Are you shifting back to India?
Know #incometax implications & residential status in the year when you come to India.
A thread š§µ
Know #incometax implications & residential status in the year when you come to India.
A thread š§µ
Before we proceed, I want to tell you that from an Income tax perspective, a person can fall into one of these "every year".
Either he/she is a:
1. Resident (R)
2. Non-Resident (NR)
3. Not Ordinarily Resident (R-NOR)
This needs to be checked every financial year (FY).
Either he/she is a:
1. Resident (R)
2. Non-Resident (NR)
3. Not Ordinarily Resident (R-NOR)
This needs to be checked every financial year (FY).
Your residential status for the FY in which you shift to India depends upon your days of stay in India in that FY.
Can be classified in:
Situation 1- <60 days in IND
Situation 2- 60 to 119 days in IND
Situation 3- 120 to 181 days in IND
Situation 4- 182 days or more in IND
Can be classified in:
Situation 1- <60 days in IND
Situation 2- 60 to 119 days in IND
Situation 3- 120 to 181 days in IND
Situation 4- 182 days or more in IND
Situation 1- Stay <60 days in IND
You will be an NR for that FY.
That's it. End :)
You will be an NR for that FY.
That's it. End :)
Situation 2- 60 to 119 days in India (1/2)
(A) If You're an Indian Citizen / Person of Indian Origin (PIO) - You will be a NR for that FY.
(A) If You're an Indian Citizen / Person of Indian Origin (PIO) - You will be a NR for that FY.
Situation 2- 60 to 119 days in IND (2/2)
(B) If you're not an Ind Citizen/PIO- Your stay in last 4 FY-
š¹<365 days - (NR)
š¹>=365 days - check:
a) You were (NR) in the last 9 out of 10 FY.
OR
b) Your IND stay was <730 days in last 7 FY.
If a/b š is ā , you're R-NOR.
Else, (R)
(B) If you're not an Ind Citizen/PIO- Your stay in last 4 FY-
š¹<365 days - (NR)
š¹>=365 days - check:
a) You were (NR) in the last 9 out of 10 FY.
OR
b) Your IND stay was <730 days in last 7 FY.
If a/b š is ā , you're R-NOR.
Else, (R)
Situation 3- 120 to 181 days in India (1/2)
(A) If You're an Indian Citizen/PIO - Check if Income from Indian Sources in FY in which you come to India:
š¹<=ā¹15L- You'll be NR.
š¹>ā¹15L- If your stay in India, in 4 preceding FYs was:
a) <365 days - (NR)
b) >=365 days - (R-NOR)
(A) If You're an Indian Citizen/PIO - Check if Income from Indian Sources in FY in which you come to India:
š¹<=ā¹15L- You'll be NR.
š¹>ā¹15L- If your stay in India, in 4 preceding FYs was:
a) <365 days - (NR)
b) >=365 days - (R-NOR)
Situation 3- 120 to 181 days in IND (2/2)
(B) If you're not an Ind Citizen/PIO- Your stay in last 4 FY-
š¹<365 days - (NR)
š¹>=365 days - check:
a) You were (NR) in the last 9 out of 10 FY.
OR
b) Your IND stay was <730 days in last 7 FY.
If a/b š is ā , you're R-NOR.
Else, (R)
(B) If you're not an Ind Citizen/PIO- Your stay in last 4 FY-
š¹<365 days - (NR)
š¹>=365 days - check:
a) You were (NR) in the last 9 out of 10 FY.
OR
b) Your IND stay was <730 days in last 7 FY.
If a/b š is ā , you're R-NOR.
Else, (R)
Situation 4- 182 days or more in India
(same treatment for Indian Citizens/PIO & Others)
Check:
a) You were (NR) in the last 9 out of 10 FY.
OR
b) Your IND stay was <730 days in last 7 FY.
If a/b š is ā , you're R-NOR.
Else, (R)
(same treatment for Indian Citizens/PIO & Others)
Check:
a) You were (NR) in the last 9 out of 10 FY.
OR
b) Your IND stay was <730 days in last 7 FY.
If a/b š is ā , you're R-NOR.
Else, (R)
TAXABILITY in INDIA - (R)š(R-NOR)š(NR) (1/2)
If you're a (R), all your incomes (including incomes earned outside India) is taxable in India.
(Of course, DTAs help you with foreign tax credits!)
If you're a (NR), only Incomes received or accrued in India are taxable in India.
If you're a (R), all your incomes (including incomes earned outside India) is taxable in India.
(Of course, DTAs help you with foreign tax credits!)
If you're a (NR), only Incomes received or accrued in India are taxable in India.
TAXABILITY in INDIA - (R)š(R-NOR)š(NR) (2/2)
If you're an (R-NOR), Incomes taxed in India:
a) Incomes received/accrued in India; &
b) Incomes from a business controlled from, or a profession set up in India.
So taxability of R-NOR is same as NR (+) point bš
Refer Image
If you're an (R-NOR), Incomes taxed in India:
a) Incomes received/accrued in India; &
b) Incomes from a business controlled from, or a profession set up in India.
So taxability of R-NOR is same as NR (+) point bš
Refer Image
TAX PLANNING - When should you come to IND? (1/4)
A) For Indian Citizens/PIO shifting to IND
If total Income (excl. foreign income) is:
š¹<=ā¹15L- After 1st October
š¹>ā¹15L- After 2nd December
By this you don't become (R) for 3 FY & your foreign income is not taxed in IND.
A) For Indian Citizens/PIO shifting to IND
If total Income (excl. foreign income) is:
š¹<=ā¹15L- After 1st October
š¹>ā¹15L- After 2nd December
By this you don't become (R) for 3 FY & your foreign income is not taxed in IND.
TAX PLANNING - When should you come to IND? (2/4)
B) For Non-Indian Citizens/PIO shifting to IND
š¹After 31st January
By this, you don't become (R) for 3 FYs & your foreign income is not taxed in IND.
B) For Non-Indian Citizens/PIO shifting to IND
š¹After 31st January
By this, you don't become (R) for 3 FYs & your foreign income is not taxed in IND.
TAX PLANNING - When should you come to IND? (3/4)
The above tax planning will work for the 1st FY always but for the 2nd & 3rd FY, it is subject to the following:-
1. That you were NR in 9 out of past 10 FYs
OR
2. That you stayed for less than 730 days in last 7 FYs.
The above tax planning will work for the 1st FY always but for the 2nd & 3rd FY, it is subject to the following:-
1. That you were NR in 9 out of past 10 FYs
OR
2. That you stayed for less than 730 days in last 7 FYs.
TAX PLANNING - CRUX (4/4)
By using the above tax planning, you become NR in the FY you come to India and become R-NOR for year 2 and year 3.
In this way, incomes earned outside India are not taxed in India in all the 3 FYs.
By using the above tax planning, you become NR in the FY you come to India and become R-NOR for year 2 and year 3.
In this way, incomes earned outside India are not taxed in India in all the 3 FYs.
PRECAUTION TO BE TAKEN BY INDIAN CITIZEN
Check for the FY in which you come to India:-
a) Indian sources' Income >15L &
b) You weren't liable to pay tax in any country due to your residential status there.
If true, you become R-NOR in IND, even if you stay in IND for 1 day.
Check for the FY in which you come to India:-
a) Indian sources' Income >15L &
b) You weren't liable to pay tax in any country due to your residential status there.
If true, you become R-NOR in IND, even if you stay in IND for 1 day.
In this thread, I have covered residential status and tax implications when a person comes back to India.
In my last thread, I covered a situation when the person was going outside India for employment.
https://twitter.com/sambhavdaga/status/1596563853886001152
This has indeed been a difficult thread to simplify for me but I have tried to simplify it by breaking it down into 4 situations which seem like the best way out to me.
Kindly RT and share it, it would mean a lot. :)
Follow @sambhavdaga for more such tax updates.
Kindly RT and share it, it would mean a lot. :)
Follow @sambhavdaga for more such tax updates.
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