How is overseas retirement fund taxed in India?

I’ve been residing in Canada since 2001. I’ll retire subsequent yr and plan to return to India quickly after. I’ll get my retirement corpus and different advantages later subsequent yr. How will this cash be taxed in India, if I’m a resident in India?

-Name withheld on request

How your earnings shall be taxed relies upon upon your residential standing and the supply of such earnings. If an earnings has been earned in India, it’s possible that it shall be taxed in India. How a lot of your earnings shall be taxable in India additionally is dependent upon your residential standing in India. Your residential standing have to be decided as per the Income Tax Act for every monetary yr.

There can also be a rule of deemed residency. An particular person who’s a citizen of India who is just not liable to tax in every other nation or territory has whole earnings, aside from from overseas sources, exceeding ₹15 lakh in the course of the mentioned FY, shall be a deemed resident of India.

In case you might be decided to be a non-resident or resident however not ordinarily resident in India, you’ll have to pay tax on earnings that accrues or arises in India or incomes which might be acquired or deemed to be acquired in India. However, in the event you qualify as a resident taxpayer, you shall need to pay tax in India in your world earnings together with any incomes from exterior India.

The ITR kind additionally requires residents to report any earnings earned by them from overseas property of their ITR filed in India and pay tax on it.

Therefore, in case you’re a non-resident or resident however not ordinarily resident in India, any retirement cash acquired by you in Canada, shall not be taxed in India. However, in case you qualify as a resident the scenario could also be totally different. In order to keep away from paying tax on the identical earnings twice, you’ll have to confer with the DTAA (Double Taxation Avoidance Agreements) between the 2 international locations.

The authorities has just lately launched a provision that permits returning NRIs to defer taxation of retirement funds to the yr of withdrawal to keep away from mismatch of taxation of earnings in India versus taxation of earnings exterior India as a consequence of mismatch within the interval associated to tax submitting. It is advisable to seek the advice of an professional to completely perceive how your corpus shall be taxed.

Archit Gupta is founder and chief govt officer, Clear.in.

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