Your first year of taxes back in India
The year you move is the one most people get wrong: two countries, part years, and new forms. Here's what India taxes, what to file, and what to settle in the country you left.
The short version
Know your status
- India taxes you by your residential status each tax year (1 April to 31 March)
- Most returnees are RNOR for two or three years, then ordinarily resident (ROR)
- Check yours with the RNOR checker
Know what's taxed
- As RNOR: income earned in India, and income received in India
- Income earned and kept abroad is generally not taxed
- As ROR: your income from everywhere, with credit for tax paid abroad
File both sides
- An Indian return for each year you have taxable income
- A final return in the country you left, if it has income tax
- Keep proof of tax paid abroad to claim credit in India
What India taxes, by status
| Non-resident (NR) | RNOR | Ordinarily resident (ROR) | |
|---|---|---|---|
| Salary for work done in India | Taxed | Taxed | Taxed |
| Rent, interest and gains in India | Taxed | Taxed | Taxed |
| Income earned and received abroad | Not taxed | Generally not taxed | Taxed, with credit for foreign tax |
| Foreign income received in India | Taxed | Taxed | Taxed |
| Report foreign assets (Schedule FA) | No | No | Yes, every year |
RNOR status doesn't cover income from a business controlled in India or a profession set up in India, even if it's earned abroad.
Filing in India
- Which return: usually ITR-2 (or ITR-3 with business or freelance income). The simple ITR-1 can't be used in the RNOR years.
- When: for most individuals the due date is 31 July after the tax year ends; later dates apply to some business and audit cases. Belated returns can be filed until 31 December, with a fee.
- Tell your bank and broker you're resident again, so the right tax is deducted and your accounts are converted.
- Claim credit for tax paid abroad by filing Form 67 before your return, with proof of the foreign tax.
- Advance tax: if you'll owe more than ₹10,000 for the year after tax deducted at source, pay it in instalments (June, September, December and March).
The year you move: you may count as resident in both countries for the same months. Tax treaties decide which country gets the first right to tax, usually by where your permanent home and closer ties are. Keep your travel dates, lease and job papers.
Closing your taxes in the country you left
| Country | What to do |
|---|---|
| United States | Citizens and green card holders keep filing a US return every year. Others file a final part-year (dual-status) return for the year they leave. |
| United Kingdom | The UK tax year runs 6 April to 5 April. Tell HMRC you're leaving (form P85, unless you file a Self Assessment return); "split-year" treatment usually taxes only the UK part of the year. |
| Canada | File a final return for the year you leave. You're treated as selling most investments on the day you leave (departure tax); RRSPs and TFSAs are exempt. |
| Singapore | Your employer must seek tax clearance (form IR21) before your final salary is paid, if you're not a Singapore citizen. |
| UAE, Saudi Arabia and the Gulf | No personal income tax, so nothing to file. Keep salary and bank records: India may ask how your money was earned. |
| Australia | File a final return as a part-year resident; you may face capital gains tax on assets other than Australian property when you leave. |
A summary only: each country has its own exceptions. Use a tax adviser for the year you leave.
Questions
Do I pay tax in India on my savings from abroad?
No. Money you saved from income that was taxed (or not taxable) when you earned it isn't income again when you bring it to India. Interest and gains it earns after you're resident can be.
Is my foreign salary taxed in India in the year I move?
Salary for work done abroad before you moved, received abroad, is generally not taxed in India if you're NR or RNOR that year. Salary for work done in India is taxed in India.
What is Schedule FA?
The part of the Indian tax return where ordinarily resident taxpayers list their foreign bank accounts, investments, retirement accounts and property. Leaving it out can bring heavy penalties under the Black Money Act, even if no tax is due.
Can I be taxed twice on the same income?
India has tax treaties with most countries NRIs live in. They decide which country taxes first, and India gives credit for tax paid abroad through Form 67, so the same income isn't fully taxed twice.
Which tax regime should I choose?
The new regime is the default, with lower rates but few deductions. The old regime can suit you if you have large deductions such as home loan interest or health insurance for parents. You can compare both each year if you have no business income.