RRSP after returning to India


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goingbacksoon   
Member since: Jan 18
Posts: 3
Location:

Post ID: #PID Posted on: 24-01-18 18:55:37

I plan to return to India in a few years for good. So I would like to plan ahead so that I can minimize taxes on RRSP withdrawals. From what I have read, one is allowed to maintain an RRSP account in Canada but not contribute to it once becoming non-resident. But I will likely need to withdraw it to buy property in India. Anyone with experience in this area, please help me with answers to questions below:

1) I read that lump sum withdrawals are taxed more than periodic withdrawals. Although I couldn't find guidelines for how periodic it should be and how quickly I can withdraw the whole amount.

2) For periodic withdrawals, I believe there is a 15% withholding tax in Canada. What about taxes in India?



Full House   
Member since: Oct 12
Posts: 2677
Location:

Post ID: #PID Posted on: 25-01-18 15:35:11



The best Information that I can give you here is to wait till you are ready to move to India and then decide to withdraw after you reach India.

I know you are currently with a Canadian Investment Banker and they are the ones to who should give you the Frequency rate that permits you to withdraw with low deductions. I am sure it is once a month with most of the Institutions. Please confirm the same with them. That sum, that you withdraw will be tax exempt even after you reach India, if it is below the total annual deductions. More so if it is a JOINT Return. So, you can plan on making the best use of it when you are really ready to do it. Also, plan your departure to reach India to get the best of both the worlds. Can't tell you more on this subject matter with two lines of writing.

Your post here is the very first one to us here, and NOT KNOWING you, I do not wish to ask you too many questions and ask you to open up yourself to us here to get PROPER GUIDANCE. It involves asking you many personal questions and a lot of other details about you.

You are very much protected by the Dual Taxation Avoidance Agreement that currently exists between India and Canada and only a handful of Financial Planners can handle this or answer your questions here within Canada. I am afraid there is one OR None there in India.
.
I can only lead you to the water. But you don't have to drink it.

Good Luck.

FH



--

Quote:
Originally posted by goingbacksoon

I plan to return to India in a few years for good. So I would like to plan ahead so that I can minimize taxes on RRSP withdrawals. From what I have read, one is allowed to maintain an RRSP account in Canada but not contribute to it once becoming non-resident. But I will likely need to withdraw it to buy property in India. Anyone with experience in this area, please help me with answers to questions below:

1) I read that lump sum withdrawals are taxed more than periodic withdrawals. Although I couldn't find guidelines for how periodic it should be and how quickly I can withdraw the whole amount.

2) For periodic withdrawals, I believe there is a 15% withholding tax in Canada. What about taxes in India?





goingbacksoon   
Member since: Jan 18
Posts: 3
Location:

Post ID: #PID Posted on: 25-01-18 16:43:06

Thanks for your advice. I also looked at the avenue of finding an accountant, who deals with such things but an hour of google search didn't lead me anywhere. I think it confirms your statement that it is not easy to get professional help (unless for those with high net worth, which I am certainly not). All these leave me clueless as to how to navigate this process.

It would still help me if you can add more detail to a couple of things you pointed out:

1) Why would withdrawal be tax exempt in India? What did you mean by total annual deductions for the year?
2) What is a joint return?

If you have any contacts for accounts, I would appreciate you sending them to me by private message.



Full House   
Member since: Oct 12
Posts: 2677
Location:

Post ID: #PID Posted on: 25-01-18 18:11:35


I know that you are an NRI. Are you a Canadian Citizen with an OCI Card? Are you leaving Canada for Good or just moving out for Six/Seven months of the year like the SNOWBIRDS do. Knowing that you are not a HIGH Networth Individual, you can be taxed at both the ends and NOt pay any tax at all to any Government. ( anywhere.) That is UTOPIA. Please do remember that Health Care is Expensive in any part of the world now and the expenses are getting out of control as we speak.(Figuratively) So, it will be great to have this coverage from Canada for free only if you can establish the residence here for a minimum of Six months. How do you do it? The last time I heard the word Coverage was when I was eating the Cutlets there in Kolkata. Only thing is that they called it the 'Kabiraji' Cutlets. (That is what it sounded like)

You have lived in Canada and you know that your Individual Tax deductions for a year is $12,000 and so also your spouse can avail the same. When you are a SENIOR and past the age of 65 a few other deductions start to kick in too. They are age related ones. Add all of these and you will see that you can easily avoid, legally that is, and not to pay tax on $35,000 and if at all it will be a small and negligible sum. This for you it is an AHA moment. For the Tax Planner, he has this at his fingertips to tell you.

Joint Return is the one you and your spouse filing a return together and pooling all of the incomes as one and thereby taking advantage of every benefit provided to you both.

Even if they want you to file a tax return there in India, the Interest that you pay on the mortgage is Tax deductible in that return there in India, which means that you are not looking to obtain a cheap Mortgage. OR, you don't have to cash in your RRSP-RRIF to purchase a property. All of these got to be seen and needs to get explained to you so that you will get a very clear picture of all of the expenses and the budgeting also. In India, there is NO Tax on the first 2.5 Lacs of income. Also, No Income Tax if it is a pension income that qualifies for a tax-free benefit. Do you have to report this income at all to claim, needs to get addressed by an Accountant there who has the forms there in front of him.

Now to the next question.: How many days did you spend there in India in the past TEN years? How many days in the past SEVEN Years. How many days in the past THREE Years. How many days in this year? all of these are silly questions that I will ask you and you will say what the heck is this guy up to? Do you know what RNOR means? Can you avail THREE Years of RNOR Status there in India? Or, maybe Two at the least? Maybe, ONE? If none, then where am I going with these questions?

Am I a Tax consultant here? No! but I am a Devil's advocate asking you the good questions so that you will get all of the benefits and then some. You will also know a few planning tips that you will get to know from the highly paid Financial Advisors. But I have to know a lot more about you.

Yes, I have heard of ONE such Planner here in Toronto. Do you want to pay a sum of $1,000 for this little information that we can provide to you here? But we need the answers to bring you out into the open.

Are you game for it. If so,

Then use the forum. As we say, we are the best there is, the best there was and the BEST there ever will be. You came to the right place to ask all of the questions....

You are ON.

FH.

------

Quote:
Originally posted by goingbacksoon

Thanks for your advice. I also looked at the avenue of finding an accountant, who deals with such things but an hour of google search didn't lead me anywhere. I think it confirms your statement that it is not easy to get professional help (unless for those with high net worth, which I am certainly not). All these leave me clueless as to how to navigate this process.

It would still help me if you can add more detail to a couple of things you pointed out:

1) Why would withdrawal be tax exempt in India? What did you mean by total annual deductions for the year?
2) What is a joint return?

If you have any contacts for accounts, I would appreciate you sending them to me by private message.





goingbacksoon   
Member since: Jan 18
Posts: 3
Location:

Post ID: #PID Posted on: 04-02-18 15:40:48

I am a Canadian with OCI status. I will be leaving for good in a few years. I will be returning in my 40s so I assume the age related deductions you referred to won't apply.

I expect I will need to withdraw my RRSP amount (could be close to 75K) within an year of arrival to buy a property.

Interesting you mentioned about RNOR status. Based on the fact that I would be an NRI for 10 years, I assume I qualify for it. In that case, if I withdrew my whole RRSP in the first three years, then does make my foreign income (in this case RRSP withdrawal) tax free? If so, this RNOR status would be a boon for my situation. Thanks a lot for introducing me to it.



Full House   
Member since: Oct 12
Posts: 2677
Location:

Post ID: #PID Posted on: 04-02-18 16:29:35



It is always a privilege to be of service to you. Hope it helps you a little bit.

Now taking into account that the interest that you pay there for Principal borrowed, you will do better by just taking only a small withdrawal to cover your personal deductions here in Canada and there by take advantage of the personal deductions and the REFUNDS it will generate in the income tax return. You will have to weigh the tax on withdrawal of RRSP's against the interest paid on the Principal borrowed for the Property there in India. It is all an accounting process and you should get to know how to do it.

I am sure you will dispose off everything that you own before you close out the chapter here. That should help you a lot.

Good Luck.

FH.



Contributors: goingbacksoon(3) Full House(3)



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