What to do with RRSP? Need advice
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Posted on: 14-11-11 17:43:20
Quote:
Originally posted by web2000
Let us say I withdraw $10000 every year from RRSP and have no income from any other sources. At the end of the year I will have no tax to pay in Canada (Since basic slab is > 10000). This money will be transferred to India to my bank account.
The point here which is not clear is that if I have to pay tax in India or not. As per my understanding tax in India is only on what I earned in India. Can anybody clarify??
On that $10,000 you withdraw, there will be a withholding tax (generally 25% = $2,500). I am sure you have taken this into consideration, right?
I am already paying tax on the Indian income. I have been filing taxes for the past several yrs in India.
Let's say that I start withdrawing $5k from RRSP every year starting 2012, I would pay witholding tax of $500. As I understand, I need to file for taxes and probably get that $500 back as my total income in canada will be less than $18k per yr.
KM
Yes, the Canadian aspect is simpler in your case.
I don't know about the Indian aspect - does that $5K get added to your Indian income?
If so, what is the taxation rate on that?
Does India tax "world income" the same way Canada would have done had the case been the other way around?
Keep in mind that no tax has been paid on that $5K yet, in any country.
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
Quote:
Originally posted by pratickm
Yes, the Canadian aspect is simpler in your case.
I don't know about the Indian aspect - does that $5K get added to your Indian income?
If so, what is the taxation rate on that?
Does India tax "world income" the same way Canada would have done had the case been the other way around?
Keep in mind that no tax has been paid on that $5K yet, in any country.
Yes India also taxes its Resident's "world Income".... and double taxation avoidance agreements comes into play when same income is taxed in two countries....
As for the withdrawal from RRSP.... my understanding is that "tax deferral" is the benefit provided by Canada not india. In Canada you are taxed only when you withdraw from RRSP.... indian tax system doesnt recognize the tax deferral benefit provided by RRSP..... hence "technically" an indian resident is required to pay taxes in the year income is earned (withdrawal or no withdrawal).... my 2 cents.....
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Vik
Quote:Yes, that's right and as I said, the Canadian side of things is rather clear.
Originally posted by ashedfc
In this case, isn't the tax on the $5000 RRSP withdrawal being paid in Canada.
The withholding tax is applied at source & the refund of withholding by CRA is based on the basic minimum exempt income
My question is : what rule exists to protect KumarM from being taxed by India on this $5,000 for the full amount?
If KumarM were a US citizen and had moved back to the US, this $5,000 would not be taxed by the US because of the existence of the social security tax treaty.
vikshr's post seems to indicate that the $5,000 would indeed be taxed by India as full income.
Every year.
Oh boy.
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
Quote:
Originally posted by pratickm
Quote:Yes, that's right and as I said, the Canadian side of things is rather clear.
Originally posted by ashedfc
In this case, isn't the tax on the $5000 RRSP withdrawal being paid in Canada.
The withholding tax is applied at source & the refund of withholding by CRA is based on the basic minimum exempt income
My question is : what rule exists to protect KumarM from being taxed by India on this $5,000 for the full amount?
If KumarM were a US citizen and had moved back to the US, this $5,000 would not be taxed by the US because of the existence of the social security tax treaty.
vikshr's post seems to indicate that the $5,000 would indeed be taxed by India as full income.
Every year.
Oh boy.
If that is true then retiring in India will cost you. As of today, drawing $10000 will cost minimum Rs 32000 as an income tax (taking 1dollar=Rs 50 and Rs 180,000 as basic slab). If you already have other income then tax will be more.
Quote:
Originally posted by pratickm
Quote:
Originally posted by ashedfc
In this case, isn't the tax on the $5000 RRSP withdrawal being paid in Canada.
The withholding tax is applied at source & the refund of withholding by CRA is based on the basic minimum exempt income
vikshr's post seems to indicate that the $5,000 would indeed be taxed by India as full income.
Every year.
Oh boy.
No, thats not what my post meant....
I think you are confusing "rrsp withdrawal" with "Income"
Let me put it differently.....
You withdraw $5000 from RRSP ..... for Canadian tax purposes this $5000 is added into your income and taxed....
For Indian tax purposes, your withdrawal from RRSP doest trigger Taxable event.... What indian tax system cares for is "what you earned during the year" (i.e. income within your RRSP).... remember, earnings inside RRSP is protected from Canadian taxes not from Indian taxes......
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Vik
