Income received, earned in India is subject to tax

An individual with residential status of Resident and Ordinarily Resident (ROR) is taxable on her global income and required to report his global assets in her India tax return


iStockPhoto
iStockPhoto

I am planning to settle back in India after 20 years of working in Paris, in February 2016. I have fixed deposits (FDs) in India. Will the interest earned on these be taxed for 2015-16?

—Karan Singh

Income received and earned in India is subject to tax in India irrespective of the residential status. Hence, interest earned on FDs is taxable for financial year (FY) 2015-16.

However, if the total income earned by you in FY16 is less than the basic exemption limit (i.e. Rs.2.5 lakh for FY16), then you would not be liable to pay tax in India.

This limit is higher in case of resident senior citizens (age 60 years or more but less than 80 years at any time during the FY, exemption limit is Rs.3 lakh) and resident super senior citizens (age 80 years or more at any time during the FY, exemption limit is Rs.5 lakh).

I am going to Manila in May this year for a 15-month project. I will be getting my Indian salary as well as a daily allowance there. How will I be taxed in 2016-17?

—Ratul Jaina

Taxability in India depends on the following two factors:

*Source of income

*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.

An individual with residential status of Resident and Ordinarily Resident (ROR) is taxable on her global income and required to report his global assets in her India tax return.

However, a non-resident or Resident but Not Ordinarily Resident (RONR) is liable to pay tax only on income whose source is in India.

In your case, you are likely to qualify as a non-resident for the FY2016-17 as:

a. You will spend less than 182 days in India in FY2016-17, and;

b. You are an Indian citizen and will go out of India for the purpose of employment abroad.

In such a case, salary income received in Manila, for the period of employment exercised in Manila, will not be taxed in India.

However, the salary or any other income received in India will be taxable in India.

In case of double taxation, provisions of the relevant Double Taxation Avoidance Agreement (DTAA) with the country may be explored.

Queries and views at mintmoney@livemint.com

READ MORE