Residential status, source of income decide taxability

Residential status is determined on the basis of physical presence of an individual in India during the relevant financial year


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I worked in India from April to June 2015. In August 2015, I went to Dubai and worked for a company there. I received my salary in my bank account in Dubai. Also, I used to remit money to my bank account in India from that account. I came back to India in January 2016. Do I need to pay tax in India for the income earned in Dubai? Also, will there be any tax on the fund remittance?

—M.R.C. Prasad

Taxability in India depends on the source of income and the residential status. Residential status is determined on the basis of physical presence of an individual in India during the relevant financial year (FY) and last 10 years.

You will qualify as an Indian resident if you satisfy any one of these basic conditions: stay in India during the FY is for 182 days or more, or stay in India during the FY is 60 days or more and in the four years immediately preceding the FY is 365 days or more.

A resident may either qualify as a resident and ordinarily resident (ROR), or resident but not ordinarily resident (RNOR).

Additional conditions:

l The individual qualifies as a resident of India in at least 2 financial years out of the 10 FYs preceding the relevant FY, and

l Stay in India during the seven FYs preceding the relevant FY is 730 days or more.

An individual qualifying as ROR is taxed on her global income and is required to report her global assets in the India tax return.

If both the additional conditions mentioned above are met, then the individual would qualify as ROR, otherwise the individual would qualify as RNOR.

Assuming that you had stayed in India for at least 182 days in FY16 and have satisfied both the above mentioned additional conditions, you would qualify as ROR for FY16 and would thus be taxable in India on your global income, including income earned in Dubai and received in Dubai bank account.

However, if you have not spent substantial time in India in the past seven FYs (i.e., either of the additional conditions is not satisfied), you may qualify as RNOR and would be taxable only on income earned in India or received directly into your bank account in India.

In such a situation, salary received for period of services rendered in India will be taxable in India, even if it is received outside India.

Remittance of funds from your Dubai bank account to Indian bank account shall not be taxable in India.
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