Why Most NRIs Overpay Taxes When Returning to India
It's a major life decision to transit from abroad to India after living there for years. Many other changes follow during the transition, along with emotional, mental, and logistical changes. The first year back in India can be financially tough, so it's crucial to understand the NRI returning to tax implications . Many nonresident Indians end up paying more tax than necessary due to the combination of misunderstood residency rules, missing DTAA (Double Taxation Avoidance Agreement), failing to restructure bank accounts, and neglecting mandatory disclosures of foreign assets. Here are the primary reasons why returning NRIs overpay taxes: Mistake 1: Getting residential status wrong Once you decide to return to India, you will either become a Resident and Ordinarily Resident (ROR) or a Resident but Not Ordinarily Resident (RNOR). Once established, residential status determines which income is taxable in India. RNOR is taxed mainly on Indian income, while ROR is taxed on both ...