I have been working in Canada for more than 12 years and now my family and I are going back to India for good on 25th August 2022 this year. I have the following questions: What will be the tax implications if I sell my house in Canada and bring that money to India? I will transfer my balance in Canada to Indian NRO account. Since I am going back to India for good, I hope to convert the NRO account into a domestic account. then interest will not be received 5 crore in household account will be subject to regular income tax?
answer: Income in India is taxed on the basis of your residence as well as the source of income. For a tax resident his global income is taxed in India and for a non-resident only Indian income is taxed in India. for the purpose of taxation of a person under income tax lawThere are three residential categories of a person for tax purposes. Residents and non-residents are the two main categories. Between these two main categories there is another category of resident but not ordinary resident. A person who is resident and does not have ordinary resident income arising in India, as well as income derived outside India from a business controlled in India or a profession established in India, is also taxed in India.
You will be treated as a resident but not a normal resident, assuming that in addition to fulfilling the basic conditions of physical stay in India during the previous year, you were a non-resident of India for nine of the last ten years or you were not physically present in India for more than 729 days during the seven years preceding the relevant year. Since you are returning to India on 25 August 2022, you will be resident and non-resident for the first two years and any income you make abroad, such as capital gains from selling property in Canada, will not be taxed in India for the first two years. ,
Since you will come back to India for good and thus become a resident for the purpose of FEMA and thus you will not be entitled to continue with your existing NRO account. You will have to re-designate all your existing NRO account as regular account and income from all your bank accounts in India will become taxable in India. In case of your NRE account, income will be exempted as long as you are not a non-resident under FEMA and once you come back to India, you will become resident for FEMA and thus interest on NRE accounts will also be taxed in India.
Balwant Jain is a tax and investment specialist and can be contacted on Twitter at jainbalwant@gmail.com and @jainbalwant.