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Photo: Ramesh Pathania/Mint
Photo: Ramesh Pathania/Mint

Only residents can benefit from DTAA

According to Article 1 of DTAA, the benefit of a DTAA agreement will be applicable only for a resident

A person who was resident and ordinarily resident of India went to Dubai in April 2017 for the purpose of employment. In the previous year 2017-18, her aggregate stay in India exceeded 183 days as she used to come to India time and again. What would be the status of taxability of her salary received from her employment in Dubai in a Dubai bank account as Article 15 (2) of Double Taxation Avoidance Agreement (DTAA) states that India can tax that component of income only when three conditions as mentioned in 15(2) is satisfied.

—Abhijeet Gathraj

For a person who is resident in India for income tax purposes, any income received or deemed to be received in India and outside India will be taxable in India. An individual is considered resident in India if she has spent at least 182 days in a financial year in India.

As mentioned by you, the status of the person is resident and ordinarily resident, the salary received in the bank account in Dubai will be included in the total income and subject to tax in India. As per article 15(2) India-UAE DTAA, for a resident, employment exercised in the other Contracting State (Dubai) shall be taxable only in the first-mentioned state (India) if the following three conditions are met. 

One, the recipient is present in the other state (Dubai) for a period or periods not exceeding in the aggregate 183 days in the relevant “previous year" or “year of income", as the case may be. Two, the remuneration is paid by, or on behalf on, an employer who is not a resident of the other state (Dubai). Three, the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other state (Dubai).

A relief is available in DTAA which says that if the recipient satisfy all the above three conditions, India will have exclusive right to tax such an income. Thus, if the recipient does not satisfy these three conditions cumulatively, then both India and Dubai will tax it. However, at the time of filing Indian income tax return such a recipient can claim relief under Section 90 for taxes paid in India.

I am a senior citizen and the length of income tax return form 2 or ITR 2 is worrying. Is it necessary for a on-resident Indian (NRI) to fill the Schedule of FSI, tax relief (TR), foreign assets (FA)?

—Rajive Kaushik

As per Article 1 of DTAA, the benefit of a DTAA agreement will be applicable only for a resident. Thus a non-resident cannot claim relief under Sections 90, 90A and 91. Therefore, a non-resident should not fill the FSI and TR Schedule. Schedule FA is not applicable for a non-resident. It must be filed by residents in India who own foreign assets abroad.

To read more queries, go to www.livemint.com/askmintmoney

Archit Gupta is founder and chief executive officer, ClearTax. Queries and views at mintmoney@livemint.com

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