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For resident Indians, income from anywhere is taxed in India

LiveMint logoLiveMint 11-09-2017 Archit Gupta

I was an NRI and working for a multinational company in Germany for 12 years. I have come back to India recently and am now a resident Indian. My German company cleared my arrears and reimbursements recently, and deposited Rs4 lakh in my India account. I am a salaried individual in India now and will file the tax return next year. How will this money, which I earned as an NRI, be treated for tax purposes? The amount was credited to my account about 5 months after I came back to India.

—Tara Chandran

To find out how your income will be taxed in India, you must first find out your residential status in India as per the income tax Act. You are considered a resident of India if you meet any one of the following conditions:

— You are in India for a period of 182 days or more in the financial year; or

— You are in India for a period of 60 days or more during the financial year and have been in India for 365 days or more during the immediately preceding four financial years.

Once you are a resident in India, your income earned or received anywhere in the world is taxable in India. Income earned or received in India is also taxable in India for a non-resident. You must include the income received from your German employer in your income tax return that you will file in India. If any tax has been deducted in Germany on this income, you can make use of the Double Taxation Avoidance Agreement (DTAA) so that your income is not doubly taxed.

I was living in Australia for the past 9 years. I have come back to India and will be here for about a year. I have a job and income in India on which I pay taxes and file tax return. However, for this year, I would not have spent more than 180 days in India. This year, part of my income was earned in Australian dollars.

When I file the tax return, will this income be included in my income or can I exclude it for tax purposes?

—Anil Sharma

Since you have not spent 182 days in India in the said financial year and have been living abroad for the last 9 years, it is likely that your residential status for the year will continue to be non-resident. Or, you may be a resident but not ordinarily resident in India if you have spent 60 days in the current year and at least 365 days in the past 4 financial years in India. As a non-resident or a resident but not ordinarily resident (RNOR), you have to pay taxes in India only on the income earned in India or received by you in India. Any income earned outside India will not be taxed in India. Therefore, income earned in India by you, such as salary or interest income from bank accounts in India, will be taxed in India. You do not have to include income earned in Australia in your Indian tax return.

Since you may be a resident of Australia in the said financial year, you must file a tax return and pay taxes in Australia as well. Local tax laws of Australia will prescribe how your income earned and taxed in India must be treated.

I have recently moved to the UAE and I have income from rental properties and deposits in India. I wish to save some money on the income tax I pay. What are the tax-saving instruments available to NRIs like me? I did not have a PPF account before leaving India.

—Asif Iqbal

You can claim tax deduction under section 80C of the income tax Act. You may consider an equity-linked savings scheme (ELSS) if you want to invest in the Indian stock markets. A maximum deduction of Rs1.5 lakh can be claimed under section 80C. Do note that NRIs may have to comply with rules and regulations of the Reserve Bank of India (RBI) before investing in Indian stock markets. You are also eligible to claim tax benefits such as deduction for property taxes paid and standard deduction of 30% from rental income earned by you in India. Section 80 TTA, which allows deduction for Rs10,000 from income from savings account is also available to you.

Archit Gupta is founder and chief executive officer of ClearTax. Queries and views at mintmoney@livemint.com

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