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I’m an OCI (Overseas Citizen of India) card holder living in Toronto. My wife and I are considering returning to India next year after retirement. I expect to receive a pension from my Canadian employers and also the Government of Canada. Besides which, we may have some funds in US or Canadian dollars. I would appreciate it if you could help me understand the tax implications on these in India.

—Name withheld on request

 

Assuming you would qualify as ‘Resident and Ordinarily Resident’ in India upon return; as a ‘Resident and Ordinarily Resident’ of India, you would be taxable on worldwide income in India and will be required to report all foreign assets in the India income tax return (ITR). Accordingly, the pension income from Canadian employers and Government of Canada will be taxable in India.

However, exemption from income tax may be claimed under Article 18 of the Double Taxation Avoidance Agreement (DTAA) between India and Canada. Even if exemption from income tax is claimed under the DTAA, the same will still be required to be reported in the ITR as foreign income.

If you qualify as ‘Non Resident’ or ‘Resident but Not Ordinarily Resident’ of India in the initial years of return, any pension received in a bank account outside India will not be taxable in India.

 

I’m an NRI (non-resident Indian). I have an income of 10 lakh from two farmhouses that I have rented out in India. How much tax will I have to pay? Am I allowed any tax deductions?

—Name withheld on request

 

Rental income from any property situated in India is taxable in the hands of the owner of the house property. The method of computing taxable rental income is as follows: Gross annual value (GAV) less municipal taxes gives the net annual value (NAV). Reduce the standard deduction of 30% of NAV and interest on housing loan from this, which will then be the taxable rental income. GAV is the higher of the following: Amount at which the property might reasonably be expected to be let out or actual rent received or receivable.

In other words, the GAV compares the actual rent received or receivable with the expected rent that the property would fetch.

Sonu Iyer is tax partner and people advisory services leader, EY India.

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