I was in the US for a few years on an employment visa and now back in my country of citizenship (India).
- For US, my taxation status will be NRA starting current and future FY. As a NRA, I don't need to pay any tax on capital gains but do have to pay the 30% tax on dividends to IRS.
- In India I qualify for RNOR tax status for the current FY and next FY which allows me to not worry about paying taxes on funds outside the Indian financial system. Post RNOR, I will need to pay taxes to Indian government on global income.
- Long term plan/hope (decade or more) is possibly to come back to the US so prefer to keep funds outside the Indian financial system to not worry about LRS etc
I have been reading up about Ireland domicled UCITS funds (VWRA etc) offered by IBKR as an alternative (rather hedge) for keeping funds in US bank/brokerages funds. This seems like a good way to avoid paying 30% dividend tax to IRS in US (understand it's not free lunch given higher ER with VWRA etc but still better than paying to IRS)
My question is how the principal and any realised appreciation will be treated by Indian Income Tax department during and after RNOR as well as FEMA laws. Here is the thinking.
A) Being currently in India, I open a new IBKR account and declare my tax residency as India.
B) The account opening process required funding it with USD via a US bank and I duly made the transfer
C) Currently IBKR is reviewing my account opening request based on the informationi provided about source of funds etc
Let's start with FEMA: Since the IBKR account is opened from India, using its India domain, would the money that I transferred from US bank to IBKR be considered as falling under the ambit of Indian financial system? If at a later date I decide to liquidate all the funds and transfer it back to my bank in the US, do I need to follow LRS rules? I understand as of date, the only way to remit USD from IBKR is possibly to US bank only, but that feature/restriction from IBKR is independent of how the Indian government may view that money (both principal as well as the gains)
Coming to taxes, if there is any realised capital gains from this UCITS Ireland based account during RNOR period, is it shielded from Indian Income tax? Again asking this given IBKR account is opened from India. The IBKR account opening menu has a blanket/generic option for tax residency and no finer options within it to distinguish between RNOR and ROR
If my concerns are valid, my plan is to start investing in IBKR only at the fag end of RNOR (to optimize on taxes because of any capital gains/rebalancing before expiry of RNOR). Moreover maintain only subset of funds in IBKR to minimize the LRS impact and continue to maintain the rest in US brokerages. This provides balance between taxation and FEMA concerns
Any thoughts?
PS: I'm aware of estate tax concerns with maintaining assets in US
- For US, my taxation status will be NRA starting current and future FY. As a NRA, I don't need to pay any tax on capital gains but do have to pay the 30% tax on dividends to IRS.
- In India I qualify for RNOR tax status for the current FY and next FY which allows me to not worry about paying taxes on funds outside the Indian financial system. Post RNOR, I will need to pay taxes to Indian government on global income.
- Long term plan/hope (decade or more) is possibly to come back to the US so prefer to keep funds outside the Indian financial system to not worry about LRS etc
I have been reading up about Ireland domicled UCITS funds (VWRA etc) offered by IBKR as an alternative (rather hedge) for keeping funds in US bank/brokerages funds. This seems like a good way to avoid paying 30% dividend tax to IRS in US (understand it's not free lunch given higher ER with VWRA etc but still better than paying to IRS)
My question is how the principal and any realised appreciation will be treated by Indian Income Tax department during and after RNOR as well as FEMA laws. Here is the thinking.
A) Being currently in India, I open a new IBKR account and declare my tax residency as India.
B) The account opening process required funding it with USD via a US bank and I duly made the transfer
C) Currently IBKR is reviewing my account opening request based on the informationi provided about source of funds etc
Let's start with FEMA: Since the IBKR account is opened from India, using its India domain, would the money that I transferred from US bank to IBKR be considered as falling under the ambit of Indian financial system? If at a later date I decide to liquidate all the funds and transfer it back to my bank in the US, do I need to follow LRS rules? I understand as of date, the only way to remit USD from IBKR is possibly to US bank only, but that feature/restriction from IBKR is independent of how the Indian government may view that money (both principal as well as the gains)
Coming to taxes, if there is any realised capital gains from this UCITS Ireland based account during RNOR period, is it shielded from Indian Income tax? Again asking this given IBKR account is opened from India. The IBKR account opening menu has a blanket/generic option for tax residency and no finer options within it to distinguish between RNOR and ROR
If my concerns are valid, my plan is to start investing in IBKR only at the fag end of RNOR (to optimize on taxes because of any capital gains/rebalancing before expiry of RNOR). Moreover maintain only subset of funds in IBKR to minimize the LRS impact and continue to maintain the rest in US brokerages. This provides balance between taxation and FEMA concerns
Any thoughts?
PS: I'm aware of estate tax concerns with maintaining assets in US
Statistics: Posted by reposetate — Mon Dec 16, 2024 12:56 am — Replies 0 — Views 64