How are you Taxed in India when you Travel Abroad

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11 years ago

Resident Individual on a temporary foreign assignment

Rahul worked out of Singapore on a temporary assignment of 4 months and earned in Singaporean Dollars during that time. He got this income credited to a bank account here in India. He has returned back home now. How should he file his income tax return?

Rahul’s taxes for this year will depend on his residential status. Since Rahul has not been outside of India for more than 182 days, he will be considered a resident.

He will be required to file his income taxes in India this year. This will also include his salary earned during the foreign assignment in Singapore.

If the assignment extends to more than 182 days, Rahul’s residential status will change and he will be required to pay taxes only on the Indian income earned thus far. Here note that, Rahul’s foreign income credited to an Indian bank account is taxable in India.

Resident Individual recently moved abroad

Prashant moves to US on a new assignment. He gets his US income credited to an NRE account in India. He continues with his FD investments and has some money put away in a savings account in India. He just received Form-16 from his Indian employer. Should he file his returns this year in India?

NRI or not, every individual must file tax return if their income exceeds Rs. 2,50,000. But note that NRIs are only taxed for income earned/collected in India. So, Rahul will pay taxes on income earned while in India, and income accrued from FDs and savings account.

Prashant’s income from India
Income from Indian employer	Rs. 3,00,000
Interest income from FDs	Rs. 25,000
Bank account savings interest	Rs. 4,500
Gross total income	Rs. 3,29,500
Deductions
Section 80C – PPF investments	Rs 20,000
Section 80TTA exemption	Rs.4,500
Taxable income	Rs. 3,05,000
Tax slab at 10%	Rs. 5,500
Cess at 3%	Rs.165
TDS deducted by employer	Rs. 4,000
TDS deducted by bank	Rs. 4,500
Tax Refund	Rs. 2835

Living in a foreign country

It’s been 3 years since Arjun moved to the US. He is paid in US dollars. He has his money invested in savings account and FDs in India. He has bought an apartment and gave it on rent for Rs.35,000 per month. He gifts his parents a car and transfers Rs.10,000 every month to their account to help with their household expenses during the year. He also transfers Rs 20,000 in his father’s account to meet the cost of insurance policy he has purchased for his parents. ¹

Rental income	Rs 4,20,000
Less: Standard 30% deduction under Section 24	Rs.1,26,000
Income from House Property	Rs 2,94,000
Income from FDs and bank account	Rs 30,000
Gross total income	Rs 3,24,000
Deduction under Section 80D	Rs.20,000
Taxable income	Rs.3,04,000

¹ Arjun’s gift to his father and money transfer of Rs. 10,000 to his mother are exempt from tax. Regarding the insurance expenses on his parents, Rahul can claim a deduction under section 80D of Rs 20,000, since his father is over 65 years of age.

He will be required to file tax return in India as his gross income exceeds Rs. 2,50,000.

NRI recently moved back to India

Returning NRIs assume RNOR status when:

You have been an NRI in 9 of the 10 financial years preceding the year of your return

You have lived in India for 2 years or less (729 days or less) in the last 7 financial years

The I-T Department allows RNORs to continue to enjoy exemptions available to NRIs for a period of 2 years after their return. Therefore, deposits held in foreign currency, which are exempt for an NRI, shall be exempt to returning NRIs for 2 years.

After these 2 years, returning NRIs are treated as resident individuals.

Resident with global income

If you are a Resident Indian your global income is taxable in India.This income may have been earned or received outside – but it shall be taxed in India. In case this income is also taxable in another country, you can take benefit of DTAA (Double Tax Avoidance Agreement).