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“Demystify Taxation for Non-Residents in India with our comprehensive guide. Explore the criteria for determining residential status, obligations, and key tax implications. Don’t navigate the complexities alone – stay informed and compliant.”

With the Globalization of economies of world, now any person can work in any country as per his knowledge, experience and expertise. Thousands of Indians are leaving India each year for their Job/ professional carrier/ business purpose etc. Similarly, foreigners are also coming in India to generate their Livelihood. Each Country has their own Taxation related laws, which each person who is earning Income from there is required to follow and has to pay taxes accordingly.

In India, Income tax is levied according to the residential Status of person during the previous year. Section 6 of Income Tax Act, 1961 describes the method how; the residential status of a person will be calculated to determine his tax liability in India. In this blog, we will try to discuss about taxability of Non Resident in India. Determining the residential status of a NRI is the starting point to decide whether his income is taxable in India or not.

Taxability of Non Resident

‘Non-resident Indian’ is an individual who is a citizen of India or a person of Indian origin and who is not a resident of India. As per section 6 of the Income-tax Act, an individual is said to be non-resident in India if he is not a resident in India and an individual is deemed to be resident in India in any previous year if he satisfies any of the following conditions:

1. If he is in India for a period of 182 days or more during the previous year; or

2. If he is in India for a period of 60 days or more during the previous year and 365 days or more during 4 years immediately preceding the previous year.

However, in respect of an Indian citizen and a person of Indian origin who visits India during the year, the period of 60 days as mentioned in (2) above shall be substituted with 182 days. The similar concession is provided to the Indian citizen who leaves India in any previous year as a crew member or for the purpose of employment outside India.

Along with above mentioned criteria, Section 6(1A) states about concept of deemed to be resident in India. According to it, an Indian citizen shall be deemed to be resident in India only if his total income, other than income from foreign sources, exceeds Rs. 15 lakhs during the previous year. For this provision, income from foreign sources means income which accrues or arises outside India (except income derived from a business controlled in or a profession set up in India).

However, such individual shall be deemed to be Indian resident only when he is not liable to tax in any country or jurisdiction by reason of his domicile or residence or any other criteria of similar nature.

After determining the residential status, if the person is determined as Resident of India, then further he has to be classified as resident and ordinary resident or resident and not ordinary resident of India.

After leaving India, many Indians assume that, in the first year itself of leaving India, they becomes NRI and they stops filing Income Tax Returns in India. Even they do not pay taxes on Income generated on their FDRs from Indian Banks, rental income, capital gain income etc. As, we all know, all these transactions are covered under SFT Reporting and if we do not file ITR, then Income Tax Department starts sending them notice U/s 133(6) of Income Tax Act, 1961 and Section 148 of Income Tax Act, 1961.

Even after receipt of these notices, they ignore to submit reply. Please note that, as and when you receive any such kind of notice then firstly determine your residential status as per above described method and submit your reply accordingly. Non reply of these notices may lead to Best Judgment Assessment by officer. If you are not well versed with Income Tax law then you must take the help of professional.

Section 9 of Income Tax Act, 1961, describes about Income deemed to accrue or arise in India. Partial Extract of section 9 is as follows:

9. (1) The following incomes shall be deemed to accrue or arise in India:—

(i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India.

Explanation 1.—For the purposes of this clause—

(a)  in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India ;

(b)  in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export ;

(c)  in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India for transmission out of India ;

(d)  in the case of a non-resident, being—

(1)  an individual who is not a citizen of India ; or

(2)  a firm which does not have any partner who is a citizen of India or who is resident in India ; or

(3)  a company which does not have any shareholder who is a citizen of India or who is resident in India,

no income shall be deemed to accrue or arise in India to such individual, firm or company through or from operations which are confined to the shooting of any cinematograph film in India;

In case of Non Residents also, income is taxable under:

√ Income Taxable U/h Salary

√ Income Taxable U/h Income from House Property

√ Income Taxable U/h Business and Profession

√ Income Taxable U/h Capital Gain

√ Income Taxable U/h Income from other Sources

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Disclaimer: This article is for the purpose of information and shall not be treated as solicitation in any manner and for any other purpose whatsoever. It shall not be used as legal opinion and not to be used for rendering any professional advice. The author will not be held responsible for any lose, if occur after using above information. Kindly consult your professionals before taking any action. This article is written on the basis of author’s personal experience and provision applicable as on date of writing of this article. Adequate attention has been given to avoid any clerical/arithmetical error, however; if it still persists kindly intimate us to avoid such error for the benefits of others readers. The Author “CA. Shiv Kumar Sharma” can be reached at mail –shivsharma786@gmail.com and Mobile/WhatsApp–9911303737

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Author Bio

My Self CA. Shiv Kumar Sharma. I am a member of "The Institute of Chartered Accountants of India" since 2012. Currently, I am in Practice and dealing in Direct and Indirect taxation along with ROC Compliances. I am writing Articles for Taxguru.in, casansaar.com and in the expert panel of ca View Full Profile

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