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For RNOR, NRI, income earned abroad is not taxable in India

  • Your residential status will have to be tested for each financial year separately and taxes filed accordingly
  • If you are an RNOR or an NRI, income earned outside India will not be taxable in India

I work with an MNC in India and I’ve been asked to move to Singapore for two years, where I will be paid in Singapore dollars. How will my income be taxed? Will I qualify as a non-resident Indian?

—Roshni Ahmed

Whether you will have to pay taxes in India depends upon your residential status for the financial year in question. You can test your residential status in the following manner. Your residential status will have to be tested for each financial year separately and taxes filed accordingly. You must meet any of the following conditions and both the additional conditions:

Conditions: a) you are in India for 182 days or more in the financial year (FY); or b) 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: you are resident in India in two of the 10 FYs immediately preceding the relevant FY; you are in India for seven years immediately preceding the relevant FY for 729 days or more.

If you meet any of the first set of conditions and both the additional conditions, you shall be considered a resident in India. If you meet any of the first conditions but do not meet the additional conditions, you shall be considered a resident but not ordinarily resident (RNOR) in India. If you do not meet any of the first conditions, you shall be an NRI. For a resident, entire global income is taxable in India. For a RNOR or a non-resident, only the income that is earned in India is taxable.

If you have always lived in India, it is likely that you will be a resident for these two years, assuming you are able to satisfy at least one of the first two conditions. In that case, your income will be taxable in India and if tax has been paid in both the countries, you can take benefit of double taxation avoidance agreement. If you are an RNOR or an NRI, income earned outside India will not be taxable in India. You will have to check your residential status for both the financial years separately.

Archit Gupta is founder and CEO, ClearTax.

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