Residential status of an Individual

As per India's Income tax (I-T) Lawan Indian residing abroad cannot be always considered as a non-resident Indian (NRI),I-Tact determines the status of residence according to duration of stay in India during a particular Financial Year(FY), more specifically the number of days stay in India.

How are You Taxed When You are a Resident Individual recently moved abroad?

An individual is regarded as a tax resident of India or Indian tax resident for any financial year (FY)if (i) he/she has stayed in India for 182 days or more during that FY, or (ii) he/she has been in India for 60 days or more during that particular FY and has stayed in India for at least 365 days or more during the four years immediately preceding the relevant FY.The same is for a Person of Indian Origin (PIO) who is on a visit to India. Although second condition is not required for these individuals. A PIO is an individual whose parents or any of his grandparents were born in undivided India. If any of the above criteria is not met he/she is considered asan‘NRI’.

Tax Prevalence in India

An NRI’s income taxes in India will depend upon his/her residential status for the year. If the status is resident, income earned from anywhere in the worldis taxable in India. If he/she isan ‘NRI,’ then the taxable income is only which is accrued or earned in India, whereas the income from outside India is not taxable in India. For e.g. Salary received for any services in India, rent income from a propertyto be found in India, capital gains on asset transfer located in India, interest earned NRO account, fixed deposits etc.

Individual Resident recently moved Abroad

As mentioned above If the individual resident has recently moved abroad his/her residential status is to be ensured if he/she is considered as resident his/her global incomes is taxable but if his/her global income is also taxed in that country role of tax treatiesDouble Taxation Avoidance Agreements (DTAA) comes into effect which ensures that If an individual is a tax resident of one country but has a source of income from another country, the same income cannot be taxed twice.

One can avoid Double taxation in either of two ways (i) the income earned in the foreign country is exempted by the law of non-tax residence ,or (ii) the country of tax residence grants a foreign tax credit for the taxes paid in the other country. India has DTAAwith many countries.



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