• Query on Foreign Income (US) Taxation in India

Hi,
I went to the US on an H1B visa in April 2017 and returned to India October 12, 2019. I believe I would be considered a resident for India taxation purpose for 2019-20 tax period as I've stayed for 180 days in India.
Is this correct based on the current tax law?
The income I earned is currently in an NRE account - is that amount taxable as I think I've heard that amounts in NRE account is non-taxable?

If my US income for 2019 is taxable, should the Gross Pay from W2 be considered for India taxation or should it be the "Reported W-2 wages" from my W2.
For tax relief, Are Federal/State/Medicare/Social taxes I paid in US considered?

Appreciate any guidance at the earliest.
Asked 5 years ago in Income Tax

Hi

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.


Resident

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 who is a citizen of India 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. Such individuals are allowed a longer time greater than 60 days and less than 182 days to stay in India. However, from the financial year 2020-21, the period is reduced to 120 days or more for such an individual whose total income (other than foreign sources) exceeds Rs 15 lakh.
In another significant amendment from FY 2020-21, an individual who is a citizen of India who is not liable to tax in any other country will be deemed to be a resident in India. The condition for deemed residential status applies only if the total income (other than foreign sources) exceeds Rs 15 lakh and nil tax liability in other countries or territories by reason of his domicile or residence or any other criteria of similar nature.


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.
From FY 2020-21, a citizen of India or a person of Indian origin who leaves India for employment outside India during the year will be a resident and ordinarily resident if he stays in India for an aggregate period of 182 days or more. However, this condition will apply only if his total income (other than foreign sources) exceeds Rs 15 lakh.
Also, a citizen of India who is deemed to be a resident in India (w.e.f FY 2020-21) will be a resident and ordinarily resident in India.
NOTE: Income from foreign sources means income which accrues or arises outside India (except income derived from a business controlled in India or profession set up in India).


Non-resident

An individual satisfying neither of the conditions stated in (a) or (b) above would be an NR for the year.

As per understanding your residence status shall be resident.therefor your global income shall be taxable.but you can claim credit of tax paid in usa 

Karishma Chhajer
CA, Jodhpur
2452 Answers
29 Consultations

Dear Sir,

 

Hope you are doing well !!

 

As per the tax laws of India, sections 90 and 91 of the Income-tax Act deal with the concept of FTC. Section 90 discusses claiming of FTC in a case where India has entered into a Double Taxation Avoidance Agreement (DTAA) with another country.

 

Under these sections, if the taxpayer is a resident of India, and he has paid taxes outside India, he can claim a credit of such foreign taxes paid against his tax payable in India.

 

In your case, you will be treated as resident so you will be liable to pay tax on global income.

 

However, you can claim credit of taxes paid in US while filing ITR in India.

 

 

In accordance with Rule 128, in order to claim FTC, the taxpayer is required to file following documents on or before due date of filing of return:

 

    1. A statement of :

 

    • foreign income offered to tax

 

    • foreign tax deducted or paid on such income in Form No. 67

    1. 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

 

    1. Proof of payment of taxes outside India

As soon as you return to India, you must intimate the bank in which you hold an NRE account to re-designate your account as a resident foreign currency account. As long as you are an NRI, interest earned by you on your NRE account is exempt from tax. However, once this account is redesignated to a resident account, any interest earned will be taxable.

 

We may assist you in entire procedure.

 

 

 

Payal Chhajed
CA, Mumbai
5189 Answers
303 Consultations

As per my calculation you have stayed in India for less than 182 days and hence you won't be resident for income tax purpose.

Yes it will be non taxable.

The total salary would be charged to tax in India. Only federal tax credit would be available but we need to further check DTAA.

 

If you want we can have a phone consultation and discuss it further.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
4306 Answers
101 Consultations

Sorry for my previous answer.

 

Yes, your observation is correct.

 

The number of stay is less than 182 days.

 

You will be treated as NRI.

 

Your income which is earned or accrued in India is taxable in India.These incomes are taxable for an NRI. Income which is earned outside India is not taxable in India. Interest earned on an NRE account and FCNR account is tax-free.

 

 

Payal Chhajed
CA, Mumbai
5189 Answers
303 Consultations

Have you permanently shifted to India or just came to visit India and stayed because of Covid?

If yes your global income wont be taxable in India.

The 15 Lakh limit would start from this FY i.e. FY 2020-21.

Naman Maloo
CA, Jaipur
4306 Answers
101 Consultations

Dear Sir

As per my observation ur stay in india is less then 182 days so u r not resident in india. But need to check the DTAA rules in ur case

U can take phone consultation for further process

Poorvi Jain
CA, Indore
143 Answers
1 Consultation

Hi,

 

Assuming you have come to India on a permanent basis and not on a temporary visit, You would be considered as resident in India. While, you were in India for less than 182 days but you fulfill the second condition of 60 days on the current year and total 365 days in proceeding 4 financial year. Thus, you qualify as resident in India.

 

Lakshita Bhandari
CA, Mumbai
5687 Answers
943 Consultations

Interest earned in NRE account post 12 October will be taxable in India. Further, you should also convert your NRE account into resident Indian account.  If you dont convert the NRE account to resident account, it would be considered as FEMA violation.


For tax relief, only federal taxes are considered

Lakshita Bhandari
CA, Mumbai
5687 Answers
943 Consultations

Hello,

 

Even though your stay in India for F.Y. 2019-20 has been less than 182 days, you would be considered as Resident since your stay is more than 60 days in current F.Y. 2019-20 and more than 365 days in previous 4 F.Y.

I hope this answer satisfies your requirements.

 

Regards,

CA Hunny Badlani

Hunny Badlani
CA, Madhya Pradesh
2608 Answers
16 Consultations

Your foreign income parked in NRE A/c. would be taxable in India. The credit of Federal Tax paid would be available against the income tax liability in India.

 

Hunny Badlani
CA, Madhya Pradesh
2608 Answers
16 Consultations

Hi

As your stay in India in current year is more than 60 days & total 365 days in preceding 4 year.that way you are a resident in India.

Interest earned after 12 October in NRE account will be taxable & you need to convert NRE account to resident.

Karishma Chhajer
CA, Jodhpur
2452 Answers
29 Consultations

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