I am an Indian working in Dubai for the last few years. I have been forwarding my monthly salary to my old savings account in India, and till December-end 2022, I have accumulated around Rs 30 lakh in that account. I did not open a non-resident ordinary (NRO) or non-resident external (NRE) account. I am opening the account now and this amount will be transferred to my NRO account once the account gets operational. I would like to know what tax implication will I have and whether I need to file my tax returns?
Answer: Under the Foreign Exchange Management Act, a person becomes a non-resident when he/she takes up employment outside India or starts any business outside India. He/she also becomes a non-resident if he/she leaves India with an intention not to return for an indefinite period.
So, ideally you should have intimated your bank about you having taken up employment outside India, and the bank would have designated your existing account as an NRO account.
You need not open a fresh NRO account. You just need to intimate your bank that you have become a non-resident, and submit documentary proof along with a request to designate your existing bank account as NRO.
Though you have technically not complied with the FEMA requirement, but this happens with almost all the people who take up employment outside India, and it does not have any income tax implications.
I presume that the salary was first received in your bank account in Dubai and later on transferred to your bank account in India.
In case the same was directly credited to your bank account in India by your employer, it would become taxable in India even if you are a non-resident.
The exact tax implications of the salary credited in your bank account in Dubai would depend on your physical stay in India during each of the financial year. So, in case you were resident in India based on your physical stay in India, then even the salary credited in your bank account in Dubai would become taxable in India for those years.
I want to buy a residential property from a non-resident Indian (NRI).
Do I have to deduct tax while making payment for the property?
Answer: Yes, under Section 195 of the Income-tax Act, 1961, any person making payment of any sum, to a non-resident, which is chargeable to tax in India has to deduct tax.
Do note that there is no threshold limit of Rs 50 lakh, like what is applicable when you buy a property from a resident. In order to find out the amount of taxable capital gains in the hands of the seller, you can ask the seller to provide you with documentary evidence about his cost of acquisition with year.
If the seller does not provide you the documents to help you determine the taxable amount of capital gains, you will have to deduct tax at a flat rate of 20 per cent on the amount of sale consideration.
Do note that you will have to obtain a tax deduction account number (TAN) number for making payment of the tax to the credit of the government as well as will also have to file the TDS return.
The author is a tax and investment expert
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
