outside both are taxable.
07:57But there are some sub clauses are there. If you are living in the UAE or outside India
08:06and you are an NRI, 9 out of 10 years, in that situation, you will be an ROR.
08:15Not ordinary resident. Or if you are living, you have not lived in India 729 days in the last 7
08:23years, you are also an ROR. In that situation, what will happen, your taxation will be similar
08:30to non-resident. Then comes converting your account. If you have the NRI account, if you
08:36have the FCNR account, you have to see that these accounts, you should convert to RFC account,
08:43resident foreign currency account. If you are an ROR, ordinary but not resident account,
08:48so then what will happen, there are some charges you have to pay to maintain your property.
08:53Sometimes you have to pay to XYZ reason. You can keep some foreign currency account while you are
08:59in India as well. So that all accounts depends upon your length of stay in the UAE and outside
09:05India and what you want to do with your foreign currency. What if you have an immovable property
09:10back home and you want to sell it and your status is NRI, do we need to pay capital gains on that
09:16property? We have to ensure whether it's a short-term capital gain or a long-term capital gain.
09:22Now earlier, if you are holding a property for 36 months, in first 24 months, if you are selling the
09:29property, you have to pay short-term capital gain and rates are very simple what you pay
09:35to your other income like 5%, 20%, 30%. If you are selling for long-term capital gain,
09:41then the rates are less. If capital gain is less than 250,000, need not to worry.
09:47And if it is more, then you have to file. 250,000 capital appreciation.
09:52Capital appreciation, I presume that there are no other income.
09:55One provision that possibly that will impact everyone that was presented in the budget by
10:01Finance Minister Nirmala Sitharaman was the gift tax. Yes, yes, yes, yes.
10:05That has changed the whole dimension about how earlier gifts were done without possibly exempting
10:12or trying to subvert tax. But now that cannot be done. Could you share your perspective?
10:18Gift tax, there is a very important change has come and the change is that the receiver of the
10:25gift, if I receive, if I am lucky to have the gift from you, I have to pay tax if it is more
10:31than 250,000. If it is coming from my wife, exempt. If it is coming from my parents, exempt.
10:40So there is a list of specified relatives. If you are receiving the gift from them,
10:45there are no change. But unfortunately, if I will receive from you or somebody else,
10:50I have to pay tax and the limit is 250,000. Would the government ask you for the source
10:55of that gift? Is that important from the giver? Yes, because when you will receive in your bank
11:01account or you will transfer the ownership. When I will receive the gift, then I have to do two
11:06things. The money has come if it is a cash to my bank account. It is very clear nowadays that who
11:12has given. What in case if there is a death, unfortunate death of the head of the family in
11:19Dubai or in the UAE or elsewhere in the world. What happens in that case? What sort of precautions
11:25you should take? And one more aspect would be on prospective NRIs if they want to leave the
11:31residential status and go abroad. What is the checklist that you would advise them?
11:37If you will die while you are NRI, there are two things. You have assets outside India and we have
11:43assets inside India. So, we will take both of them. First, asset outside India because you died
11:52in the UAE. Then what will happen? Your bank account will be frozen and if you have a DIFC
11:58bill where you have specified who will get your property will be executed. If you do not have a
12:05will, then it will be based on a more complicated way and I think it is outside the scope here.
12:10If you are in India, you have a will. Life is very simple. That bill will be executed
12:17and you can execute the Indian will here in the consulate. If there is no will,
12:22then what will happen? You have a joint account. Rules are quite different.
12:27Either a survivor will get the money. If it is a nomination, it will go to the nominee. If it is
12:33not all of them, then it will go as per the code which goes to the wife and the children.
12:39If you are coming here in Dubai and you work only for 100 days, as per FEMA, you become non-resident.
12:47You open your bank account. After 100 days, you have gone back to India. As per income tax also,
12:54as you have not completed 182 days, you are still resident and your income in the UAE will be
13:01treated as income in India. It will be subject to tax. But I will give you the formula of three.
13:09Tax your status in FEMA and income tax. This is the single most important thing.
13:16What is my status? I am resident, I am non-resident, I am NROR or what?
13:22So this is the first thing which we have to see the status. Second thing, whether my income is
13:29about 250,000, I have to file the return. So this is the second thing which we have to take care.
13:37And third and fourth most important thing is your documentation. When you leave, just don't
13:44leave in the excitement. See whether I have the will in place to whom I want to give my income,
13:51how I will I want to pay my expenses. All documentation won't take time.
13:55This is the most comprehensive discussion on NRI and taxation that we have had in
14:01recent past. Thank you very much for your time and thank you sir for your time.