“Clearing the air on tax queries for Non-Residents in India. Understand residency criteria, tax implications, TDS, property transactions, and more.”
Recently my client came back to India after staying in the United States for 3.5 years & was wondering whether he is required to file an income tax return here in India. Is he a resident or a non-resident?
Another day my neighbor was curious whether they can get credit of the taxes paid outside India. Also people tend to ask whether a bank account held outside India needs to be declared in India. A lot of you also might be wondering on the similar lines. So to clear all your doubts I have presented all common doubts relating to regular queries in a tabular format for all categories of individuals:
| S. No. | Particulars | Resident-ROR | Non Resident-NR | Resident not ordinarily resident-RNOR |
| 1. | Governing Section for definition | Section 6(1),6(6)(a) | Section 6(1),6(6)(a) | Section 6(1),6(6)(a), 6(1A),6(6)(c),6(6)d) |
| 2. | Timelines | Basic condition: In India for 182 days or more OR In India for 60 days or more during the previous year AND 365 days or more during the four years immediately preceding the previous year Additional conditions: Been a resident in 2 out of 10 previous years immediately preceding relevant P/Y AND he has been in India for 730 days or more during 7 years immediately preceding the relevant P/Y | One who does not satisfy any of the basic conditions | One who satisfies basic conditions but does not satisfy the two additional conditions is RNOR + is an Indian citizen not liable to tax in any other country & total income (except foreign sources) exceeds taxable income of Rs.15lacs during relevant P/Y + is in India for 120 days or more(but less than 182 days) |
| 3. | Tax on which income | Global income is taxed | Income received or deemed to be received /accruing or arising in India | Income received or deemed to be received /accruing or arising in India/business is controlled or profession is setup in India |
| 4. | Property held in India sold to Indian resident-Whether Taxable in India? | Yes. TDS u/s 194IA at 1% to be deducted. Can be claimed at the time of filing ITR | Yes. TDS u/s 195 at 20% to be deducted. Lower deduction certificate can be applied | Yes. TDS u/s 194IA at 20% to be deducted. Lower deduction certificate can be applied after fulfilling certain conditions |
| 5. | Whether capital gain arising against sale of capital asset in India, taxable in India & what rate? | Any capital gain through the transfer of capital asset situated in India is deemed to accrue or arise in India. Long term capital gain(LTCG) is taxed at 20% on transfer of immovable property, 10% in case of transfer of shares/units & Short -term capital gain(STCG) is taxed at 15% u/s 111A, normal slab rate in case of STCG on sale of immovable property | Any capital gain through the transfer of capital asset situated in India is deemed to accrue or arise in India.
For Unlisted Securities Long term capital gain in the hands of non -resident is taxable at 10%withoutindexation and without giving effect to the first proviso to Section 48 (under the proviso capital gain is calculated in foreign currency) For Listed Securities If a security/bond is listed on a recognized stock exchange and it is a long-term capital asset then LTCG is calculated at 20% with indexation or 10% without indexation, whichever is lower. |
Any capital gain through the transfer of capital asset situated in India is deemed to accrue or arise in India.
For Unlisted Securities: Long term capital gain in the hands of non-resident is taxable at 10% without indexation and without giving effect to the first proviso to Section 48(under the proviso capital gain is calculated in foreign currency) For Listed Securities: If a security/bond is listed on a recognized stock exchange and it is a long-term capital asset then LTCG is calculated at 20% with indexation or 10% without indexation, whichever is lower. |
| 6. | Whether to report Foreign assets and Income? | Yes, since global income is taxed | No | No |
| 7. | Can TDS deducted be claimed? | Yes. In at the time of filing ITR, TDS which has been deducted & reflecting in 26AS can be claimed | Yes. In at the time of filing ITR, TDS which has been deducted & reflecting in 26AS can be claimed | Yes. In at the time of filing ITR, TDS which has been deducted & reflecting in 26AS can be claimed |
| 8. | Is ITR Filing mandatory in India? | Yes | Yes, if a person holds any beneficial interest in asset held outside India or has a signing in account located outside India has to file ITR as per Section 139(1) read with 4th proviso. Exemption to file ITR : If a person does not earn any income in India other than income from investment in specified fund ref Explanation(c) Sec 10(4D) | No , provided no income accrues/arises/received in India |
| 9. | Can exemption u/s 54/54F/54EC be claimed? | Yes | Yes | Yes |
| 10. | Can credit be availed of taxes paid outside India ? | Yes. By filing Form 67 before before the due date of filing of return as specified u/s 139(1). | No , as per Rule 128 of Income Tax rules, for Form 67, a resident taxpayer is eligible to claim credit for any foreign tax paid in a country outside India. | No , as per Rule 128 of Income Tax rules, for Form 67, a resident taxpayer is eligible to claim credit for any foreign tax paid in a country outside India |
Conclusion:
From the taxation point of view, any person first has to check whether he is to be taxed as a resident or a non-resident or resident but not ordinarily resident and then proceed to check the benefits & available remedies. Hopeful that the compilation of provisions tabled above would be of used profusely.
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The author deals in the matters of international taxation, direct & indirect taxation & other statutory compliances. She can be reached at jainrashi2008@gmail.com for any further assistance.
DISCLAIMER: The views expressed are strictly of the author. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of a firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.
Author Bio
HI,
THANK YOUR FOR FROVIDING DETAILED INFORMATION IN SUMMARY FORM.
HOWEVER, I AM UN ABLE TO TAKE PRINT OUT.
LAST COL. IS NOT PRINTABLE.
REQUESTED TO PROVIDE THE COPY ON MY
E-MAIL : amit@indiantaxation.com
Well written. But, we’are unable to take print out in full. The last col. is getting cut. Can you pl. send a copy of your article in full form.
Desikan, FCA, Chennai
desikan1952@gmail.com