If you’re an NRI – or Non-Resident Indian, you may be aware of recent discussions centering on potential tax law changes in India. In particular, it was rumoured that the update meant NRIs would now have to declare their assets and bank accounts held outside the country.
If that caused consternation, confusion or concern, you’re not alone. The media jumped on the bandwagon and ran a slew of articles on the topic – with some of the details contradicting each other.
Now however, the dust has settled. To help you get a clearer picture of the rules, we’ve put all these insights together in one place for you to look at.
So without further ado, here’s your handy FAQ of what the recent furore means for you.
Do I have to declare foreign assets and bank accounts?
This is perhaps the most pressing question on people’s minds.
And the simple answer is: not if you’re an NRI. The only time you’d want to declare foreign assets is if you were asking the Indian government for a tax refund. And even then, the Central Board of Direct Taxes (CBDT) has clarified that disclosure is optional. For Indian residents, the picture is somewhat different, and the rules stipulate that assets outside the country have to be declared as well. But again, it’s worth reiterating that this requirement does not apply to expatriates.
Why does my ITR form have a column for overseas assets?
Ah. This is actually where the entire furore started.
You see, the Central Board of Direct Taxes (CBDT) brought out new Income Tax Return (ITR) forms on March 31st 2017. And those new forms had an additional column that left space for the declaration of overseas assets.
But as is clear now, the column leaves space for declarations only in case they’re ever needed. For NRIs, this column can safely be left blank, no problem.
I don’t have any taxable income in India, but am getting email notifications to submit a tax return
The CBDT has clarified that these are automatic notifications, and generated based on people’s Permanent Account Number (PAN). So if you hold a PAN from India – even if you don’t live there anymore and don’t have any taxable income there – you might receive an automated reminder to file your taxes. Don’t worry if it doesn’t apply to you.
Wait! Is the income I earn abroad taxable in India?
Excellent question. This depends entirely on your legal status. If you’re an Indian resident for a financial year, then your global income is taxable – which includes money you’re making outside the country.
But if you’re classified as a Non-Resident Indian, then you’re only liable for taxes on income earned and accrued within the country. Specifically, the threshold set is Rs 250,000. If you’re making anything over that from sources in India, then you need to file a tax return.
What is income earned and accrued within the country?
This includes any financial advantages gained within the Indian geography. It can mean income from fixed deposits, capital gains on assets within India, interests on savings accounts, and of course direct salaries and payments made to you.
How do I know whether I’m considered a resident of India or not?
Here’s a simple litmus test.
Have you lived in India at least 6 months, or 182 days of the last financial year? You’re legally considered a resident for that year.
If you haven’t spent that much time in the country, you’re still classified as non-resident.
In short, if you’re an NRI, you only need to declare income earned within India if it crosses the Rs 250,000 an annum threshold. Other than that, you’re absolutely fine.
We hope our questionnaire us unknotted some of the complexities surrounding the situation. We’re always happy to help our readers make sense of the financial world.