After serving abroad for 32 years, I returned to India in 2023. Can I accept foreign consultancy services income in my bank account outside India? Can I save any tax by retaining my income outside India?
—Name withheld on request
Assuming that you were a non-resident Indian (NRI) under the Indian Income Tax Act for at least nine out of 10 financial years preceding FY24-25, you would become a resident but not ordinarily resident (RNOR) for FY 2024-25. Usually, foreign income is not taxable under IT Act for a RNOR individual. However, since you would be providing consultancy services from India, such income would become taxable in India at the normal slab rates. Depending upon the withholding of taxes on such income in the foreign country, you can claim credit of such withheld taxes in India generally to the extent of income tax payable under IT Act.
Also, since you would have become a resident under FEMA (Foreign Exchange Management Act) by now, as a service exporter, you are not permitted to receive such consultancy income in your foreign bank account. You are required to realize and repatriate the receipts to India within a period of nine months from rendition of the services.
I am an NRI (non-resident Indian) living in Sharjah and have a tax residency certificate of that country. I liquidated some mutual fund (MF) units during my yearly visit to India in December 2023. Will I get any exemption benefit for the sale?
—Name withheld on request
Since, you have a tax residency certificate in UAE (United Arab Emirates), proceeds from the sale of Indian mutual fund investments are not liable to tax in India as per Article 13(5) of the India-UAE Double Taxation Avoidance Agreement (DTAA).
Once you qualify as a resident of UAE, it covers the entire tax period which will also include the period of your travel to India or for that fact, to any other third country too. It is therefore not necessary that you have to execute the sale of MF investments only while staying in UAE.
Also, in order to claim capital gains exemption under the India-UAE DTAA, you need to file an online Form 10F on the Indian tax portal.
Harshal Bhuta is partner at P.R. Bhuta & Co. Chartered Accountants.
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Published: 15 Apr 2024, 03:11 PM IST