A client is returning to India permanently after 12 years working in the Gulf. What tax points would you discuss?
What the interviewer wants to hear
- Residential status in the year of return and RNOR possibility
- Taxation of foreign income and assets once resident
- Foreign bank accounts and NRE or FCNR deposits
- Reporting foreign assets in the return
- Timing of income and sale of foreign assets
Model answer
First I would work out his residential status for the year of return and the next few years, based on his travel dates. After many years abroad, he may qualify as resident but not ordinarily resident for a period, during which foreign income is generally not taxed in India unless it comes from a business controlled or profession set up in India. This window is valuable, so I would plan around it. I would review his foreign assets: Gulf bank accounts, end-of-service benefits, investments and property. Interest on NRE deposits is tax-free only while he is non-resident, so these accounts need to be redesignated, and FCNR deposits have their own rules on return. Once he becomes ordinarily resident, his worldwide income becomes taxable in India and foreign assets must be reported in the return, even if they produce no income. I would advise on timing large receipts or asset sales during the RNOR period where it legitimately helps.
Can you answer it under time pressure?
Take a timed medium round and get scored on every answer.
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