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Business News/ Money / Calculators/  Taxation of income earned depends on residential status

Taxation of income earned depends on residential status

Residential status would be determined based on the number of days of stay in India


I work in Malaysia and stay here most of the year, while my wife divides her time between here and India. As a freelance photographer, she sometimes does work here also, for which she is paid into her Indian account. This is apart from her income in India. How will her income from assignments in Malaysia be taxed?


The taxability of income in India would depend on the residential status of a person. In order to determine the residential status, it is important to understand the exact number of days of stay in India during each financial year (FY), which then determines the scope of taxation.

Under the India-Malaysia double taxation avoidance agreement (DTAA), the income earned by a professional who is a resident of India, would be taxable only in India. However, such income may also be taxed in Malaysia in case the person:

a) Has a fixed base regularly available in Malaysia for the purpose of performing freelancing photography; or

b) Stay in Malaysia exceeds 183 days during an FY; or

c) The remuneration for the services is derived from a resident of Malaysia or borne by a permanent establishment or fixed base of a person who is not a resident in Malaysia and the amount exceeds $2,000 in the FY concerned. Assuming that your wife qualifies to be a professional photographer and also qualifies to be a resident of India, the income earned by her would be taxable in India and may also be taxed in Malaysia. If she qualifies to be a non-resident in India, only such income which accrues or arises in India or is deemed to accrue or arise in India or is received in India or is deemed to be received in India would be taxable. As the photography services are rendered outside India and if the right to receive such income accrues outside India, she should not be subject to tax in India merely on its receipt in India. However, this would require further examination in the context of specific facts. I suggest that you consult your adviser.

My mother is a diplomat and keeps moving to various countries. I stay with her. I take up odd jobs such as teaching wherever I go. I invest the income in India. What will be the tax treatment and where do I have to pay taxes?

—Vidhi Juneja

The tax treatment of the income earned by you would depend on the residential status of a person and the residential status would be determined based on the number of days of stay in India. The tax treatment would also depend upon the nature of income and its taxability under the applicable double taxation avoidance agreement.

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Published: 11 Dec 2014, 06:40 PM IST
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