Tax Rules for a Resident Individual on a Temporary Foreign Assignment

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It is important for Indians on overseas deputation or Indians who have become a permanent citizen of other country, for example obtaining a Green card in the USA, to have some knowledge of their tax liabilities and obligations in India.

To put it in simple terms, you are an NRI if you are an Indian living abroad. The Income Tax (I-T) Act specifies the number of days a person stays in India o outside of the country to be tagged as either a Resident of the country or an NRI. Your tax obligations i.e. whether tax laws of residents or NRI applies to you is determined by your residential status. This residential status, in turn, specifies income that are taxable in the country and all those income that are exempted from tax laws. In order to avoid any tax related complications, it is important for you to be doubly sure of the category that you belong to.

Criterion for being a Resident of India:

Section 6 (1) of the Income Tax Act, 1961, lays down two sets of parameters to determine if a particular individual is Indian citizen or not. If the person meets any of the following two criteria, he/she will be deemed a resident of the country.

Condition 1

An individual is in the country for 6 months (182 days to be more precise) or more in a financial year. The same is applicable to a Person of Indian Origin (PIO) who is on a visit to India. A PIO is a person whose parents or grandparents were born before the country was partitioned.

Or

An individual is in India for more than two months (60 days) in a financial year or lived for a whole year (365 days) or more during the last four years preceding immediately the current year

People who hold Indian citizenship and who have moved abroad for a business abroad or team individuals from an Indian ship who have moved out of the country in a financial year or people of Indian origin (PIOs) on a visit to the country need to take note of that the time of 60 days made reference to in the above condition is supplanted by 182 days. (In the non-tax domain, the PIO scheme has been converged with Overseas Citizen of India plan and it accommodates visa-related relaxations.)

In this way, if an Indian citizen has gone for abroad assignment in FY 2016-17, the law stipulates that he be treated as a tax resident of India for the year finished March 31, 2017, in the event that his stay in India has been for 182 days or more for the year 2016-17. Tax residents of India (ROR) are only liable to charge on income earned abroad, that incorporate interest income on bank accounts held in foreign countries.