An individual chooses to stay outside India and work day and night away from family and social circle for years and decades. The intentions are to have better living standards by earning more, looking at opportunities available vis-a-vis in his own home country. The apparent intentions of a person looking to become Non-Resident Indian (NRI) is to have a better capability to deliver for family needs, education of children and have a good and comfortable post-retirement life.
After having lived for years outside India being NRI, the moment of thought is sure to pop up, thinking let us go back to India. It is the call of the motherland, to take a break from work and now to enjoy post-retirement life.
The second thought triggers, is that there is a lot to be done before going back to India. The planning and preparations take a lot of energy and time, especially when they are planning for going back for good.
One of the points of consideration or botheration is NRI taxation. It is essential to know and to be aware of the implications that would arise post moving back to India. The laws of the land, the compliances, and concerns that are required to be addressed and all. That too, it is important when someone is planning to move back to India has had not complied to filing tax for NRI returns for years for reasons like no tax liability, awareness, the requirement of the case, or having been used to living in countries having no direct tax liability as such on income earned like in UAE or other gulf countries. People out there are habitual because of the prevailing income tax rules and being in their comfort zone.
The points that need to be assessed have been discussed in brief point by point:1. Residential Status
Taxation of an Individual in India is based on an assessment method followed looking upon the number of days stayed in India and outside India. There are two acts, which govern the taxation and investment provisions for NRIs, i.e. Income Tax Act, 1961 and Foreign Exchange Management Act, 1999.
As per the Income Tax Act, in all, there are three major classifications of the status of an individual, which define him are Resident, Non-Resident and Resident But Not Ordinary Resident (RNOR). Based on the status, taxation of various source of income is defined.