Final word on tax implications during ROR status for USC,NRA ?

doesntMatter · Post by **doesntMatter** » Thu Feb 15, 2007 6:51 pm

Hello Gurus,
Can one of you experts please confirm if the attached spreadsheet that I found in http://groups.msn.com/R2INRIFinanceAndInvestments/general.msnw?action=get_message&ID_Message=50594&ShowDelete=0&CDir=2&all_topics=1
thread is the final word on tax implications for USC and NRA during ROR stage ?
For the US tax purposes, the only way to differentiate the contribution from the growth and divident in the IRA account is to check from the past W2s and Tax filings for all the IRA and 401k contribuitions. Am I 'correct' ?

There is a lot of information spread accross many threads and posts and sometimes it gets confusing reading them all. I think the spreadsheet developed by Vimat will be very usefull to all newcommers like me if it can be ratified as 'golden'

Thanks,

layman · Post by **layman** » Sat Feb 17, 2007 9:05 pm

I see a few differences for USC ROR

(1) Foreign Earned Income credit is increased to 82400

(2) UMT should have a note saying that Foreign earned income should be accounted while calculating the UMT for any UMT item.

(3) If you rent a house in India, you will get tax benefit in US filing.
"Taxpayers who qualify for the foreign income exclusion also might be eligible for a tax break on a portion of overseas housing costs." according to
http://www.bankrate.com/brm/itax/tips/20010221a.asp?caret=1

I request Bobus to comment on this.

doesntMatter · Post by **doesntMatter** » Wed Feb 21, 2007 9:22 am

Desi,RRK,Bobus,
Can one of you please help with this.

Thanks,

doesntMatter · Post by **doesntMatter** » Sun Mar 04, 2007 8:25 am

bump.
Once this is ratified, we can include this in the document section and will be a terrific reference. Vimat and Bobus have done some commendable work in terms of formalizing and document this and if we can preserve it in the doc section, it will save time and effort.

srig · Post by **srig** » Sun Mar 04, 2007 7:02 pm

I agree.. If the experts in Desi, Bobus and others can help finalize this document, it will be an invaluable resource for all.

couple of comments of mine:
a) I wish we had a section on the tax implications of the RNOR period. I know that Capital gains during this period become free of tax for a NRA, but would like to see other implications.

b) I have heard differing opinions on the tax rate for IRA withdrawals by an NRA. This document says UMT + 10%, and I have seen Desi quote DTAA tax + 10%. Can someone who has filed such tax share their experience?

Thanks

donut · Post by **donut** » Sun Mar 04, 2007 7:51 pm

I know this subject can get really complicated and there are numerous terms and this has been discussed so much. But as I am planning my long term investment strategy , I have the following simple questions.

1) How are US ROTH IRA withdrawals taxed in India when a)You returned to India after just H1B b)You returned to India with GC but not citizenship c)You returned to India as US citizen

2)How are US Equity dividends taxed in India when a)You returned to India after just H1B b)You returned to India with GC but not citizenship c)You returned to India as US citizen

3)How are capital gains on US stocks taxed in India when when a)You returned to India after just H1B b)You returned to India with GC but not citizenship c)You returned to India as US citizen

There is too much mumbo jumbo in other documents for me as a new user reading a document with too much acronyms is like reading code.

Thanks

donut · Post by **donut** » Sun Mar 04, 2007 8:34 pm

I also saw about the RNOR status when you return to India.My question is basically for the long term. So I am interested in knowing the tax structure during and after the RNOR status.

Bobus · Post by **Bobus** » Sun Mar 04, 2007 11:05 pm

#1 Doesntmatter: My Vanguard retirement account statement differntiates contributions from growth/earnings. So what you mentioned is not the only way to determine contributions.

#2 Layman: I agree with the 3 points mentioned by you.

#5 Srig: In addition to stock cap gains, NRA is also exempt from US tax on US bank interest. Regarding US taxation of IRA withdrawals by NRA, there is a separate thread on it which you may look up.

#6 and # 7 donut: As mentioned by you, your questions are simple/basic and have been addressed numerous times in different threads. If those threads seem like mumbo-jumbo to you, I do not think anything that I will add in this thread will help you. My suggestion is that you get your feet wet and put some effort into reading threads and learning. I do not have an aptitude or an interest in repetition or spoon feeding.

donut · Post by **donut** » Mon Mar 05, 2007 7:09 pm

It is not that I am familiar with financial terms. I think the various articles on taxation are not well organized and is all over the places. May be it will be better if they are properly organized. There could be one post listing all types of investments and for each investment we have taxes in India and taxes in US.
Taxes in India has two parts, taxes during RNOR and taxes later. For each part folks returning with just h1b, folks with GC and folks returning as US citizens.
Taxes in US atleast has two parts, taxes for US citizens living abroad and taxes for NOn-US citizens living abroad.

If there is a master post listing all possibilities (like above, I do not know whether I have covered all possible scenarios) and hyperlinks to threads covering each scenario that would be great.
Also in the excel sheet what do you mean by US marginal tax?Is it at Income tax rate or Capital Gains tax rate?

Again I am trying to provide some feed back how to organize the tremendous amount of data in this forum into information.

I am also looking for some quick answers to my questions by the way. :emwink:

doesntMatter · Post by **doesntMatter** » Mon Mar 05, 2007 9:26 pm

The information in this forum is like an open source code where due to the dilligent efforts of a few, many benefit and we are extremely grateful for the efforts and guidance of gurus/experts like Desi, Bobus, RRK, Mukherji, Vimat, Vinod and many others who I may not know of. Just like open source code, there are also limitation on documentation and the information is fragmented. If new commers (like me) can organize all the knowledge gained over a few months and develop docs/spreadsheets and submit to the forum, it will make the life of the experts easy and the next generation of newcommers can benefit. It will our 2c. The experts also wont have to repeat their answers. May be this spreadsheet can be a starting point. I haven't done anything yet but am planning to take the comments, questions and expand this spreadsheet.

Looking forward for more guidance, questions, doubts, responses and participation.
I request the experts to take one more look at this spreadsheet and the questions that come up and give their valuable insights.

Admins, instead of having the doc attached to the original message, can we have a working document in the Doc section and refer to that in all our messages. We can then update it and upload it on an ongoing basis. Whenever someone wants to update it, they can download the doc, make the changes and upload it. May be we can even use wiki based system to document this. Admins can then approve every change.