Ram is employed with an MNC. He was on a short-term onsite assignment and retuned back to India in June 2019. His income was taxed twice (both in India and abroad). Is there a way by which he can get a tax relief in India?
1. If Ram is a “Resident and Ordinarily Resident” in India during the FY 2019-20, his global income shall be taxed in India.
An individual shall qualify to be a Resident, Resident – Ordinarily resident (ROR), Resident not ordinarily resident (RNOR) or Non resident in India based on his / her stay in India during a financial year and the previous financial years.
2. In this scenario, the salary income could be taxed twice – once in the foreign country where he was deputed (source-based taxation) and the second time in India (Residence based taxation).
3. He can choose to be governed by the provisions of the specific DTAA or the Income tax law in India, whichever is beneficial to him.
DTAA – Double Taxation Avoidance Agreements are tax treaties between two or more countries to avoid taxing the same income twice
4. If he chooses to DTAA route, tax is computed on the global income of Ram and he can claim credit of taxes paid in the source country under section 90 of the Income Tax Act.
5. In order to claim the Foreign Tax credit, along with his Income Tax returns, he is required to furnish a statement of income earned outside India and taxes paid thereon in Form 67.
NRI and related tax issues
In spite of shifting base to different geographies, many Indians keep in touch with their roots, tradition, culture and rituals as that has been the way our DNAs are made!
Income tax as a subject by itself undergoes numerous changes every year and it could be quite cumbersome to keep a tab on the innumerable changes. Recent changes to the Income Tax Act changed the way NRIs are taxed in India. With the introduction of the term “deemed resident”, it becomes all the more important to review the residential status every year. The Income Tax law is more stringent now and has more tools to track and tap information to enable effective taxing of the NRIs.
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With a 15 year experience in the Industry, Chocksi decided to commence his practice after the “Entrepreneurial Bug” bit him ! He is the Founder Partner of Chockalingam Unnamalai & Associates, Chartered Accountants.
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