Non-resident individuals arriving in India needs to keep in mind the residential status criteria and reporting requirements.
Residency rules in India
An individual becomes resident of India if he is present in India for
a) 182 days or more OR
b) 60 days or more (120 days if Indian citizen or PIO having total income (other than income from foreign sources exceeding INR 15 Mn) or more AND was present in India for 365 days or more in preceding 4 years
Additional conditions of residency
An individual is an ordinary resident (ROR) if:
A) He has been resident in India for 2/10 preceding P.Ys. AND
B) He has been in India for 730 days or more during 7 preceding P.Ys.
Reporting of assets held and Income earned outside India in ITR
- ROR are required to disclose details of assets (movable and immovable) held outside India in the income tax return Form (Schedule FA) as well as income earned and taxes paid outside India (Schedule TR).
- The categories of assets that need to be listed in this schedule are bank accounts, securities accounts (Demat / share-trading), shares or securities, insurance contracts, immovable property, financial interest in any entity, trusts in which the individual is a trustee or beneficiary and any other asset held outside India at any time during the calendar year
Designate NRE/NRO accounts to Resident Accounts
- NRE accounts should be designated as resident accounts or the funds held in these accounts may be transferred to the RFC accounts, at the option of the account holder, immediately upon the return of the account holder to India for taking up employment or on change in the residential status.
- NRO accounts may be designated as resident rupee accounts on the return of the account holder to India for taking up employment, or for carrying on business or vocation or for any other purpose indicating his intention to stay in India for an uncertain period.
Implications under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
- Non-disclosure of foreign assets could result in applicability of provisions of Black Money Act wherein pxenalty in relation to undisclosed foreign income and asset is a sum equal to three times the tax computed in addition to tax payable by him.
- Morever if an ordinary resident, who is required to furnish a return of his income for any previous year, fails to furnish such return before the end of the relevant assessment year, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of Rs.10 Lakhs.