BackRelief from double taxation is linked with residential status
If you have already spent around 200 days in India, you will qualify as a resident of India during this year
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I was in India for around 200 days in the tax year and then moved to the UK. After moving to the UK, I was paid in pounds, which went into my UK bank account. In the UK, income up to £10,000 is exempt from tax. Mine was a little higher and I have paid taxes. While filing taxes in India, my chartered accountant has asked for details regarding my income in the UK and I was told that this income is taxable in India. Is that true? Also, as I am a Resident and Ordinarily Resident (ROR), is it not true that if I am paying taxes in the UK, then I do not have to pay taxes in India?
—Ravi
The taxability in India is linked with one’s residential status. An Indian national, who is leaving India for the purpose of taking employment, would qualify as non-resident of India by spending less than 182 days in India during the relevant financial year. This is a special relaxation available for Indian nationals, wherein you don’t need to follow the general look-back rule where the person can qualify as resident by merely spending more than or equal to 60 days in the relevant financial year if the period of stay in India in the past four years was more than or equal to 365 days (this does not include the number of days in the current year).
If you have already spent around 200 days in India, you will qualify as a resident of India during this year. ‘Resident’ again has two more categories: ROR and Not Ordinarily Resident (NOR). If this is your first overseas assignment, then it’s likely that you qualify as an ROR as you would satisfy these conditions: You have spent more than or equal to 730 days in India in the past seven years, and you qualified as resident of India in two of the past 10 financial years.
Once you qualify as an ROR, your worldwide income would be subject to tax in India under the Income-tax Act, 1961. Hence, under the Act, the salary income received for the services rendered in the UK would also be subject to tax in India. However, the Act provides for relief in case of double taxation. Tax payers have the option to pay tax as per the provision of the Act or applicable Double Taxation Avoidance Agreement (DTAA), whichever is more beneficial.
Double taxation can be avoided either in the form of income exemption or by claiming credit of taxes paid in other jurisdiction. The availability of relief is linked with your residential status under the DTAA. In your case, it is recommended to evaluate your residential status under India-UK DTAA and then decide whether this income is taxable in India or not. Please note that being an ROR, you also need to report all your foreign assets in your India tax return.
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