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I am a British citizen. Being an OCI cardholder, I’m planning to work from India. My salary is from a company in the UK and taxes will be deducted at source. Would I have to pay tax in India too?

—Name withheld on request

To identify whether your income will be taxable in India, you need to first establish your residential status for tax purposes in India. Note that residential status must be established every financial year. Also note that taxability of an income depends upon the source of such income and also the place of its receipt. For example, salary paid for services rendered in India may be considered as income earned in India even though it is paid and received outside India.

You can test your residential status in the following manner. You must meet any of the following conditions and both the additional conditions.

Conditions: You are in India for 182 days or more in the financial year (FY); or 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 ones, you shall be considered a resident in India. If you meet any of the first conditions but do not meet the additional ones, 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.

Your income is being paid in the UK and taxes are being deducted at source; in case you qualify as a resident in India or when you are a non-resident or RNOR in India for tax purposes, yet it is established that such income is earned in India, it will have to be reported in your income tax return to be filed in India.

In case such income becomes taxable in both countries, you will be eligible to claim benefits under the Double Taxation Avoidance Agre-ement (DTAA). This will make sure you don’t have to pay tax on the same income twice.

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

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