Do you need to close your NRE account after coming back to India?

With immigration rules constantly changing with the pandemic situation, it is difficult to keep up to date with it all...

What are the tax implications on sale/purchase of land, What happens if the transaction is done by way of Gift?

Agricultural land/farm house/plantation property

The transfer of agricultural land/farm house/plantation property can be only made by way of gift or sale to resident citizens of India.

Tax Implication

When an NRI sells property, the buyer is liable to deduct TDS @ 20%. In case the property has been sold before 2 years (from the date of purchase) a TDS of 30% shall be applicable.

The sale of a property will attract tax on capital gains. In case the sale is carried out within two years of the date of purchase, STCG or Short-Term Capital Gain tax is applicable as per slab rate applicable for taxable income in India. In case of sale after the two years of purchase, LTCG or Long-Term Capital Gains tax will be applicable at 20%.

In case of inheritance, the date of purchase for the previous owner will be considered to assess short term or long term capital gain transaction. The property cost in considerable will be the cost incurred by the previous owner for purchase.

I moved to India in March 2008 with family and then moved back to the UK on June 28, 2020. My family moved to the UK the year before. So I stayed around 89 days in India in FY20-21. My Indian income in FY 20-21 is below 15 lks. Essentially would I be considered resident, non-resident or RNOR? Would foreign income be taxable? Do I need to file my full list of assets still or is that not necessary?

Given that your stay in India is less than 120 days, you will essentially be considered as Non-Resident Indian. CBDT has clarified that NRIs are liable to pay tax only on income derived from an Indian business or profession. No tax will be applicable for global income or foreign income. All resident & non-resident individuals with more than Rs.2,50,000 annual income are required to file an income tax return in India. You will be liable to pay income tax on your Indian income only. Further, foreign assets held during the financial year only need to be listed in the ITR.

I'm an NRI since last 4 and a half year. I will come back to my home country within next 6 month. So my NRI tenure will be 5 Years. I will be getting retired at 58. I'm holding NRE NSE -5.26 % and NRO Bank accounts in India.

My questions are as follows...

(a) Do I need to close my NRE account after coming back to India?

You become a resident Indian on Day 1 of your return. Thus you can no longer maintain NRI bank accounts or avail benefits on NRI investments. You should convert/re-designateor close your NRE account after the return, on a priority basis. If you fail to convert your NRE account within 3 months of the return, it will be considered as a violation of Foreign Exchange Management Act (FEMA) and attract a penalty.

(b) Interest earned is Tax Free for NRE account, how long the interest will remain Tax-Free after returning back to India, if I can hold the NRE account.

Interest from NRE account is tax-free only for non-residents. As soon as you return to India, any interest earned on NRE account will be taxable. You can however opt for transferring your funds in NRE accountto the RFC (Resident Foreign Currency) account upon the return.

(c) Will there be any capital gain on the investments made in last 5 years through NRE account, like SIP or ULIPs

First up, you must inform your bank, fund house and associated insurance company about the change in residential status from non-resident status. Once you become resident, the regular tax laws as applicable for ‘Resident Indian’ will apply. There will not be any change in tax laws for previous FYs.

The capital gain tax is assessed based on holding period of shares/mutual funds. The rule is similar for residents. If you sell the funds after holding for more than 12 months (from the date of purchase), long term capital gains is taxable at 10% to gains over exempted Rs 1 lakh. However, for sale within 12 months of purchase of shares/MFs, short term capital gain is levied at 15 %. For debt mutual funds, 36 months of holding is considered as long term capital gain. LTCG on debt funds is taxed at 20% after indexation, while STCG is taxed at individual’s slab rate.

(d)Best investment suggestions for NRI income in India for retirement

Retirement planning should always offer balanced income & capital protection against inflation. Know that, your overseas income will not be taxed here as you are protected by double taxation relief. As your status changes, you should avail benefits of special senior citizen schemes for resident Indians such as Senior Citizen Saving Scheme and Senior Citizen FDs & PO Schemes. These will yield fixed returns, tax benefits and stability to your portfolio. Basis your goals and risk appetite, invest in a mix of guaranteed return schemes,market linked debt &equity mutual funds and certain annuity schemes such as ULIPs, National Pension System etc. Last but not the least, you should also purchase adequate health insurance and save emergency fund for six months. It is always recommended to use professional advice and secure your funds.

Being an NRI if I invest in ULIP with GST exemption for NRI, will I continue to get this benefit even if I again become Indian citizen say after 5 years?

You should first inform your insurance company about the change in NRI status. GST is applicable to ULIPs and it will vary basis the size of premium. Kindly check with the issuing company to understand the GST cost. You would not be liable for any double taxation.