Foreign earnings shouldn’t be taxable below DTAA

I’m an OCI (Overseas Citizen of India) card holder dwelling in Toronto. My spouse and I are contemplating returning to India subsequent yr after retirement. I anticipate to obtain a pension from my Canadian employers and likewise the Government of Canada. Besides which, we could have some funds in US or Canadian {dollars}. I might recognize it in case you may assist me perceive the tax implications on these in India.

—Name withheld on request

Assuming you’d qualify as ‘Resident and Ordinarily Resident’ in India upon return; as a ‘Resident and Ordinarily Resident’ of India, you’d be taxable on worldwide earnings in India and will likely be required to report all international property within the India earnings tax return (ITR). Accordingly, the pension earnings from Canadian employers and Government of Canada will likely be taxable in India.

However, exemption from earnings tax could also be claimed below Article 18 of the Double Taxation Avoidance Agreement (DTAA) between India and Canada. Even if exemption from earnings tax is claimed below the DTAA, the identical will nonetheless be required to be reported within the ITR as international earnings.

If you qualify as ‘Non Resident’ or ‘Resident but Not Ordinarily Resident’ of India within the preliminary years of return, any pension acquired in a checking account exterior India is not going to be taxable in India.

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

—Name withheld on request

Rental earnings from any property located in India is taxable within the palms of the proprietor of the home property. The technique of computing taxable rental earnings is as follows: Gross annual worth (GAV) much less municipal taxes provides the web annual worth (NAV). Reduce the usual deduction of 30% of NAV and curiosity on housing mortgage from this, which can then be the taxable rental earnings. GAV is the upper of the next: Amount at which the property would possibly moderately be anticipated to be let loose or precise lease acquired or receivable.

In different phrases, the GAV compares the precise lease acquired or receivable with the anticipated lease that the property would fetch.

Sonu Iyer is tax companion and folks advisory companies chief, EY India.

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