Case: A client (US citizen) was planning on moving from US (California) to India (Pune) in his early 40s along with his wife and a 11 year old son.
What assistance did he require?
My client was staying in the US since almost 20+ years. He and his wife were working in the US and all of their assets as well as investments were also in the US. They had a house, investments in 401k, IRA as well as some brokerage accounts. During the course of his move, he had 3 options from his employer – move to India on a US payroll (W2), move to India on India payroll (Form 16) or work from India as an independent contractor. The clients wanted to understand the overall financial repercussions of his move.
How did we deal with his situation?
Here is how we approached this case:
Since my client had never lived for an extended period or worked in India, he had no idea of how India tax system works and what to expect. So, we spent the fist session in having an overview of India and US tax systems. I explained to him the various residency status in India – ROR, RNOR and NR, how taxation would work for him as a US citizen once he moves back to India.
In the subsequent sessions, we discussed at length about each asset class. We discussed in detail about the following:
a. 401k and IRA reporting during RNOR phase and how taxation and reporting changes once he becomes a ROR.
b. Pros and cons of renting and selling his US home before moving to India, during RNOR and ROR period.
c. Taxation of of other investment accounts such as dividends, interest and capital gains on US and India tax returns moving to India.
In addition to the above, we also discussed:
d. Financial implication as well as reporting complications of working in India on a W2 vs. Form 16 vs. 1099.
e. My client was not aware but we also spoke about investing in India mutual funds, buying a property in India, GIFT city investments, FEMA compliances required on moving to India which he will have to comply with etc.
How long did the assignment last and what did the client receive at the end of the assignment?
The client required a total of 5 sessions over a period of 1 year. This one year period served as a hand holding period for him to plan his move carefully. It also gave him time between sessions to understand and consider all the aspects of every decision and come back for the next one with a detailed plan and his questions.
He received:
a. A checklist of the “to do” items in US and India before and after the move
b. No. of days calculation to help maximize his RNOR status in India.
c. A detailed pros and cons of selling vs, keeping each asset class
d. Foreign asset reporting and compliance requirements on the US and India