Confused about the place of taxation for your income?

Globalization brought a wave in the educated Indian workforce as more and more MNCs venture in our country offering jobs to professionals in various sectors. Going abroad on a work visa is common, this creates a lot of confusion regarding the taxation. NRIs face a lot of difficulty when it comes to payment of taxes.  
Please note that liability of taxes in India depends on the residential status in India during the FY i.e. April-March. If you stay for less than 182 days during the financial year period, you will be declared as an NRI. In case of an NRI, only income which is deemed to be received or accrued in India is taxable in India while for a resident Global income earned is taxable in India.

Further, to add more, there are 2 types of Resident Individuals, i.e. Ordinarily and Not Ordinarily Resident. In case of Not Ordinarily Resident Individual only the income which is accrued or received in India is taxable in India which is same as NRI.
In case of Resident but Ordinarily Resident, global income would be taxable in India. In case such a person is a resident in more than one country at a time, then the liability of taxes would fall under both the countries but one is liable to pay taxes only once in one country and claiming relief u/s 91 or 91( depending on applicability of DTAA) in the other country.
Case Study:

Mr. X is an Indian citizen went to Canada for employment. He leaves India for first time on Sep 26, 2010. During the PY 2011-12 he comes to India for 175 days. Now, we have to determine his residential status for AY 2011-12 & AY 2012-13.


An Individual is said to be resident in India as per primary conditions mentioned above:

In the given example, since Mr. X is an Indian citizen, leaving India for employment, therefore condition 2 is not operative. But condition 1 will get satisfied if he stays in India for at least 182 days in PY.

Number of days of stay of Mr. in India in the PY 2010-11.

















Since Mr. X stays for less than 182 days (179 days) in India, so he is a Non-Resident in AY 2011-12. Also, in AY 2012-13, he stays for 175 days in India which is less than 182 days, so he is a non-resident for AY 2012-13 also.


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