I came across an article in Mint about taxation of global income in India for a resident citizen. If a taxpayer is a resident for FY17-18, even though he was in the UK from July 2014 to July 2017 and got the salary from April to July 2017 from his UK office, why won’t the salary for April-July 2017 be taxable in India? Won’t this be counted as foreign income, and thus taxed in India? —Sumukh Jois 

In the said question, the taxpayer was resident but not ordinarily resident in India (RNOR). Those who have RNOR status are taxed almost the same way as NRIs, so they only have to pay tax on income that was paid to them in India or was accrued or earned in India. The taxpayer was RNOR and if his salary was paid in the UK, there was no need to declare it in the Indian income tax return. Had the taxpayer received or earned the UK income in India, he would have to include it in his India income tax return. Once his status changes to resident in India for tax purposes, income earned anywhere in the world would have to be shown in India’s income tax return and tax paid on it.

What are the tax rules for interest income from NRO account?—Rashi Ahuja

Interest income from an non-resident ordinary rupee (NRO) account is fully taxable in India. Tax must be paid according to the income tax slab of the individual. It has to be reported under the head ‘income from other sources’. It is treated similar to interest income from a savings bank account; so taxpayer can claim deduction under section 80TTA up to 10,000 on this interest.

This income is also subject to TDS—30% (plus surcharge and cess) on payments made to NRIs. The bank will deduct TDS on interest paid on an NRO account. Gross income must be reported in your tax return. The TDS that will appear in your Form 26AS is tax already paid by you and can be included in your tax return. If your total income is taxed at a lower rate, a refund may arise, which can be claimed in the tax return.

How much tax deducted at source (TDS) applies to a property sold by an Overseas Citizen of India (OCI)? The owner is a US resident. —Nike

It appears that the seller, who is a US resident, is likely to be a non-resident in India. If a property is sold by a non-resident in India, the buyer has to deduct TDS at 20% (plus surcharge and cess).

To make sure the buyer is deducting taxes on the gains, the NRI seller can approach his income tax officer to determine the value of capital gains and furnish a certificate obtained from the income tax officer to the buyer to avoid excessive TDS in India. The buyer will then deduct taxes on the amount of capital gains at 20% instead of the amount of sales consideration.

Archit Gupta is founder and chief executive officer, ClearTax

Queries and views at mintmoney@livemint.com

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