NRIs who return to India after spending significant time abroad on a job face difficulties with receiving money from retirement accounts. This may be due to differences in tax policy between countries.
I worked for an international NGO headquartered in the US from 2008 to 2018 with an H-1B visa, but was based in India. My salary in dollars was received in my bank in India each month. Social security and income tax were deducted proportionately for the days I worked in the US physically (which was about three to four weeks each year), and I also received contributions from the employer to a retirement fund (403b), which was invested in a mutual fund. The accumulated fund has now been processed for withdrawal after deducting 10% of the proceeds towards income tax. India and the US have signed a double taxation avoidance agreement (DTAA). So, what will be my additional tax liability for the amount I have received? I am retired and my main income is interest from my savings, with occasional consultancy fees.
You have been in India since 2018 and, therefore, it is likely that you are resident in India for tax purposes. As a person who is resident in India, you are required to report your global income in your tax return to be filed in India. Do note that residential status must be determined for each financial year in question.
NRIs who return to India after spending significant time abroad on a job face difficulties with receiving money from retirement accounts. This may be due to differences in tax policy between countries. It causes a great deal of frustration to NRIs who later become residents and report retirals receipts in Indian tax returns.
The government had announced in the Budget of 2021 that rules to remove this hardship will be announced.
Meanwhile, you should report your retirals in your income tax return in India as you are resident in India for tax purposes. Benefits under the DTAA shall be available to you; this will make sure that you do not have to pay tax on the same income twice.
Archit Gupta is founder and chief executive officer, ClearTax.