Planning to adventure beyond the borders of India? Ceasing your tax residency in India is a critical step to ensure smooth financial transitions. This detailed guide will walk you through the essential steps to cease your tax residency in India.
Understand the Residential Status Criteria
Familiarize yourself with Section 6 of the Income Tax Act, 1961, which defines the criteria for determining the residential status of an individual. An individual is considered a resident if they stay in India for 182 days or more during a financial year or 60 days or more in a financial year and 365 days or more during the four preceding years.
Physical Stay Outside India
Ensure that your physical stay outside India meets the criteria for non-residency. You must stay outside India for 182 days or more during the financial year.
Maintain Documentation
Keep meticulous records of your travel, including copies of your passport, boarding passes, and any other relevant documents that evidence your physical stay outside India.
Update Financial Records
Inform your bank, financial institutions, and investment bodies about your change in residential status. Update your KYC details to reflect your non-resident status.
File Income Tax Returns
File your income tax returns for the relevant financial year, indicating your non-resident status. Use the appropriate ITR form for non-residents and ensure all global income is declared.
Close or Convert Resident Bank Accounts
Close or convert your resident bank accounts to Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts as per the Reserve Bank of India's regulations.
Comply with FEMA Regulations
Ensure compliance with the Foreign Exchange Management Act (FEMA) regulations. This includes reporting any foreign assets and income and adhering to guidelines on remittances.
Notify Relevant Authorities
Inform the Income Tax Department and other relevant authorities about your change in residential status. This can be done through the filing of Form 30C or other requisite forms.
Legal References
- Income Tax Act, 1961 - Section 6
- Foreign Exchange Management Act (FEMA), 1999
- Income Tax Rules, 1962
Useful Links
- Income Tax Department
- Central Board of Direct Taxes (CBDT)
- National Securities Depository Limited (NSDL)
- Goods and Services Tax (GST)
- Ministry of Finance
