In general, the investment and tax arrangements for non-resident Indians (NRIs) returning to India are rather liberal. However, NRIs must carefully plan their return to India to avoid shocks in managing their abroad income and investments. One can look for various articles on nri tax planning in india to know about the benefits in detail.
In this post, we will look at some of the most prevalent financial planning issues for returning NRIs.
Benefits of NRI Tax planning:
NRI Tax Residency Status:
NRIs must first assess their residential status for the fiscal year and whether the income was generated in India to determine if the money earned overseas would be taxed in India. According to Indian law, two acts control taxation and foreign investment for returning NRIs: the Foreign Exchange Management Act (FEMA) and the Income Tax Act (ITA). The FEMA oversees foreign investment and transactions involving Indian residents living outside of India. Foreign bank accounts and foreign investments in real estate, equities, mutual funds, enterprises, money transfers, remittances, borrowing and lending, and gifts are all examples of this. The ITA, on the other hand, governs taxation and specifies how such investments should be taxed.
Account for Earners of Foreign Currency (EEFC):
An Exchange Earners Foreign Currency account is a service that allows native Indians to deposit 100% of their foreign exchange profits into the account. Professional income, including director’s fees, consultant fees, lecture fees, and honoraria earned by a professional, as well as payments received by exporters and various other forms of revenue, may be included in earnings. The feature allows account holders to save transaction expenses by eliminating the need to transfer foreign currency into rupees and vice versa. Furthermore, monies kept in an EEFC account can be used for any authorised current account transactions as well as allowed capital account activities.
Treatment of Indian Assets Held During Non-Residential Status:
During their time as an NRI, an individual may have assets, investments, and bank accounts in India. There are special accounts for NRIs who have investments in India. An NRI’s Indian bank account is either a Foreign Currency Non-Resident (FCNR) account or a Non-Resident External Rupee (NRE) account. These accounts are formed in order to deposit revenue generated abroad. The funds in these accounts can be freely sent internationally, according to the rules and limitations of the resident country. An NRI must re-designate Indian banking accounts from FCNR/NRE to the RFC accounts listed above upon re-establishing residency.
The Wealth Tax:
Money and assets brought into India by an NRI who was habitually resident in a foreign country . And has returned to India with the aim of permanently remaining are typically excluded from wealth tax for seven consecutive assessment years, subject to certain limits. Furthermore, funds kept in an NRE account on the day of an individual’s return. To India are considered to be funds imported into India on that date. They are also not subject to the wealth tax. The exemption from wealth tax does not apply to income derived from assets imported into India.
This article describes in detail the various benefits of nri tax planning. There are many nri tax planning firms in India that explain the benefits in detail.