What would be the standing of an OCI cardholder for I-T function?

I acquired US citizenship in November 2021 however have been staying in India since 15 January. I’ve acquired an Overseas Citizen of India (OCI) card. What will likely be my standing for checking account and revenue tax (I-T) functions? I’m a retired senior citizen from India and have solely curiosity revenue in India.

— Name withheld on request

The guidelines for the willpower of residential standing underneath the trade management legislation are completely different from these underneath the Income-tax legislation. The residential standing underneath the trade management legislation impacts the standing of your financial institution accounts.

Under the Income-tax legislation, residential standing is set primarily based on the bodily presence of a person in India throughout a monetary yr (FY) and the previous 10 FYs. For Indian residents, even when they don’t turn out to be residents primarily based on bodily presence in India, they will nonetheless turn out to be residents (however not ordinarily resident) primarily based on the absence of legal responsibility to pay tax in every other nation or territory due to domicile or residence or every other standards of comparable nature, if India-sourced revenue exceeds ₹15 lakh. Residential standing wants contemporary willpower for annually.

If the person satisfies any of the fundamental situations talked about beneath, the person would qualify as a ‘resident’; in any other case, she or he would qualify as a ‘Non-Resident’. A resident might both qualify as a resident and ordinarily resident (ROR) or resident however not ordinarily resident (RNOR).

An particular person qualifying as ROR is taxable on his worldwide revenue in India and is required to report all international belongings within the India revenue tax return (ITR). Also, the revenue earned from such international belongings throughout the related yr together with the character of revenue and head of revenue underneath which such revenue has been provided to tax within the India ITR must be reported about every international asset.

An particular person qualifying as non-resident or RNOR has to pay tax on the next incomes: revenue accruing or arising in India, revenue deemed to accrue or come up in India, and revenue acquired or deemed to be acquired in India. In the case of RNOR, revenue that accrues or arises exterior India from enterprise managed or skilled set-up in India can be taxable in India.

Under the trade management legislation, when an individual leaves India for the aim of employment or for carrying on enterprise or for every other function indicating his intention to remain exterior India for an unsure interval, he could also be thought of as a “particular person resident exterior India”. A non-resident Indian (NRI) is a “person resident outside India” who’s both a citizen of India or an individual of Indian origin. As a “particular person resident exterior India”, he is required to designate his existing resident bank accounts to non-resident accounts due to a change in his residential status. Similarly, if a person is coming to India for employment, business, or vocation or with an intent to stay in India for an uncertain period of time, then in such case, under exchange control law, the person will qualify as a “person resident in India”.

In your case, you will need to decide your residential standing underneath the Income-tax legislation and trade management legislation.

Interest revenue from financial institution accounts in India will likely be taxable in India. However, you could declare a deduction as much as ₹50,000 underneath Section 80TTB out there for senior residents aged 60 years or extra throughout the related FY in case you qualify as a “resident” of India underneath the Income-tax legislation. If you qualify as an RNOR underneath the Income-tax legislation, you’ll be able to declare exemption from Income-tax on curiosity revenue on international foreign money deposits with scheduled banks. Also, if the deposits with Indian banks/public corporations had been made with inward remittance of convertible international trade when you had been non-resident, you’ll be able to declare a decrease tax price of  20% (plus relevant surcharge and cess) even after qualifying resident, until the encashment of such deposits by electing for such choice within the ITR if such choice is helpful to you.

Sonu Iyer is tax accomplice and folks advisory providers chief, EY India.

Subscribe to Mint Newsletters

* Enter a legitimate electronic mail

* Thank you for subscribing to our e-newsletter.

Never miss a narrative! Stay related and knowledgeable with Mint.
Download
our App Now!!

Topics