• Notification Date: 25-01-2022
• Notification No: N/A

Income Tax introduces New Implications on the NRIs returning India

An NRI for the last 30 years, we are staying in Hong Kong at present. Being responsible salaried citizens, we have been paying all the taxes on time in Hong Kong. Our incomes are deposited in the bank accounts held in Hong Kong. We keep the money in USD and Hong Kong Dollars. Our investments are made in Mutual Funds. Our shares are in USD which are bought with our tax-paid salary. The investments and the savings account are in the same banks. Our accounts are held in HSBC and DBS banks in Hong Kong. We have our savings and wealth management accounts. Our HSBC accounts in India have both NRE and NRO accounts. But there is neither of the accounts in the Indian branch of DBS.

We have a few queries related to this matter.

1) We are planning about shifting to India. But we are worrying about the right month to return to India to receive the maximum status as NRI after we relocate. We need to know for how many years our NRI status would be maintained.

2) What will happen to our bank accounts in Hong Kong? How long can those savings be maintained as USD without converting into INR?

3) We earn dividends from the investments in wealth management accounts in HK. Will our income from the foreign accounts be declared as a foreign income? Do we need to pay the tax in India? What will be the rate of tax payable by us? When do we need to start paying the tax after coming to India?

To mitigate the queries, the tax department has given the answers.

If an NRI stays in India for less than 182 days in a financial year, then they will be considered a non-residential citizen of India for that year. An NRI may come to India as a resident. But they cannot stay for a period longer than two years. For a non-residential Indian, the income from Indian sources is only subjected to tax. When an Indian citizen stops being a normal resident and becomes a non-ordinary resident, their global income is are subject to income tax.

There is no restriction regarding the investments made out of India. You do not have to withdraw them and bring the money into Indian currency. After getting the money you are free to deposit the same in Resident Foreign Currency (RFC). You may also use them at your convenience. After becoming an Indian resident, you need to declare your properties held in a foreign country, such as investments and assets in ITR.

Your dividends received from the foreign assets will be considered tax-free for two financial years. After that, you need to pay the tax on your global assets as an Indian citizen.