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Ask Mint Money | India-sourced income is taxable for non-residents in India

Ask Mint Money | India-sourced income is taxable for non-residents in India
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First Published: Wed, Jul 06 2011. 09 45 PM IST
Updated: Wed, Jul 06 2011. 09 45 PM IST
I got transferred to the UK from April 2010 to March 2011. I got my salary in the UK and paid my taxes there. However, my company paid me referral prize and performance bonus of around Rs 1.2 lakh in India. This reflects in my Form 16 and states that no tax has been deducted apart from profession tax. Do I have to pay a tax on Rs 1.2 lakh?
-Brijesh Shirodkar
Residential status of an individual is based on the number of days spent during a tax year. Since you have been out of India for the entire year (2010-11), being employed in the UK, you would qualify as a non-resident in India for FY11. In case of non-residents, only India-sourced income is taxable. Accordingly, salary received by you from your employer in the UK would not be taxable in India.
However, referral prize and performance bonus paid in India will be treated as India-sourced income and shall be taxable in your hands.
As far as income-tax slabs are concerned, the same rates will be applicable to you as are applicable in case of resident Indians. As per the slab rates applicable for FY11, income up to Rs 1.6 lakh is fully tax-exempt. Assuming you have no other source of income in India (except for referral fees and performance bonus), you will fall within the lowest tax bracket and no tax shall be payable by you on Rs 1.2 lakh. Accordingly, the Form 16 issued by the employer reflects no tax deducted at source.
In 2006, I had taken a policy from a private insurer. I paid my premiums only for the first four years. What will be the tax implications if I withdraw now or after two-three years?
-Pradeep Padmanabhan
According to section 10(10D), any sum received under a life insurance policy, including the bonus on such policy, is exempt from tax. However, in relation to a policy issued post 1 April 2003, the exemption shall be available if the premium paid/payable in any of the years during the term of the policy does not exceed 20% of sum assured.
Therefore, the sum so received shall be exempt, if the premium paid/payable in any of the years during the policy term does not exceed 20% of the sum assured.
However, under the Direct Taxes Code (DTC), which is proposed to be implemented from 1 April 2012, any such sum received on withdrawal will be exempted only if the sum assured is received on completion of the insurance period and the premium payable during the policy term does not exceed 5% of the capital sum assured. At the moment, DTC does not carry any provision with regard to policies that have been issued before 1 April 2012, wherein the premium paid/payable on the policies does not exceed 20% of the capital sum assured and are due to expire/mature post 1 April 2012.
Queries and views at mintmoney@livemint.com
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First Published: Wed, Jul 06 2011. 09 45 PM IST
More Topics: Tax | NRI | Salary | Income-tax | Brijesh Shirodkar |