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Individual income tax returm form by IRS, concept for taxation (Photo: istock)
Individual income tax returm form by IRS, concept for taxation (Photo: istock)

Residential status decides how a person’s global income is taxed

Whether or not your income will be taxed in India depends on residential status for the financial year

I am employed with a multinational corporation based out of Gurugram. I may move to my company’s office in Dubai later this year. In this case, I would have already spent over 120 days in the current financial year in India. Will my salary in Dubai this year would be subject to tax in India? My current employment agreement is with an Indian entity, which will be terminated and a fresh agreement with a UAE-based entity will be signed under which I will be paid my salary. I have been an Indian resident, employed full time here and paying my taxes since 2011.

—Name withheld on request

Whether or not your income will be taxed in India depends on residential status for the financial year. A taxpayer would qualify as a resident if he satisfies one of the following two conditions: a) stay in India for a year is 182 days or more or; b) stay in India for the immediately four preceding years is 365 days or more and 60 days or more in the relevant financial year.

In the event a person who is an Indian citizen leaves for employment during an FY, he will qualify as a resident of India only if he stays in India for 182 days or more. Such individuals are allowed a longer time greater than 60 days and less than 182 days to stay in India. Effective financial year 2020-21, this period of 182 days is reduced to 120 days or more for such an individual whose total income (other than foreign sources) exceeds 15 lakh.

Additional conditions: you are resident 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 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 a non-resident in India.

Based on the information provided by you, you are likely to be resident in India. Since you are resident in India, your entire global income shall be taxable in India, including income received in Dubai.

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

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