This is the first time ever I am planning to go abroad. I am totally ignorant of how much of my money earned abroad would be taxed in India. Do I have to open a new NRE account for each specific currency I earn abroad and which bank do I prefer for NRO and NRE accounts?
Answer: As far as taxation of your income earned outside India is concerned, it will be taxed in India in case you are a resident of India for the year in which the income is earned. The Indian income will always be taxed in India whether you are a resident or non-resident. The residential status under the income tax laws primarily depends on your physical stay in India. You are treated as a resident of India if you have been physically present in India for more than 182 days during the relevant year.
A person who leaves India to take up a job outside India or to start any vocation, or business outside India or leaves India with an intention to stay outside for an indefinite period, becomes a non-resident under the FEMA (Foreign Exchange Management Act) as soon as he leaves India. Only a person who has become a Non-resident under FEMA can open an NRE (Non-Resident External).
It is not necessary for you to open an NRE account as you can always remit your money to your existing account which needs to be designated as an NRO (Non-Resident Ordinary) account. If you wish you can open a new NRO account but you will have to get your existing bank accounts as an NRO account.
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It is not necessary for you to open an NRE account in each of the currencies that you earn abroad rather you are not allowed to open an NRE account in all the currencies. You can open an NRE account in permitted Foreign currencies. If you wish you can open an NRE account in Indian rupee. Since many Indian banks have a global presence. I would advise you to go for the bank which has a branch in the country of your workplace for operational convenience.
Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and on @jainbalwant on Twitter.
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Updated: 25 Sep 2023, 12:18 PM IST