Returning to India to set up your practice: RNOR, 44ADA and GST

The move back does not switch on Indian tax on everything you own at once. For your first two to three years you are usually Resident but Not Ordinarily Resident, and in that window your foreign pension, your foreign interest and your foreign investment income stay outside the Indian net. What India taxes is your Indian income, and that includes the income from the practice you are setting up here, because a profession set up in India is Indian-source and is taxed for any resident, RNOR or not.

So the planning idea is simple: your practice income is taxable from the first patient, but your foreign income has a grace period. It is worth timing the realisation of foreign gains and drawdowns into the RNOR years where you can, while you build the practice up, because once you become ordinarily resident your worldwide income comes into charge. The RNOR asset calendar is the tool for that, and setting up the practice runs alongside it.

As an NRI you could not use the presumptive scheme for professionals; as a resident you can, and for a returning doctor or consultant it removes a lot of the early burden. Under Section 44ADA a resident carrying on a specified profession, which includes medical, legal, engineering, architecture, accountancy and technical consultancy, can declare 50 per cent of gross receipts as income and pay tax on that, with no requirement to maintain detailed books or get a tax audit.

The scheme is open while your gross receipts stay within ₹50 lakh, raised to ₹75 lakh where no more than 5 per cent of your receipts are in cash, which for a card-and-UPI practice is easy to meet. You file the short ITR-4 rather than the full ITR-3. If your actual costs are low, running well under half your receipts, 44ADA is usually a straightforwardly good deal; if your real margin is thinner than 50 per cent, keeping books and claiming actual expenses on ITR-3 can be better. That comparison is worth doing once, at the start.

GST is where returning doctors most often either over-worry or under-check. The point that matters most is that health care services by a clinical establishment, an authorised medical practitioner or para-medics are exempt from GST, so your consultation and treatment income does not carry it, and if that is all you earn you supply only exempt services and need not register at all.

But the exemption is specific to clinical care, and some income sits outside it. Cosmetic or plastic surgery that is not to restore function, room rent above ₹5,000 a day in a hospital, and non-clinical earnings like pharmaceutical advisory work, consulting to industry or product endorsement are taxable supplies. Once your taxable, non-exempt turnover crosses ₹20 lakh, ₹10 lakh in the special-category states, registration is due. Many pure clinicians never cross it; a doctor with a side stream of advisory or endorsement income needs to watch the line.

There is one thing the RNOR shelter does not cover, and returning doctors hit it often. Income for work you physically perform while sitting in India is Indian-source under Section 9, even if the patient, the hospital or the platform paying you is abroad. So a foreign locum shift you take remotely, or telemedicine consultations you run from your desk in India for overseas patients, are Indian income from the first rupee, not sheltered foreign income, because the work happened on Indian soil.

GST adds a twist that surprises people: the same telemedicine fee from a foreign patient can be a zero-rated export of service for GST, supplied under a letter of undertaking without charging tax, while still being Indian-source income for income tax. The two systems ask different questions, where the work was done for income tax, where the customer is for GST, so one fee can be taxable income and a zero-rated export at the same time. Getting both right, rather than assuming foreign-paid means foreign-and-untaxed, is the early-days work.

Dr Anand returned to Pune after twelve years in the UK and opened a private clinic. In his first year back he is RNOR. His clinic brings in ₹38,00,000 of consultation receipts, almost all through card and UPI; he also draws a ₹9,00,000 foreign pension from the NHS and earns interest on his UK savings.

His foreign pension and UK interest are sheltered this year because he is RNOR, so India does not tax them. On the clinic income he uses 44ADA: 50 per cent of ₹38,00,000, so ₹19,00,000 is his presumed income, taxed at slab rates, with no books and no audit, filed on ITR-4, and his advance tax paid in one instalment by 15 March. His clinical income is GST-exempt, and since he has no non-clinical supplies he does not register for GST. When his RNOR years end, his CA revisits the plan, because from then his NHS pension becomes taxable in India with treaty relief, and that is the year the numbers change.