I am a returning NRI and my status will be converted to resident and ordinarily resident in India. I own certain shares in the US market that are not subject to any tax because they were purchased in the UAE. I am not sure whether I will be eligible for LTCG tax on these shares once I come back to India. If that’s going to happen, I’d prefer to liquidate those shares and bring the capital with me when I get back. Please let me know whether property acquired outside India out of non-Indian income will be eligible for taxation after becoming an ordinary citizen of India.
—Name withheld on request
To find out whether your income will be taxed in India or not, you need to establish your residential status as per Income Tax Act of India for the relevant financial year. You can check your residential status in the following way.
Conditions: a) you are in India for 182 days or more in the financial year(s); or b) You are in India for 60 days or more in a financial year and 365 days or more in the four financial years immediately preceding the relevant financial year. Additional Conditions: You are a resident of India in two of the 10 financial years immediately preceding the relevant financial year; and you are in India for 729 days or more in the seven years immediately preceding the relevant financial year. If you satisfy either of the first set of conditions and both the additional conditions, you will be deemed to be resident in India. If you meet one of the first conditions, but do not satisfy the additional conditions, you will be considered a resident but not ordinarily resident (RNOR) in India.
If you do not fulfill any of the first conditions, you will be a non-resident in India.
Soon after your return, your residential status is likely to be that of non-resident and RNOR for some time. For a non-resident and RNOR, only income earned or received in India will be taxable in India.
Once you become a resident of India, all your global income will be taxable.
Archit Gupta is the founder and CEO of Cleartax.
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