I have been in US since Aug 2006 (work visa) and now returning India next month to pursue a job. I understand that I shall have a RNOR status for all tax purposes in India. At what rate will my salary be taxed , when I file my Indian tax return on March 31st 2016? How do I smartly use my RNOR status to my benefit?
Dear Sir,
With reference to the salary income it will be taxed directly in India as same is accrue and arise in india and hence same will be subject to tax in india irrespective of your status as resident or resident but not ordinary resident.
You can do tax planning with respect to your passive income like interest, dividend etc.
In the present case you are RNOR. You are returning back to India now. In this case you are allowed to keep your RNOR status for up to 3 financial years post your return back to India.
In that case it will be beneficial to you as your taxation will be very much in line with that of an NRI and therefore income that you may earn outside of India (while you may have returned back) will continue to be not taxed in India. Therefore
1. Any income that is ‘earned’ in India is taxable for you in India
2. Your income outside of India is not taxable in India
And you can continue this status for a period of 3 years. However, once you have attained the status of a Resident, all of your income within and outside India will be taxable in India, barring any concessions that may be available under the Double Taxation Avoidance Agreement between India and the country from where your overseas income has arisen.
Your salary will be taxed at the rates applicable to Individuals resident in India.
You can continue to maintain your NRE account, the interest on which is exempt from tax. Your global income is not taxable, which means your income from investments, if any,outside India will not be taxable. So you can plan your investments accordingly.
A comprehensive financial planning needs to be done in your case by exploring all the available options.
Thanks all for the prompt response. What shall be my tax rate slab in India? Since in curent financial year , I shall only be working 4 months ( Dec 2015 - March 2016).
The tax rates in India for the financial year 2015 to 2016 is as follows:
Up to INR 250,000 = NIL
INR 250,000 – INR 500,000 = 10 percent
INR 500,001 – INR 1000,000 = 20 percent
INR 1,000,000 and above = 30 percent
Dear Tax Payer,
First step to calculate your taxability is to determine your residential status.
1. Your Residential Status:
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As per Section 6 (1) of the Income-tax Act, 1961, an individual is said to be resident in India in any previous year, if he—
(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or
(c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days ( or more in that year.
Analysis:
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Condition 1. FY 2015-16 - In India < 182 days.
Condition 2. FY 2015-16 - In India < 60 days or from 1 April 2011 to 31 March 2015 <365 days.
If you satisfy both the above conditions, you will be a Non-Resident for the purpose of the Income Tax. If you are not satisfying both the above conditions, you may be a resident or not-ordinarily resident.
The passport will be the final and conclusive proof of the person’s entry into and exit from India to calculate the period.
Taxability of your Income
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If you are a resident - As per Section 5(1) - all your income including the income which is accrued or arose outside India will be taxable.
If you are a not ordinarily resident - your income which is accrued or arose outside India shall not be taxable in India unless it is derived from a business controlled in or a profession set up in India.
If you are a non resident - As per Section 5(2) - your income which is accrued or arose outside India shall not be taxable in India .
Considering the above provisions and the facts provided, it is very clear that your salary income from India shall be taxable at the applicable rates. Any other income which is accrued or arose in India like any interest received from FD or Savings bank account in India or any dividend received in India, etc. will also be taxable in India.
Applicable Slab Rate
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Up to INR 250,000 = NIL
INR 250,000 – INR 500,000 = 10% (Education Cess 2% and SHEC 1% extra)
INR 500,001 – INR 1000,000 = 20% (Education Cess 2% and SHEC 1% extra)
INR 1,000,000 and above = 30% (Education Cess 2% and SHEC 1% extra)
You can consider various investments for the purpose of tax planning.
Regards,
CA. Rajeev P T
Partner
Rajan Chakravarthy & Associates, Chennai
Email: ca.rajeevpt@gmail.com
*****This Opinion is based on stated facts and the legal position as on date. The views expressed may not be relevant where there is any change in facts or law. This Opinion is not in the nature of an assurance that an alternative view or interpretation cannot emerge.
First Rs. 2.5 L will be exempt. Later 10% for income between Rs. 2.5 to Rs 5 L, 20% between Rs. 5 L to Rs 10 L and then 30%.
As you will be returning only next month, you may not be staying for more than 182 days during the current Financial year. It means you will still be Non Resident only and not RNOR as mentioned by you. However, your Indian income will continue to be taxed. Further, you will also have to offer your Indian Income in your tax return for 2015, when you file your return in April 2016. You will however, get double taxation benefit in your US tax return if you have paid tax in India.