Taxation depends on number of days you stay in India

There is no requirement to pay taxes or file a tax return in India if your total income earned or received in India is below the threshold for taxability


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I went to England to pursue a one-year course in September 2014. I visited India for 10 days during my studies. I have been employed by a multinational company and have been posted in Dubai since October 2015. My first salary, in dirhams, has been deposited directly by my employer in a bank in Dubai. This financial year I have been in India for six days. Will I qualify as a non-resident Indian (NRI) for taxation this financial year? Am I legally bound to open a non-resident external (NRE) account in India and just declare my salary in my income tax return? If I open an NRE account and my money is transferred to India, will I be liable to pay income tax on the amount earned in Dubai?

—A. Mittal

Based on the information provided, that you have been in India for six days and that your stay in India will be for less than 182 days for the period from 1 April 2015 to 31 March 2016, you will most likely qualify as an NRI. The income earned and received in Dubai would not be taxable in India. Further, India has a double taxation avoidance agreement with the UAE. In case of double taxation, relevant provisions of the agreement may be explored. There is no requirement to pay taxes or file a tax return in India if your total income earned or received in India is below the threshold for taxability, i.e. Rs.2.5 lakh for FY16.

You are not legally bound to open an NRE account in India and transfer your income received in Dubai to that account. If you transfer any money to your NRE account in India after it is received in a bank account in Dubai, it will not be taxable in India as the first receipt of income is outside India.

I have been working abroad but have resigned and would like to return to India. Would my retirement money (which is a lump sum amount) be taxed since 2001 if I file my tax return as a resident Indian in 2015-16?

—Kanu Singh

In case you qualify as a resident and ordinarily resident on the basis of the number of days spent in India during the period from 1 April 2015 to 31 March 2016 and earlier years, your global income will be taxable in India. In such a case, the lump sum amount of the retirement benefit received outside India may be taxable in India. However, applicable benefits under the relevant tax treaty may be explored. If you qualify as an NRI, only the income earned or received in India will be taxable in India.

The taxability of lump sum amount of the retirement benefit earned or received abroad would be case specific and would depend on the individual’s facts.

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