Advise for r2i Plans

[desiR2I]

I need your advise on our R2I Plans.
I know its a lot of questions but your advise is greatly appreciated.

Here is our current position:
Me and my wife (No Kids) are planning to R2I in the next few weeks/ months, I am a U.S. Citizen and my wife is a GC holder (by marriage). My wife works in IT and her company is interested (she asked for it) in transferring her to Pune in the next few weeks/ months. I have a consulting business in the U.S. which I will support from India and expand:
Questions
1) Citizenship: My wife has spent 31 months as a GC holder and is expected to file her Citizenship paperwork in October (can file for citizenship after 33 months as GCholder).
1A) Is it ok for her to travel here to the U.S. in October to file her paperwork and come to US periodically for her citizenship paperwork (fingerprinting etc).
1b) Should she push her company to pay her US $ salary for citizenship purpose to prove her intent on long-term US residence
1C) Would we be ok if we sold our house
2) 401k: I currently have 50k and my wife has around 25k in her 401k,
2A) I dont need the funds right now should I still withdraw the funds and convert them to Indian Rs.
2B) If the suggestion is to withdraw what is the most tax efficient way.
2C) If I do a withdrawal of a few thousand every year and have my brother wire the money to me every year would that be a problem tax wise, I know its not legal but how would the GOI find out.
2D) Both our companies will allow us to keep our 401k balance with our current programs, should we convert to IRA.
3) US Salary/ Income: If my wife continues her US Salary and I continue my US Consulting Business Income
3A) Do I have to file Indian taxes at all or should I just file US taxes
4) Housing:
4A) We will be in Pune for atleast 6-12 months would we able to get short term leases and how much would it be.
4B) Should we buy a house in Pune or rent as I do want to invest in Real estate once we get to India.
5) Salaries:
5A) My wife is a Manager for a big 5 consulting company what kind of salary should she be expecting (Her relocation was requested by her and not by the company)
6) Taxes:
6A) Would we paying dual taxes in the U.S. and India for her salary

[indian]

<>

Isn't wait time 4 years 9 months in GC Status to get Citizenship?

[desiR2I]

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Isn't wait time 4 years 9 months in GC Status to get Citizenship?[/quote]

Not for GC to citizenship based on marriage

[desiR2I]

Bump... Any help is appreciated

[srinpo]

You are asking for free advice, and I cant miss the oppurtunity to give free random advice:emsmile: .
People (including me) are probably not well aware of this GC by marraige to US citizen, so many people wont be able to answer that one. I suspect the rules are lot easier for getting citizenship based on marriage to US citizen. If so take the risk of moving to India before citizenship.
If it isnt, and it is same as GC folks getting citizenship, then my advice will be why dont wait & get the citizenship, before you move. The advice is based on the fact your wife actually wants to move (for me the #1 point), and you have no Kids, and getting citizenship is what you want, and since already you both seem big shots, you will not have any dearth of oppurtunities.
Obviously not to disappoint you but to tell the truth, the amounts you have quoted in savings are too little, to worry about planning or even assuming will help your life in India. What will help you in India is your income in India which seems you will be more than comfortable (prediction based on what you have given).
I suggest leave 401K as it is. Even if you quit the company, most places will let you keep 401K, and it is getting you tax defered savings, so make use of it. Absolutely legal and till you start withdrawing money from that, you dont owe taxes to US & India.
You are asking if you should negotiate USD salary. Why not ? If you can & your wife is capable of commanding US$ salary, why not ? But for tax purpose etc. it makes no difference. (US citizenship sake, please check with others).
I dont understand the brother wiring money stuff. In US also you cant give your money to someone just like that. You are allowed to gift only 10K per person per year. And if it is the procedural stuff you are concerned, why do you need others help to wire. You can send a fax from here to wire, or use many other online (eg. ICICI) service to transfer the money, or if it isnt super urgent, simply writing a check would do (You can get the money in < 30 days). If I were you, I wont count the money in US, just live with your money in India what you will be earning. Some packet change while travel is what you need. (Meaning around 4-5 K is good enough for starters).
Irrespective of dollar or Ruppee salary, after around 3 to 4 years, you will have to pay tax to India. You are aboslutely fine to keep all your dollars in US and invest or gamble with them as you like. But there will be a tax liability to India based on Indo-US Tax treaty. Remember not only in India, also in US (being a US Citizen), you do have a tax liability for Indian incomes and investments as well. Current scenario is you will pay some tax to India for the US income, but for things like Indian mutual funds etc. (which have lot of tax concession in India), you will have to pay to US.
You will intialliy file tax in India as "not ordinarily resident" and after that magic 3 or 4 years, it will become "Ordinarly resident". It is all depends on how much risk you want to take, will the Indian gov realy know etc. Things are reasonable computerized nowadays, and while agreed that Indian system is extremely slow, it is possible the computer kicks in and points out that you cant be "not ordinarlity resident" for too long or insists on why foreign income is not shown. Then a human can look at that return and insist that you show the US tax return (being US citizen you have to file a US return). It may not happen, but to me working as big shots as you mentioned, and living a good life style and not showing this dual incomes, for long doesnt look feasible. May be you can try that, if your intention of India move, is very temporary, like 3 or 4 years (or may be 5 years).

[desiR2I]

People (including me) are probably not well aware of this GC by marraige to US citizen, so many people wont be able to answer that one. I suspect the rules are lot easier for getting citizenship based on marriage to US citizen. If so take the risk of moving to India before citizenship.
If it isnt, and it is same as GC folks getting citizenship, then my advice will be why dont wait & get the citizenship, before you move. The advice is based on the fact your wife actually wants to move (for me the #1 point), and you have no Kids, and getting citizenship is what you want, and since already you both seem big shots, you will not have any dearth of oppurtunities.

We are not big shots just among the normal people who want to move back. I believe the greencard process is just shorter for marriage to citizen. Other then that no other change.

Obviously not to disappoint you but to tell the truth, the amounts you have quoted in savings are too little, to worry about planning or even assuming will help your life in India. What will help you in India is your income in India which seems you will be more than comfortable (prediction based on what you have given).
Over and above our 401k we are hoping to bring 500k with us as initial investments (planning to liquidate everything except 401k). I am assuming that will help us start our lives and help to put money down for car, house etc.

I suggest leave 401K as it is. Even if you quit the company, most places will let you keep 401K, and it is getting you tax defered savings, so make use of it. Absolutely legal and till you start withdrawing money from that, you dont owe taxes to US & India.

According to what I reach somewhere else on this forum I can bring the money GOI tax free in the first 2 years of returning to India. After that it is taxable in India. Now if I had to pay tax in US, penalty in US and tax in India that would easily eat away atleast 50% of my corpus.


You are asking if you should negotiate USD salary. Why not ? If you can & your wife is capable of commanding US$ salary, why not ? But for tax purpose etc. it makes no difference. (US citizenship sake, please check with others).

The company is willing to give her a US$ salary till her citizenship thing is sorted out. I was thinking it will prove her intent to come back after a short time. We are planning that she will quit her job after 6-8 months of working for the company.
I dont understand the brother wiring money stuff. In US also you cant give your money to someone just like that. You are allowed to gift only 10K per person per year. And if it is the procedural stuff you are concerned, why do you need others help to wire. You can send a fax from here to wire, or use many other online (eg. ICICI) service to transfer the money, or if it isnt super urgent, simply writing a check would do (You can get the money in < 30 days). If I were you, I wont count the money in US, just live with your money in India what you will be earning. Some packet change while travel is what you need. (Meaning around 4-5 K is good enough for starters).

The reason why I was thinking my brother can wire the money to me is - I was thinking I will withdraw the funds periodically (example 10,000 every year) pay the US penaltly and taxes (assuming low as it is very low income for the respective year) and just bring it in as a gift from brother. This way I dont have to show India income.

Irrespective of dollar or Ruppee salary, after around 3 to 4 years, you will have to pay tax to India. You are aboslutely fine to keep all your dollars in US and invest or gamble with them as you like. But there will be a tax liability to India based on Indo-US Tax treaty. Remember not only in India, also in US (being a US Citizen), you do have a tax liability for Indian incomes and investments as well. Current scenario is you will pay some tax to India for the US income, but for things like Indian mutual funds etc. (which have lot of tax concession in India), you will have to pay to US.
You will intialliy file tax in India as "not ordinarily resident" and after that magic 3 or 4 years, it will become "Ordinarly resident". It is all depends on how much risk you want to take, will the Indian gov realy know etc. Things are reasonable computerized nowadays, and while agreed that Indian system is extremely slow, it is possible the computer kicks in and points out that you cant be "not ordinarlity resident" for too long or insists on why foreign income is not shown. Then a human can look at that return and insist that you show the US tax return (being US citizen you have to file a US return). It may not happen, but to me working as big shots as you mentioned, and living a good life style and not showing this dual incomes, for long doesnt look feasible. May be you can try that, if your intention of India move, is very temporary, like 3 or 4 years (or may be 5 years).[/quote]

So basically I pay taxes in India and then ask for credit to US govt.

[srinpo]

So basically I pay taxes in India and then ask for credit to US govt.[/quote]

I dont understand this statement. Tax credit works only upto a maximum of tax paid or tax owed. In other words, if you earn x dollars in US, and pay 25% as net tax. The same x dollars in India will make you pay 33% in tax. So to India you will pay net 8% tax. (You claim the 25% tax you paid in US as tax credit). But on the other hand if Indian tax happens to be less, then you wont get anything back from India. Tax credit is just 0. Same argument holds true vice versa (US & India interchanged).
I still dont understand the logic of why you want to disturb your 401K. Do you need that money to live ? I mean both you & your wife is working, and she is a manager in some co. and I guess you are also some similar job profile. From this I am concurring, your paycheck in India is adequate to live. And 10K$ even if you wire from brother etc. is trivial amount. So I dont understand or accept this wiring as good strategy. But hey, you know more, so probably you have better reason.
And similarly what ever other investments you have, why are you keen on brining to India ? If that is a part of investment strategy that's fine. dollar is depreciating and even Bank FD's in India are giving 9.5% (extremely safe). Mutual funds are giving 50-100% and Ruppee is reasonably repatriable, so if that is a explicit investment strategy, then it is fine. But are you saying some other reason I dont understand ?
You know we are living in global world atleast in this respect, your Bank/brokerage accounts in US, pretty much behave as you were in US. For eg. I use schwab account, and have a US mailbox etc. address (not a must though) and access my account online. Even if I were in US, this is what I'll be doing.
So I missing this aspect of what is your intention. One speculation I have is may be you want to move to India permanently everything. But since you want US citizenship, even then you have US Tax liability. You cant escape that.
The other ideas like brother wiring etc. as I see dont solve any problems. If you with draw 401K money, you will get that as income, and forms 1099 etc. will show that you have earned that money. So you will be paying taxes (& penalties) to IRS. So theoritically this info will be in your 1040US return, and theoritically you have to attach or show in Indian return. So any additional Indian taxes you will have to pay. It doesnt matter how you use that money. So I still dont get this brother wiring idea. Even if you just put that money in another account in US, or give to your brother just like that, you still have to pay Indian additional tax. Atleast this is the theory.
You have to obviously make a practical call wrt to moral & feasible reason. My take is unless it is a just year or 2, it isnt practical to hide the US income. After all what you have is a paper trail, and the irony is unless you are doing something totally illegal, this is tracable. So I dont see any other option. Do some basic tax reduction planning. Eg.s no muni-bonds, dont opt for qualified dividends based stocks/funds, have as much in capital gains as possible (Indian capital gains are more advantages than US cap gains)

[RRK]

I suggest you split your questions into non-finance and finance and post the finance questions in the appropriate tax threads. This will help you to get more suggestions.

[nupita]

About your first concern (Citizenship for Wife), IMO, if she does not apply for citizenship at all it should not matter much. You being a US citizen, she can again get the GC if you decide to return to US. By forgoing citizenship process for her, you can expedite you R2I process and can avail of the facilities and investment vehicles in India which only Indian Citizens get.

You probably should evaluate all the pros and cons, if you have not already.