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Returning NRIs get tax exemption for two years

Determine your residential status for examining your eligibility to seek exemption

Q. I used to work for a bank till December 2013 and then retired. My tax returns are up to date. However, I got a JOB in a foreign country in January 2014. Now, as per the income tax rules, the previous year ends in March 2014 for the assessment year 2014-15. Since according to the income tax rules, I am not a non-resident Indian (NRI), since I have not stayed out of the country for more than the stipulated number of days in the previous year, how will my income earned abroad be treated as per the Income-tax Act? Should I pay tax on my foreign earnings in India? I am paying tax abroad on my earnings.

Expert Comment: The scope of your taxable income and the consequent tax liability depends upon your residential status. Considering your stay in India exceeds 182 days during the FINANCIAL year 2013-14, you will be treated as a tax resident of India and the entire income earned by you in India or outside India would be taxable in India.

However, depending upon the country in which you are employed, you may be eligible to claim the credit of taxes paid on the salary earned in the foreign country against your tax liability in India under the relevant double taxation avoidance agreement. Further, you should consult a tax adviser with specific facts.

Q. After coming back to India, I have converted some of my foreign CURRENCY non-resident (FCNR) deposits to resident foreign CURRENCY (RFC) deposits. How long can I enjoy tax-free interest on both my FCNR and RFC deposits?

Interest earned on deposits held in foreign currency with a scheduled bank, by a non-resident or by a person who is not ordinarily resident (RNOR), is exempt from income tax as per the provisions of section 10(15) of the Income-tax Act, 1961.

The exemption would be available until you are non-resident or a RNOR under the Act. An individual is considered to be RNOR if she has been a non-resident in India in nine out of the 10 previous years preceding that year, or has been in India for a period of 729 days or less during the seven previous years.

Typically, a returning Indian who has been a non-resident would continue to enjoy the tax exemption for two years upon acquiring the status of RNOR. You should consult a tax adviser and determine your residential status for examining your eligibility to seek exemption.

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