Entire global income is taxed in India for resident Indian status
If you are resident or non-resident but not ordinarily resident in India, you will be paying tax on income earned in India
I am a returning non-resident Indian (NRI) and my status will be converted to resident and ordinarily resident (and not resident and not ordinarily resident or RNOR) in India. I hold some shares in the US that are not subject to any tax as they were bought from the UAE. Will I have to pay long-term capital gains (LTCG) tax on these shares once I am back to India? If I have to, I would prefer to liquidate those shares and bring the capital with me once I come back to India. Are assets acquired outside India from non-Indian income taxable once I become an ordinary citizen of India?
How your income is taxed in India depends on your residential status as per the Income Tax Act. To be a resident of India for tax purposes, you must meet any of the following conditions and both the additional conditions.
The conditions are: you are in India for 182 days or more in the financial year (FY); or you are in India for 60 days or more in the FY and 365 days or more in the four FYs immediately preceding the relevant FY.
Additional conditions are you are resident in India in two of the 10 FYs immediately preceding the relevant FY; and you are in India in the seven years immediately preceding the relevant FY for 729 days or more.
If you do not meet any of the first set of conditions, you would be a non-resident in India. If you meet the first set of conditions but not the additional conditions, you would be RNOR in India.
So long as you are non-resident or resident but not ordinarily resident in India, you will be paying tax in India, only on the income earned in India. Once your status is that of a resident, which is when you meet any of the first two conditions and both the additional conditions, your entire global income will be taxed in India.
I am a resident and ordinarily resident. I am an instructor with an education website, and I get paid in US dollars for my courses hosted on the website. There is no committed fee and my payout is purely based on courses subscribed. The payment comes to my bank account in India. Will the payments be subject to income tax?
Yes such income is taxable in India. You can include this income as income from a business or profession in your tax return. You will also be eligible to deduct expenses incurred to earn this income. You can also claim deductions allowed under Section 80 of the Income Tax act. Tax has to be paid on total taxable income according to slabs applicable to you.
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Archit Gupta is founder and chief executive officer, ClearTax.
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