How to file ITR as an OCI on Indian income?


My son is based in London for the past 12 years . He was an NRI and has income in India from NRE deposits and mutual funds. He has been regularly filing IT returns which have been assessed up to date. He has now obtained British citizenship and has applied for OCI status.

Will he get the indexation benefits as per Indian tax laws on his MF income? How does the Double Taxation Avoidance Treaty with UK apply?

He is working in UK and TDS is being deducted from his salary. What is the form and the procedure to be followed for filing tax returns as an OCI for Indian income tax?

Does he have to declare his financial assets to the UK tax authorities? Will his PAN and Aadhar numbers still be valid as an OCI?

– Name withheld on request

As your son is based outside India, he would qualify as “Non Resident” of India under the following circumstances:

a. His physical presence in India is less than 60 days during the relevant financial year;

b. His physical presence in India is less than 120 days during the relevant financial year if India sourced income does not exceed 1,500,000; or

c. His physical presence in India is less than 182 days during the relevant financial years if India sourced income less than 1,500,000.

On the sale of mutual funds in India, he would be eligible for indexation benefit in case of long-term capital gains in case of mutual funds other than equity-oriented mutual funds.

Double Taxation Avoidance Treaty: Benefit may be claimed under the Double Taxation Avoidance Agreement (DTAA) between India and the UK if there is double taxation of any income in India and in the UK. The benefit could be either of the following :

(a) Exemption of income

(b) Lower rate of tax or

(c) Credit for taxes paid in the other country.

There is no separate procedure to be followed for filing tax returns in India as an Overseas Citizen of India card (OCI) holder. He can continue filing returns in India as a non-resident. Further, his PAN and Aadhaar are valid as an OCI.

Sonu Iyer is tax partner and people advisory services leader, EY India.

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