Tax Rules for Residents Living in a Foreign Country

When an individual is residing in Foreign country and earning in dollars but having some of his amount invested in Indian banks in the form of FD’s & RD’s, it will be termed as “Person living in a foreign country”.

Tax Rules for Residents living in a Foreign Country

For example - Rahul is living in US from last 3 years and earning in US dollars. He has some of his amount invested in Indian bank accounts in the form of savings and fixed deposits. He bought an apartment and given on a rent to a tenant for Rs. 40000. He gifted a car to his parents and started transferring Rs. 10000 to their parent’s account every month in order to meet the household expenses during a year. He also transferred the amount of Rs. 20000 to his father’s account in order to pay the cost of Insurance policy which he has purchased for his parents.

Rental Income Rs.4,80,000
Less: Standard 30% deduction under Section 24 Rs.144,000
Income from house property Rs.3,36,000
Income from FDs and bank account Rs.30,000
Gross total income Rs.3,66,000
Deduction under Section 80D Rs.30,000 (Claim up to Rs.50000
Taxable income Rs.3,36,000

Rahul’s gift to his father and a transfer of Rs. 10000 every month towards household expenses are exempted from tax. As far as insurance policy amount is concerned, Rahul can claim a deduction under Section 80D for Rs. 25000 as his father is a senior citizen. Hence, he has to file income tax return in India as his income is more than Rs.250000.

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