𝗡𝗥𝗜 𝗛𝗼𝗺𝗲𝗰𝗼𝗺𝗶𝗻𝗴 - 𝗧𝗵𝗲 𝘁𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻𝗮𝗹 𝗥𝗡𝗢𝗥 𝗖𝘂𝘀𝗵𝗶𝗼𝗻

I recently had a conversation with an NRI who shared that he is moving back to India sooner than planned. What started as a discussion on relocation quickly turned into a much deeper conversation on tax and financial implications of returning home.

We spoke about several issues that one may need to navigate —changes in tax residential status, disclosure of overseas assets and income, dual-country tax filings, restructuring bank accounts, reviewing foreign retirement benefits etc. 

Sharing a few things we spoke about:

👉🏼𝗧𝗵𝗲 𝗥𝗡𝗢𝗥 𝘁𝗿𝗮𝗻𝘀𝗶𝘁𝗼𝗿𝘆 𝘁𝗮𝘅 𝘀𝘁𝗮𝘁𝘂𝘀: Depending upon the days of stay in previous years, the Indian tax law recognizes a special transitory residential status called Resident but Not Ordinarily Resident (‘RNOR’), which provides a cushion for individuals relocating to India after spending several years abroad. 

 👉🏼𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗰 𝘁𝗮𝘅 𝗮𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲: Under the RNOR phase the Indian tax applies only to Indian-sourced income, allowing income earned overseas— such as salary, rent, interest, or capital gains - to largely remain outside India’s income tax framework.

However, once the tax status of the returning individual transitions to Resident and Ordinary Resident (‘ROR’) – based on physical stay presence in India, he/she is liable to tax on worldwide income. 

 👉🏼 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗚𝗮𝗶𝗻𝘀 𝗼𝗻 𝗜𝗺𝗺𝗼𝘃𝗮𝗯𝗹𝗲 𝗽𝗿𝗼𝗽𝗲𝗿𝘁𝘆 𝗮𝗯𝗿𝗼𝗮𝗱: For NRIs owning property abroad, aligning the timing of the sale with the timing of relocation is key. If the sale takes place during the RNOR phase, the resulting capital gains are generally not taxed in India and are typically taxed only in the country where the property is located.

👉🏼 𝗖𝗹𝗮𝗶𝗺 𝗼𝗳 𝗙𝗼𝗿𝗲𝗶𝗴𝗻 𝘁𝗮𝘅 𝗰𝗿𝗲𝗱𝗶𝘁𝘀: Only on becoming a ROR, the taxes paid overseas on foreign sourced income may qualify for credit in India subject to such income being offered for tax in India and the complying with the prescribed conditions(i.e., filing Form 67 with supporting documents).

👉🏼 𝗗𝗶𝘀𝗰𝗹𝗼𝘀𝘂𝗿𝗲 𝗼𝗳 𝗙𝗼𝗿𝗲𝗶𝗴𝗻 𝗔𝘀𝘀𝗲𝘁𝘀: In most cases, returning NRIs continue to hold savings, assets, and investments overseas at the time of their return to India. Once an individual becomes a ROR, all such foreign assets are required to be disclosed in the Indian income-tax return. 

Accordingly, this transitory RNOR window can be utilized to realign overseas financial assets and manage the timing of income recognition, given that foreign-sourced income is generally not taxable in India during this phase.

#RNOR #ReturningToIndia #NRI #ReturningIndians 

#CrossBorderTax