Key Considerations for OCIs Returning to India
When OCIs (Overseas Citizens of India) decide to return to India, there are several important aspects to keep in mind regarding taxation, financial assets, banking, customs duty, and everyday living.
Taxation
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Tax Status: Determined by the number of days stayed in India during the financial year (April 1 to March 31).
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Ordinary Resident (ROR): If an individual stays in India for more than 182 days in a financial year, they qualify as ROR and global income is taxable in India.
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Non-Resident (NR): While living abroad, OCIs typically have NR status.
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Not Ordinarily Resident (NOR): For approximately 2 years after returning, based on being an NR for 9 out of the last 10 years. During this period, only income generated from Indian sources is taxed, not worldwide income.
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Global Income: For ROR status, each type of income (e.g., salaries, rental income, capital gains, social security receipts) received outside India must be evaluated for double taxation relief under the Income Tax Act and DTAAs (Double Taxation Avoidance Agreements).
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US Tax Obligations: OCIs who are US citizens must file US tax returns regardless of their stay in the USA. Double taxation relief can be claimed, but overall tax filing becomes more complex.
Holding Foreign Assets
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Declaration: Foreign assets, including bank accounts, must be declared in Indian tax returns.
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Reporting: Foreign bank and brokerage accounts will be reported to the home country under FATCA (for the USA) and CRS (for OECD countries like Australia, UK, Canada, Germany).
Bank Accounts
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Conversion: NRE, NRO, and FCNR accounts need to be converted to regular resident savings/deposit accounts upon becoming an Indian Resident.
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NRO Account: Converted back to a resident savings account.
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NRE and FCNR Accounts: Can be converted to Resident Foreign Currency (RFC) accounts. Fixed deposits can be held to maturity in original NRE/FCNR accounts.
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RNOR Status: Interest earned on RFC accounts is tax-free for 2 years after return.
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RFC Accounts: Allow retaining foreign currency and remittance overseas later. Available in various convertible currencies and can be current, savings, or term deposit accounts.
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LRS Scheme: Indian Residents, including OCIs, can avail of schemes like the Liberalized Remittance Scheme (LRS) for transferring funds up to a limit in foreign currency.
Customs Duty on Imported Items
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Transfer of Residency Facility: NRIs/PIOs who have stayed abroad for at least 2 years and are returning to India for an extended period can import most personal and household articles duty-free and other listed items at a concessional rate.
Everyday Living
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Citizenship Distinctions: OCIs may encounter differences in fees and guidelines for government museums, famous places like the Taj Mahal, hotels, air tickets, etc., where distinctions are made between Indian Citizens and Foreign Citizens.