India

A tax guide for Indians staying abroad

01 Aug 2017 | By Gogona Saikia

In its battle against black money, the government has asked those staying overseas to furnish relevant details.

However, allaying fears that it is trying to tax global income, the CBDT clarified that details were needed to facilitate refunds in cases taxpayers don't have an Indian bank account.

Read on to know the tax obligations for those living outside the country.

In context: Filing tax returns: A guidebook for Indians outside

01 Aug 2017A tax guide for Indians staying abroad

CategoriesCategories of taxpayers: Residents and non-residents

Depending on when an individual has shifted abroad, they might be a 'tax resident' (ROR) or 'non-resident'.

An individual is considered a tax resident for a particular financial year if a) they have lived in India for at least 182 days of the year, and b) if they have stayed here for at least 60 days this year and also the last four years.

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More detailed clauses and classification

MoreMore detailed clauses and classification

For persons of Indian origin (PIO) visiting, the 60 days in the aforementioned clause is substituted by 182 days.

There's another category: 'Resident but not ordinarily resident' (RNOR). This is a resident in the current year but a) was a non-resident in nine of the last 10 years, and b) has stayed in India for maximum 729 days in the last seven years.

Tax obligationsSo what's taxable, what's not?

Global income, including interest on overseas holdings, is taxed only for residents. RNOR and non-residents are taxed only on their India income, including salary, rental income, capital gains on assets sold in the country etc.

NRE and FCNR accounts held by NRIs, where foreign income is deposited, are not taxable. However, interest on NRO account where Indian income is deposited is taxable.

TreatiesTo save from double taxation, there are tax treaties

If an individual is a tax resident of one country but has income earned in another, tax treaties simplify things. They effectively let the latter tax the income.

Either the non-tax country exempts the income earned abroad, or the residence country provides foreign tax credit for duties paid elsewhere.

India already has such treaties with about 100 countries including US, UK, Australia and Canada.