How can I profit from DTAA to keep away from double taxation in India?

I’ve been a US citizen for 15 years. Despite shifting again to India in September, I proceed to work for a US firm and my wage is credited right into a international checking account. How can I profit from the double taxation avoidance settlement (DTAA) on my wage earned earlier than October? Do I must file a tax return?

—Name withheld on request

To learn the way your earnings might be taxed, you will need to first set up your residential standing. This decided as per the Income Tax Act for every monetary yr. Therefore, you need to decide your residential standing for FY23 to learn the way your earnings shall be taxed.

For this, you need to meet sure situations—you might be in India for 182 days or extra within the related monetary yr (FY); or you might be in India for 60 days or extra within the FY and twelve months or extra within the 4 FYs instantly previous the related FY.

In the above situation, the interval of 60 days is substituted by 182 days for a citizen of India or an individual of Indian origin, who lives outdoors India and comes to go to India within the stated monetary yr. The similar applies for a citizen of India who leaves India within the stated monetary yr for the aim of employment outdoors India or as a member of a crew of an Indian ship.

There can be one other rule of deemed residency. An particular person who’s a citizen of India who will not be liable to tax in another nation or territory has complete earnings, aside from from international sources, exceeding ₹15 lakh through the stated FY, shall be a deemed resident of India.

For a citizen of India or an individual of Indian origin, who comes on a go to to India, the 60 days are thought-about modified within the following method.

If complete earnings, aside from earnings from international sources, exceeds ₹15 lakh, the 60 days are substituted by 120 days; in another case, the 60 days are substituted by 182 days. Such individuals are thought-about as deemed residents.

Additional situations: you’re a resident in India in two of the ten FYs instantly previous the related FY; and you might be in India within the seven years instantly previous the related monetary yr for 729 days or extra.

If you meet any of the primary set of situations and each the extra situations, you shall be thought-about a resident in India. If you meet any of the primary situations however don’t meet the extra ones, you shall be thought-about a resident however not ordinarily resident in India.

If you don’t meet any of the primary situations, you shall be a non-resident in India.

In case you might be decided to be a non-resident or resident however not ordinarily resident in India, you’ll have to pay tax on earnings that accrues or arises in India or incomes which can be acquired or deemed to be acquired in India. However, if you happen to qualify as a resident taxpayer, you shall must pay tax in India in your international earnings together with any incomes from outdoors India.

Therefore, in case you’re a non-resident or resident however not ordinarily resident in India, earnings acquired outdoors India for providers rendered outdoors India shall not be taxed in India.

However, in case you qualify as a resident the scenario could also be completely different. In order to keep away from paying tax on the identical earnings twice, you’ll have to confer with the DTAA between the 2 nations.

Archit Gupta is founder and chief govt officer, Clear.in.

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