Usually, returning NRIs have to pay tax only on their India income
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I am expecting a consultancy assignment, to deliver the work here in India. I am an Indian resident and not an NRI. Before I finalise the details, I would like to know some details. Can I ask the US firm to deposit the money directly into my India bank account? Do I have the option to keep the deposit in dollars or do I have to get it automatically converted to rupees at prevailing forex rates? If I retain the money in dollars, should it be only in a fixed deposit or savings-cum-flexi deposit account? What will be the interest rates paid to me by the banks in India? Will the US firm be expected to deduct TDS and remit to income-tax department in India and give me proof of such deposit (since I am not sure they can generate Form 16). I will need to charge Goods and Services Tax, (GST) on the earnings and remit to government. At what exchange rate should I calculate and deposit the same?
Resident Indians who have earnings in foreign currency from consultancy services can opt to receive their proceeds in specific accounts. These are Exchange Earners Foreign Currency Account (EEFC account) or Resident Foreign Currency (Domestic) Account (RFC account). Money is deposited in these accounts in a specific foreign currency and can be converted to rupees as and when required. However, these accounts are in the nature of current accounts and do not earn any interest. Account holders can make commission-free foreign exchange payments for specific purposes. In case you do not plan to use this foreign currency outside India in the near future, it may be beneficial to receive the proceeds in rupees in your Indian savings account. You can then invest them as per your needs.
Since you are receiving payment from outside India, usually they do not deduct TDS unless the local laws so specify. Also note that Form 16 is only applicable in case of payments made as salary.
To find out how GST will be levied on your services, we need to see where these have been supplied. We have to identify where the ‘place of supply’ of the service is, so that GST is charged properly. If services are supplied outside India and either the recipient or supplier of service is outside India, usually location of the recipient is taken as place of supply. Therefore, this will be an export of service since recipient is in the US. Exports are zero-rated and you do not have to deposit any GST on these services. However, the place of supply rules under the IGST Act lay down some specific scenarios where place of supply may be other than the location of recipient. So you must check whether your services fall under these specific situations or not.
I have returned to India after staying in Kuwait for 7 years. Will I need to file a tax return in 2018? Is there any tax-related paperwork that I need to settle this year or can I start to worry about it after 1 April 2018?
First of all you need to find out your residential status in India for each of the financial years 2017-18 and 2018-19 as per the income-tax act. You are considered a resident for income-tax purposes, if you have spent at least 182 days in India during the financial year or if you have spent 60 days in the current financial year and 365 days in the past 4 financial years in India. If you meet any of these 2 conditions, you will be considered resident in India. A resident may be ordinarily resident or not ordinarily resident in India.
Returning NRIs may be considered resident but not ordinarily resident (RNOR) when—they have been an NRI in 9 out of 10 financial years preceding the year of return or if they have lived in India for 729 days or less in the last 7 financial years. When you are an RNOR, you may continue to enjoy tax benefits available to NRIs, which means, only the income earned in India will be taxed in India. However, if you do not meet any one of these conditions, you will be ordinarily resident in India and your worldwide income will be taxable in India.
Archit Gupta is founder and chief executive officer of ClearTax.
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