I’ve been working from Gabon in Africa for a year now and as I’ve lived outside India for more than 182 days, I qualify as a non-resident Indian (NRI). My employer is paying my salary in an Indian bank account. Being an NRI, will the salary received from my employer’s overseas account be taxable?
—Name withheld on request
Firstly, you should establish your residential status in India for the financial year in question. Here’s how your residential status is identified. 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; 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 an NRI.
However, condition b) does not apply to Indian citizens who have left India for employment abroad. Therefore, you are unlikely to meet any of the first set of conditions and you will be an NRI for tax purposes.
Indian tax laws state that income that is received in India shall be taxable in India. Whether salary directly received in an Indian bank account by an NRI for receives rendered outside India has been a matter of frequent litigation. In these cases, usually the view has been that such salary is not taxable in India since the services have not been rendered in India, and funds have been merely remitted to an Indian bank account. However, in some cases, such income is taxed in India based upon the fact that it was first received in India. It is recommended that you receive the salary locally where you are employed and then remit it as required by you. Otherwise, you may have to report it in tax returns in both the countries and take credit of taxes paid in the country where you are resident for tax paid outside based upon double tax avoidance agreement between the two countries.
I am an Australian citizen. My sister passed away recently and I want to buy a flat for my sister’s children and husband. What are the tax implications for me and my sister’s husband? Can he receive the flat as a gift? Will it be wiser to buy the flat in my father’s name?
Yes, you can purchase a flat as a gift for your sister’s husband, and this will not be taxable in his hands. Gifts to specified relatives are exempt from tax. Your sister’s husband is included in the list of specified relatives, as per the Income Tax Act. However, in case there is any income from this asset, it shall be clubbed with income earned by you from India and will be taxable in your hands. Since you are likely to be a resident in Australia for tax purposes, you must also comply with local laws that may apply to such a purchase.
Archit Gupta is founder and chief executive officer, ClearTax