Home / Money / Personal-finance /  NRI money transfers to India are tax-free, if not being invested

I am a non-resident Indian (NRI). I have an NRI account in India, in which I keep my savings. From this account, I transfer a fixed amount every month to a joint account with my wife. My wife has no income of her own. Will tax be levied on this savings account? Should I file tax returns?—M.A. Haq

There is no tax implication for you or for your wife for transferring money from one account to another, as long as your wife does not invest on your behalf. NRIs must convert all their resident bank accounts to non-resident (ordinary) or NRO or non-resident external or NRE account. Also, any interest income earned from a bank account (except interest from NRE account which is tax-free) shall be included in the income tax return of the first holder of the account. An NRI must file tax return in India, if income from India exceeds Rs2.5 lakh in a financial year.

I was in the UK from July 2014 to July 2017, when I came back to India. I got salary from April to July from my UK office. Do I need to show the UK salary from April-July 2017 in my return? I have paid tax in the UK for April-July. —Paras Jain

Firstly you must find out your residential status in India for FY18. To be a resident of India for tax purposes, you must meet one of the conditions and both additional conditions.

Conditions: You are in India for 182 days or more in the financial year (FY); or you are in India for 60 days or more in the FY and 365 days or more in the four FYs immediately preceding the relevant FY.

Additional conditions: You are a resident in India in two of the 10 FYs immediately preceding the relevant FY; and you are in India in the 7 years immediately preceding the relevant FY for 729 days or more.

If you do not meet any of the first set of conditions you would be an NRI. Since you have been in India post July 2017 you are likely to be resident in India. However, you do not meet any of the additional conditions, so your status will be resident but not ordinarily resident in India (RNOR).

In this situation you must pay tax on income earned from India. In case this UK salary is paid to you in your Indian account, you must include it in your tax return in India. By taking benefit of the Double Taxation Avoidance Agreement between the two countries, you can avoid paying tax on the same income twice. However, if this salary has been received in the UK, you do not have to show it in your tax return of India.

Archit Gupta is founder and chief executive officer, ClearTax.

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