Hello:
I am a USC and planning to R2i in the next few months. Other than my 401K account, all of my investments have been in real estate and as NRE/FCNR deposits with banks in India. I have the following questions:
(1) My company doesn't have a subsidiary in India. If I'm going to work from my home in India for my current company and if my company is willing to pay my Indian salary in US Dollars, can I receive 100% of the salary in US dollars? I read a PwC article a few years back stating that only 75% of the salary can be drawn in a currency other than Indian rupees. Is this still true?
(2) If I sell any land that I own in India, do I need to pay capital gain taxes in India and US? I heard from some of my friends that if you hold the land for more than 3 years, you may not have to pay capital gain taxes if you are a USC. Is this correct?
(3) Do I need to change my NRE and FCNR accounts to NRO accounts?
(4) Is there a good CPA in Chennai with experience in helping USC's file US and India taxes and also in tax planning?
(5) I understand that there is a $80K tax exemption for foreign earned income when you file the US tax return. Can I get the standard deductions on top of this? If my work is not working, is the $80K only applicable to me or can I take additional deductions for my wife?
(6) If I inherit mutual funds/stocks from my parents, what are the tax implications for a USC?
I will greatly appreciate your responses. Thanks a ton.
USC-R2I: Tax Planning needed for salary paid in US
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nagappan01
- Posts: 8
- Joined: Sun Jan 28, 2007 6:55 am
USC-R2I: Tax Planning needed for salary paid in US
#21 Nagappan: Please see responses below. Your questions are in red.
I am a USC and planning to R2i in the next few months. Other than my 401K account, all of my investments have been in real estate and as NRE/FCNR deposits with banks in India. I have the following questions:
(1) My company doesn't have a subsidiary in India. If I'm going to work from my home in India for my current company and if my company is willing to pay my Indian salary in US Dollars, can I receive 100% of the salary in US dollars? I read a PwC article a few years back stating that only 75% of the salary can be drawn in a currency other than Indian rupees. Is this still true?
I did not know about the rule you have brought up until you mentioned it. Upon checking the RBi site, it appears that the rule does stand, so thanks for bringing it to my attention - I do not recall anyone mentioning about this rule in this forum earlier.
http://www.rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=2566
Extract
. Amendment of Regulation 7
In the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000, in Regulation 7, after sub-regulation (7), the following sub-regulation shall be added, namely:-
'(8) A national of a foreign state resident in India being an employee of a foreign company on deputation to the office/branch/subsidiary/joint venture in India of such foreign company may open, hold and maintain a foreign currency account with a bank outside India and received the salary payable to him for the services rendered to the office/branch/subsidiary/joint venture in India of such foreign company, by credit to such account;
Provided that,
[LIST=1][LIST=1]
the amount to be credited to such account shall not exceed 75 per cent of the salary accrued to or received by such person from the foreign company;
the remaining salary shall be paid in rupees in India;
Income tax chargeable under the Income Tax Act 1961 is paid on the entire salary as accrued in India.'[/LIST][/LIST]-----------------------
(2) If I sell any land that I own in India, do I need to pay capital gain taxes in India and US? I heard from some of my friends that if you hold the land for more than 3 years, you may not have to pay capital gain taxes if you are a USC. Is this correct?
You will be liable to both GOI and IRS on the cap gains tax from sale of India land. For GOI tax purposes, 3 year holding period permits long term cap gain (as opposed to short term) classification.
(3) Do I need to change my NRE and FCNR accounts to NRO accounts?
NRE account has to be closed or converted to either RFC or resident rupee account immediately upon R2I. NRE and NRO account cannot be maintained by resident.
Off the top of my head, I believe FCNR can be continued until maturity - there are some threads in the forum that deal with this - please check those.
(4) Is there a good CPA in Chennai with experience in helping USC's file US and India taxes and also in tax planning?
Dont know.
(5) I understand that there is a $80K tax exemption for foreign earned income when you file the US tax return. Can I get the standard deductions on top of this?
Yes.
If my work is not working, is the $80K only applicable to me or can I take additional deductions for my wife?
Upto $80K foreign earned income exclusion is per individual who works. If spouse does not work, the exemption is not $160K. The amount has been revised to 82,400 or thereabouts from $80K. Further, the exclusion rules have been modified in 2006 by bringing in what is called a stacking provision. Please search the forum on "stacking" to see what these new rules are about.
(6) If I inherit mutual funds/stocks from my parents, what are the tax implications for a USC?
No tax implications for you at the time of inheritance. If you inherit Indian mutual funds, because you are USC, you will be in for headaches because Indian mutual funds are PFICs in US tax law eyes, and those eyes are not good. Search the forum for PFIC.
I am a USC and planning to R2i in the next few months. Other than my 401K account, all of my investments have been in real estate and as NRE/FCNR deposits with banks in India. I have the following questions:
(1) My company doesn't have a subsidiary in India. If I'm going to work from my home in India for my current company and if my company is willing to pay my Indian salary in US Dollars, can I receive 100% of the salary in US dollars? I read a PwC article a few years back stating that only 75% of the salary can be drawn in a currency other than Indian rupees. Is this still true?
I did not know about the rule you have brought up until you mentioned it. Upon checking the RBi site, it appears that the rule does stand, so thanks for bringing it to my attention - I do not recall anyone mentioning about this rule in this forum earlier.
http://www.rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=2566
Extract
. Amendment of Regulation 7
In the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000, in Regulation 7, after sub-regulation (7), the following sub-regulation shall be added, namely:-
'(8) A national of a foreign state resident in India being an employee of a foreign company on deputation to the office/branch/subsidiary/joint venture in India of such foreign company may open, hold and maintain a foreign currency account with a bank outside India and received the salary payable to him for the services rendered to the office/branch/subsidiary/joint venture in India of such foreign company, by credit to such account;
Provided that,
[LIST=1][LIST=1]
the amount to be credited to such account shall not exceed 75 per cent of the salary accrued to or received by such person from the foreign company;
the remaining salary shall be paid in rupees in India;
Income tax chargeable under the Income Tax Act 1961 is paid on the entire salary as accrued in India.'[/LIST][/LIST]-----------------------
(2) If I sell any land that I own in India, do I need to pay capital gain taxes in India and US? I heard from some of my friends that if you hold the land for more than 3 years, you may not have to pay capital gain taxes if you are a USC. Is this correct?
You will be liable to both GOI and IRS on the cap gains tax from sale of India land. For GOI tax purposes, 3 year holding period permits long term cap gain (as opposed to short term) classification.
(3) Do I need to change my NRE and FCNR accounts to NRO accounts?
NRE account has to be closed or converted to either RFC or resident rupee account immediately upon R2I. NRE and NRO account cannot be maintained by resident.
Off the top of my head, I believe FCNR can be continued until maturity - there are some threads in the forum that deal with this - please check those.
(4) Is there a good CPA in Chennai with experience in helping USC's file US and India taxes and also in tax planning?
Dont know.
(5) I understand that there is a $80K tax exemption for foreign earned income when you file the US tax return. Can I get the standard deductions on top of this?
Yes.
If my work is not working, is the $80K only applicable to me or can I take additional deductions for my wife?
Upto $80K foreign earned income exclusion is per individual who works. If spouse does not work, the exemption is not $160K. The amount has been revised to 82,400 or thereabouts from $80K. Further, the exclusion rules have been modified in 2006 by bringing in what is called a stacking provision. Please search the forum on "stacking" to see what these new rules are about.
(6) If I inherit mutual funds/stocks from my parents, what are the tax implications for a USC?
No tax implications for you at the time of inheritance. If you inherit Indian mutual funds, because you are USC, you will be in for headaches because Indian mutual funds are PFICs in US tax law eyes, and those eyes are not good. Search the forum for PFIC.
USC-R2I: Tax Planning needed for salary paid in US
The restriction on receiving at max 75% of salary outside India imposed by the FEMA sub-regulation posted in the previous post, as stated, applies only to non-Indian citizens who work in India for a non-Indian company in its India branch/office or have been deputed to the non-Indian firm's Indian subsidiary/joint venture.
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happy_BB_99
- Posts: 1
- Joined: Tue Mar 27, 2007 7:13 am
USC-R2I: Tax Planning needed for salary paid in US
Hi,
We are in a situation to be eligible to apply for US citizenship and also plan to return to India by next year. Our biggest dilemma is whether to go for US citizenship or not. One of the concerns I have is regarding double taxation. I tried to read lots of threads on this in this forum, but am not sure if a US citizen (OCI holder) end up in paying double taxes to both countries. Could somebody clarify this?
Also, with the USC/OCI status, would somebody has to pay higher school fees for kids or other college fees? I dont want to end up in paying high fees and charges just bcoz I am USC/OCI living in India. Although, USC gives me good flexibility for travel to my whole family, I also dont intend to come to US more frequently once I return back for good.
On the other note, can somebody tell me if it is worth to apply for re-entry permit to keep the GC status instead. The whole ball-game here is that we do understand the efforts to get the GC status and not want to lose it immediately just because we are returning back, but also do not want to lose Indian citizenship by heart:-)
Appreciate your thoughts/concerns.
Regards,
Bhaskar...
We are in a situation to be eligible to apply for US citizenship and also plan to return to India by next year. Our biggest dilemma is whether to go for US citizenship or not. One of the concerns I have is regarding double taxation. I tried to read lots of threads on this in this forum, but am not sure if a US citizen (OCI holder) end up in paying double taxes to both countries. Could somebody clarify this?
Also, with the USC/OCI status, would somebody has to pay higher school fees for kids or other college fees? I dont want to end up in paying high fees and charges just bcoz I am USC/OCI living in India. Although, USC gives me good flexibility for travel to my whole family, I also dont intend to come to US more frequently once I return back for good.
On the other note, can somebody tell me if it is worth to apply for re-entry permit to keep the GC status instead. The whole ball-game here is that we do understand the efforts to get the GC status and not want to lose it immediately just because we are returning back, but also do not want to lose Indian citizenship by heart:-)
Appreciate your thoughts/concerns.
Regards,
Bhaskar...