Q.1110 Tax free income in India is Taxable in USA for US Resident

Question: Dear Sir / Madam We have been advised that our permanent resident visa for US has been approved. We should be getting our Immigrant Visa in a weeks time and thereafter we can decide when to travel to USA. On arrival in USA we will get our Green Card in a months time. My Wife and self are thinking of moving to USA and stay with our daughter. Tentatively we will be travelling Jan/ Feb 2018 We have seperate SCSS account with SBI from which we get Quartely Interest. We have seperate FD accounts wth South Indian Bank which gives us Quarterly interest I get Rs.2000 as Interest monthly from LIC through Varishta Pension Bhima Yojana My Wife and self are filing Income Tax Return in India seperately. Both of us are Senior Citizens. Our individual income is below 3 lacs per year and thus both of us do not have any taxable income in India. We wiil become Permanent Resident only after landing in USA / receive green card.So by what time we should inform SBI / SIB that we are having status change such that our account are converted to NRO ? Should the SCSS accounts with SBI be closed ? We will incurr 1% penalty for premature closure. Is it possible to continue SCSS accounts to run to full 5 years period and withdraw at maturity ? FD with SIB are getting additional 0.5% interest for Senior Citizen. Will SIB ask us to close current FD and open fresh FD which will not get additional 0.5% for Senior Citizen or SIB will allow current FD to run till maturity time? As we wish to continue keeping our money in India and receive interest in India we will be filing Income Tax return in India. What will be our tax liability in USA as our income in India are tax exempted ? Kindly give your advice on above Answer: Regarding your questions: 1. You would be better off to visit your Indian bank and advise them of your forthcoming move prior to departure. Fill the required forms to convert resident saving bank account to NRO account. Banks require the applicant’s photo, copy of passport & visa. There is always an option to send documentation from abroad, however this may require getting documents attested by the Indian embassy or a Notary. 2. The tax slab of 3 lakh per year mentioned in your email will change when you move to USA. The tax slab benefits available to senior citizens are NOT available to NRIs. So instead of 3 lakh exemption only 2.5 lakh will apply to you. 3. Regarding Senior Citizens Savings Scheme (SCSS) accounts, if a depositor becomes an NRI after opening an account, he/she may continue to hold the account till its maturity. The facility to extend SCSS account is not available to NRIs. 4. Regarding FD held in Indian bank prior to becoming non-resident, your bank may or may not allow you to hold the deposit till maturity. Bank may ask you to break deposit and perhaps open a fresh one. Speak to your bank regarding this. 5. US residents or US citizens are taxed on their global income subject to any Double Tax Avoidance Agreement [DTAA] that may apply. The interest income that you receive in India even if not taxable in India will be taxable in USA. When filling US taxes and declaring Indian interest income, you will be able to claim a credit for any tax paid in India on that income. Furthermore, depending on the amount of your income in India when you become resident in USA, you may have other tax related reporting requirements. Check your liability to FBAR reporting if your foreign assets are above the specified thresholds. Your daughter residing in USA should be able to help you understand your US tax filing and reporting requirement with the help of a USA tax professional. Seniors moving abroad from India For the benefit of seniors planning to move abroad, I recommend that they read an article that I posted several years back on this website titled ‘Reality Check - Before moving from India’ To read article Click HERE or use the link provided: http://nriinformation.com/articles3/parents.htm
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Q.1110 Tax free income in India

is Taxable in USA for US Resident

Question: Dear Sir / Madam We have been advised that our permanent resident visa for US has been approved. We should be getting our Immigrant Visa in a weeks time and thereafter we can decide when to travel to USA. On arrival in USA we will get our Green Card in a months time. My Wife and self are thinking of moving to USA and stay with our daughter. Tentatively we will be travelling Jan/ Feb 2018 We have seperate SCSS account with SBI from which we get Quartely Interest. We have seperate FD accounts wth South Indian Bank which gives us Quarterly interest I get Rs.2000 as Interest monthly from LIC through Varishta Pension Bhima Yojana My Wife and self are filing Income Tax Return in India seperately. Both of us are Senior Citizens. Our individual income is below 3 lacs per year and thus both of us do not have any taxable income in India. We wiil become Permanent Resident only after landing in USA / receive green card.So by what time we should inform SBI / SIB that we are having status change such that our account are converted to NRO ? Should the SCSS accounts with SBI be closed ? We will incurr 1% penalty for premature closure. Is it possible to continue SCSS accounts to run to full 5 years period and withdraw at maturity ? FD with SIB are getting additional 0.5% interest for Senior Citizen. Will SIB ask us to close current FD and open fresh FD which will not get additional 0.5% for Senior Citizen or SIB will allow current FD to run till maturity time? As we wish to continue keeping our money in India and receive interest in India we will be filing Income Tax return in India. What will be our tax liability in USA as our income in India are tax exempted ? Kindly give your advice on above Answer: Regarding your questions: 1. You would be better off to visit your Indian bank and advise them of your forthcoming move prior to departure. Fill the required forms to convert resident saving bank account to NRO account. Banks require the applicant’s photo, copy of passport & visa. There is always an option to send documentation from abroad, however this may require getting documents attested by the Indian embassy or a Notary. 2. The tax slab of 3 lakh per year mentioned in your email will change when you move to USA. The tax slab benefits available to senior citizens are NOT available to NRIs. So instead of 3 lakh exemption only 2.5 lakh will apply to you. 3. Regarding Senior Citizens Savings Scheme (SCSS) accounts, if a depositor becomes an NRI after opening an account, he/she may continue to hold the account till its maturity. The facility to extend SCSS account is not available to NRIs. 4. Regarding FD held in Indian bank prior to becoming non-resident, your bank may or may not allow you to hold the deposit till maturity. Bank may ask you to break deposit and perhaps open a fresh one. Speak to your bank regarding this. 5. US residents or US citizens are taxed on their global income subject to any Double Tax Avoidance Agreement [DTAA] that may apply. The interest income that you receive in India even if not taxable in India will be taxable in USA. When filling US taxes and declaring Indian interest income, you will be able to claim a credit for any tax paid in India on that income. Furthermore, depending on the amount of your income in India when you become resident in USA, you may have other tax related reporting requirements. Check your liability to FBAR reporting if your foreign assets are above the specified thresholds. Your daughter residing in USA should be able to help you understand your US tax filing and reporting requirement with the help of a USA tax professional. Seniors moving abroad from India For the benefit of seniors planning to move abroad, I recommend that they read an article that I posted several years back on this website titled ‘Reality Check - Before moving from India’ To read article Click HERE or use the link provided: http://nriinformation.com/articles3/parents.ht m
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