OCI working in India - status and tax treatment?

OCI working in India - status and tax treatment?

Hi,

I'm a naturalized US citizen and OCI and I've recently returned to India (in May 2023). I'm working for a firm in India now and drawing salary in INR. I have the following questions -

1. My NRE/ NRO accounts were automatically converted to resident status by my bank since my company needed me to open a new salary account here. Is that expected? Should my accounts be converted to resident accounts even though I've been in India for less than 182 days in the current FY so far?
2. Can I open a new NRE/ NRO account with another Indian bank in order to move funds from my US bank account to India and book FCNR deposits? Is it ok to have an account in 'resident' status in one bank and 'non-resident' status in another bank? Would there be any regulatory/ FEMA implications?
3. What would my status be for tax purposes? I've stayed in India for less than 729 days in the preceding 7 FYs, so would I be considered RNOR? If yes, for how long would I be able to maintain RNOR status?
4. My understanding is that I can get an exemption under FEIE on income up to $120,000 and avoid paying double taxes. Since I moved to India in May, I would have spent more than 330 days in india by the time I file taxes in the US next April. Would I also be able to claim credit for any excess taxes in the US or India under FEIE?

Thanks!

Asked 1 year ago in Income Tax

The accounts gets converted as per FEMA law and in FEMA it sees the intention of the person first rather than just the number of days. Since you have an intention to work and be in India. It will be considered as resident bank accounts.

Why do you wish to have a NRE NRO account when you will become resident in India.

Yes you would be considered as RNOR. It generally stays for an individual for 2 years if they stay in India for long.

I am not sure about FEIE but you can claim credit of taxes paid on doubly taxed income.

Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo

CA, Jaipur

4292 Answers

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Talk to Naman Maloo

Hi Naman,

Thanks for your response. With regards to your question about why i want to open a NRE/ NRO account now that I've moved to India and intend to stay here for some time, I need to move my funds from my US bank account, and my understanding is that if I book FCNR deposits I can also earn interest on them, which would be tax free until the time I hold RNOR status. What I'm not sure about though is if I can maintain a resident account in one bank and NRE/ NRO accounts in another bank at the same time? I was told by the bank representative that I can do it since I've just moved to India and and want to bring funds from the US to India, and so its justified. But I wasn't sure if there would be any FEMA complications. Can you provide any guidance?

Thanks!

Asked 1 year ago

Yes you could do so and your understanding is correct that interest on FCNR account would be exempt until you hold RNOR status.

I don't think FEMA would affect opening a FCNR account.

Naman Maloo

CA, Jaipur

4292 Answers

101 Consultations

Talk to Naman Maloo

Under FEMA, the residential status is based on intention of moving to India rather than number of days of stay. Once you come to India for employment, you are considered as resident. Ideally, you cannot open FCNR account as thats for FEMA non-resident. Yes you would be considered as RNOR for tax purposes for 2 years. Yes you can also claim FEIE as well as double tax relief.

Prerna Peshori

CA, Pune

199 Answers

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Talk to Prerna Peshori

1. They can wait for 182 days to convert your accounts to NRE/NRO.

2. It may be subject to litigation

3. RNOR

4. You would be resident in both the countries. For tax purposes, a person can be resident in one country only. With the help of tie-breaker rule, your residential status would be determined

For detailed discussion you may opt for phone consultation

Vivek Kumar Arora

CA, Delhi

4950 Answers

1105 Consultations

Talk to Vivek Kumar Arora

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