BackNRIs returning for good must inform bank
When your deposit accounts are converted to resident accounts, interest earned on them shall be fully taxable in India
PremiumI am an overseas citizenship of India (OCI) cardholder. I was an Indian citizen, but some time ago my citizenship status changed, with eligibility to work in India. When I checked with my bank, they said my accounts need to be redesignated as non-resident external (NRE) and non-resident ordinary (NRO) accounts. As an OCI cardholder, is that change required? I have no source of earnings abroad and will continue to reside in India for now. Will this also change my tax status?
—Maria
If you are planning to return to India permanently and do not intend to go back, you should make a declaration to your bank of your intention to permanently stay in the country. In such a situation you cannot continue to hold on to your NRE deposits and all your non-resident accounts must be converted to resident accounts. This is as per the Reserve Bank of India’s (RBI) regulations.
When your deposit accounts are converted to resident accounts, interest earned on them shall be fully taxable in India. Therefore, even though your residential status as per the Income-tax Act of India may be that of a non-resident, you will have to pay tax on these deposits and file an income tax return. Moreover, tax deducted at source (TDS) will also be deducted before interest is credited to you.
Your residential status for tax purposes is determined as follows—you must meet any of the following conditions and both the additional conditions:
Conditions: a) you are in India for 182 days or more in the financial year (FY); or b) 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 resident in India in two of the 10 FYs immediately preceding the relevant FY; and you are in India in the seven years immediately preceding the relevant FY for 729 days or more.
If you meet any of the first set of conditions and both the additional conditions, you shall be considered a resident in India. If you meet any of the first conditions but do not meet the additional conditions, you shall be considered a resident but not ordinarily resident (RNOR) in India. If you do not meet any of the first conditions, you shall be a non-resident in India.
Archit Gupta is founder and chief executive officer, ClearTax. Queries and views at mintmoney@livemint.com
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