My son is a non-resident Indian (NRI) based mostly in London for the previous 12 years. He has revenue from NRE deposits and mutual funds and has been commonly submitting revenue tax (I-T) returns. He has now obtained British citizenship and utilized for OCI (abroad citizenship of India) standing. What would be the implication of this on his Indian revenue? Will the curiosity revenue on NRE deposits proceed to be tax free?
—Name withheld on request
As your son relies outdoors India, he would qualify as non-resident of India below the next circumstances:
His bodily presence in India is lower than 60 days in the course of the related monetary yr; or his bodily presence in India is lower than 120 days in the course of the related monetary yr if India-sourced revenue doesn’t exceed ₹15 lakh; or his bodily presence in India is lower than 182 days in the course of the related monetary years if India-sourced revenue lower than ₹15 lakh.
Implication on his Indian revenue: The change of citizenship from India to the UK is not going to affect his non-resident tax standing in India . As a non-resident, he would proceed to be taxable in India on the next incomes: Income accruing or arising in India; revenue deemed to accrue or come up in India; revenue acquired or deemed to be acquired in India.
Will the curiosity revenue on NRE deposits proceed to be tax free?
Under the trade management regulation, when an individual leaves India for the aim of employment or for carrying on enterprise or for every other goal indicating his intention to remain outdoors India for an unsure interval, he could also be thought-about as an individual resident outdoors India.
Under the India I-T regulation, curiosity revenue from Non Resident External (NRE) accounts might be exempt from revenue tax in India if the person qualifies as an individual resident outdoors India below trade management regulation.
As your son will proceed to be based mostly outdoors India, he’ll qualify as an individual resident outdoors India below trade management regulation and curiosity revenue from NRE account will proceed to be exempt from tax in India.
Sonu Iyer is tax companion and folks advisory providers chief, EY India.
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