In case of double taxation, claim foreign tax credit

Any income, the source of which is located in India, is taxable in India


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I am going to Singapore for a 6-month scholarship programme. I will also be working with the university there, for which I will get paid. My company in India will continue to pay me. Will I have to pay taxes for both the incomes?

—Pratyaksh K.

Taxability in India depends on two factors: source of income and residential status.

Any income, the source of which is located in India, is taxable in India (irrespective of residential status). Residential status is determined on the basis of physical presence of an individual in India during a financial year (FY). An individual with residential status of Resident and Ordinarily Resident is taxed on her global income and is required to report her global assets in her India tax return. But a Non-Resident or Resident but Not Ordinarily Resident is liable to pay tax only on India source income.

For FY17, you will most likely qualify as Resident and Ordinarily Resident in India. Income received in India and Singapore will be taxable in India. Income received in Singapore may also be taxable in Singapore. As a tax resident of India, you may claim foreign tax credit on doubly taxed income on the basis of the Double Tax Avoidance Agreement (DTAA) between Singapore and India against taxes paid in Singapore.

I am an Indian resident and I work on contract basis. The company that has recruited me is based in the UK and they are paying me in British pounds (tax-free). The company has a branch in Bangladesh, which is where I will work from on a work permit. The nature of my job is such that I work for about six months and am off for six. But if I get extra work there, I will work in Bangladesh beyond six months. The salary is credited to my Indian bank account. Should I convert it into a non-resident Indian (NRI) account or let it be? Also, do I need to pay tax in India as I will be abroad for more than six months?

—Arjun Pusloori

The income received in the Indian bank account will be taxable in India irrespective of your residential status in India. As the income is sourced from Bangladesh, it may be taxable in Bangladesh also. In case of double taxation, you may claim foreign tax credit on the doubly taxed income based on DTAA between Bangladesh and India against India income-tax for taxes paid in Bangladesh. As you are an Indian resident, you may not be able to open or hold special NRI accounts.

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