For tax purposes, I was an non-resident India (NRI) for 6 years (FY 2009-10 to FY 2014-15). Then, I spent most of the last 2 financial years in India. As a result, for tax purposes, I attained not ordinarily resident (NOR) status for two financial years (FY 2015-16 and FY 2016-17) so there was no tax on my overseas salary.
In the current year (FY 2017-18), I started working in Dubai but the company shut down and I and planning to return to India and start working here.
1. I am yet to spend 183 days in Dubai for this financial year (maybe I would be spending around 145 days). What would be the actual count of days that would determine my tax status in India? Would this be 60 days or 182 days? My stay in India was more than 365 days in last 2 financial years and was more than 730 days in last 4 financial years.
2. After returning to India, if my days in India would be spent more than 182 days and I fall in the category of Resident (ROR) then
a. Would this make my Dubai salary taxable in India?
b. Dubai salary is tax-free in Dubai. Does this provide any tax exemption or credit in India as per Double Taxation Avoidance Agreement (DTAA)?
c. How will Indian tax authorities consider the tax-ability or exemption of various components of my Dubai salary?
d. Before returning to India and leaving Dubai, what kind of documents I would need from my Dubai employer and other authorities to prove my overseas salary components and figures for filing tax returns in India next year?
To find out how your income will be taxed in India, you must first find out your residential status in India as per the Income-tax Act.
You are considered resident in India if you meet any one of the following conditions:
1. You are in India for a period of 182 days or more in the financial year, or
2. You are in India for a period of 60 days or more during the financial year and have been in India for 365 days or more during the immediately 4 preceding financial years.
Since you will be in an Indian employment at the end of the year, hence the condition of 60 days (second condition above) will be applicable to you. You will meet the second condition above.
There are some conditions on the basis of which you may be resident but not ordinarily resident:
1. If you have been an NRI in 9 out of 10 financial years preceding the year, or
2. You have during the 7 financial years preceding the year been in India for a period of 729 days or less.
However, you do not meet any of these conditions. You will be considered an ordinarily resident Indian for tax purposes. If you are ordinarily resident in India, your income earned or received anywhere in the world is taxable in India. Therefore, income earned in Dubai will be taxable in India. Since no tax is paid out of India there is no DTAA benefit available to you. You may claim tax exemptions as per Indian laws on the various components of your salary.
You must ask your employer for pay slips, employment letter to support the payments made to you. You must bring details of any assets owned by you outside India, including any bank accounts. These have to be mandatorily reported by resident Indians.
Archit Gupta is founder and chief executive officer of ClearTax.
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