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The taxability of an individual in India depends upon his residential status in India for any particular financial year.
For the purpose of income tax in India, the income tax laws in India classifies taxable persons as:
a. A resident
b. A resident not ordinarily resident (RNOR)
c. A non-resident (NR)
The taxability differs for each of the above categories of taxpayers. Before we get into taxability, let us first understand how a taxpayer becomes a resident, an RNOR or an NR.
A taxpayer would qualify as a resident of India if he satisfies one of the following 2 conditions :
1. Stay in India for a year is 182 days or more or
2. Stay in India for the immediately 4 preceding years is 365 days or more and 60 days or more in the relevant financial year
In the event an individual leaves India for employment during an FY, he will qualify as a resident of India only if he stays in India for 182 days or more. This otherwise means, condition (b) above of 60 days would not apply to him
Resident Not Ordinarily Resident
If an individual qualifies as a resident, the next step is to determine if he/she is a Resident ordinarily resident (ROR) or an RNOR. He will be a ROR if he meets both of the following conditions:
1. Has been a resident of India in at least 2 out of 10 years immediately previous years and
2. Has stayed in India for at least 730 days in 7 immediately preceding years
Therefore, if any individual fails to satisfy even one of the above conditions, he would be an RNOR.
An individual satisfying neither of the conditions stated in (a) or (b) above would be an NR for the year.
Resident: A resident will be charged to tax in India on his global income i.e. income earned in India as well as income earned outside India.
NR and RNOR: Their tax liability in India is restricted to the income they earn in India. They need not pay any tax in India on their foreign income.
-Please check your residential status according to above explanations.
-Also note that in a case of double taxation of income where the same income is getting taxed in India as well as abroad, one may resort to the Double Taxation Avoidance Agreement (DTAA) that India would have entered into with the other country in order to eliminate the possibility of paying taxes twice.
-In accordance with Rule 128, in order to claim FTC (foreign tax credit), you would be required to file following documents on or before due date of filing of return:
- A statement of :
- foreign income offered to tax
- foreign tax deducted or paid on such income in Form No. 67
- Certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the taxpayer :
- From the tax authority of the foreign country
- from the person responsible for the deduction of such tax
- signed by the taxpayer
- Proof of payment of taxes outside India
We may assist you in entire procedure.