I labored within the US for 3 months and acquired wage. I paid tax there on that wage. Also, I acquired wage in India apart from these three months. Should I pay tax in India for the US revenue?
—Name withheld on request
Taxability of an revenue in India is dependent upon residential standing in India, supply of revenue and place of receipt of revenue. Residential standing in India is set primarily based on bodily presence in India within the present monetary 12 months (FY) and previous 10 FYs. Residential standing is dynamic and wishes recent willpower every FY. Assuming you qualify as “Resident and Ordinarily Resident” in India, you might be liable to tax on worldwide revenue in India and you might be required to report all overseas incomes and property within the India income-tax return.
Accordingly, the entire wage revenue together with wage earned and acquired within the US will probably be taxable in India. You might declare overseas tax credit score in India in opposition to India income-tax payable on doubly taxed revenue for taxes paid within the US beneath Article 25(2) of the Double Taxation Avoidance Agreement (DTAA) between India and the US. To declare overseas tax credit score, additionally, you will have to file kind 67 electronically earlier than the unique due date to file income-tax return. Form 67 must be supported by a certificates/ assertion specifying the character of revenue and the quantity of tax deducted or paid within the US.
I’m working with an MNC in India and I’ve been requested to maneuver to the UK for 3 years. How will my revenue be taxed? Will I qualify as a non-resident Indian?
—Ankit
Taxability in India is dependent upon residential standing in India, supply of revenue and place of receipt of revenue. Residential standing is set on the idea of bodily presence of a person in India throughout a monetary 12 months (i.e., from 1 April to 31 March) (together with work days and non-work days) and the previous 10 FYs. For Indian residents, even when they don’t develop into “Resident” based on physical presence in India, they can still become “Resident But Not Ordinarily Resident” (RNOR) primarily based on absence of legal responsibility to pay tax in some other nation or territory by cause of domicile or residence or some other standards of comparable nature, if India sourced revenue exceeds ₹15 lakhs. Residential standing is dynamic and wishes recent willpower for every FY.
In your case, through the FY of leaving India for employment within the UK and through the FY of employment within the UK, you might qualify as “Non Resident” (NR) of India, if you are an Indian citizen; and your physical presence in India is less than 182 days during the relevant FY. During the FY of returning to India permanently, you may qualify as “NR” of India, in case your bodily presence in India is lower than 60 days through the related FY or your bodily presence in India is 60 days or extra through the related FY however lower than 12 months within the previous 4 FYs.
But, being an Indian citizen, even in case you are “NR” as per above criteria, you may still become “RNOR”, in case you are not liable to pay tax in some other nation or territory by cause of domicile or residence or some other standards of comparable nature and India sourced revenue exceeds ₹15 lakhs.
If you qualify as “ROR” of India during the relevant FY, salary income received and earned in the UK will be taxable in India. You may claim foreign tax credit in India against India income-tax payable on doubly taxed income for taxes paid in the UK under the Double Taxation Avoidance Agreement (DTAA) between India and the UK. To claim foreign tax credit, you will also need to file Form 67 electronically before the original due date to file income-tax return. Form 67 needs to be supported by a certificate/ statement specifying the nature of income and the amount of tax deducted or paid in the UK. If you qualify as “NR or “RNOR” of India through the related FY, wage revenue acquired and earned within the UK won’t be taxable in India.
Sonu Iyer is tax companion at EY India.
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