Have you also returned to India after working abroad, and are worried about whether your foreign earnings will be taxed in India or not? Then this article is for you! Know what the Indian tax rules say about tax on returning from abroad and how your tax residential status is decided, so that you do not unnecessarily pay more tax on your earnings.
Key Takeaways
Quick Read- What is tax residential status
- How is residential status decided
- Conditions in special cases
- How much tax will be levied on which status?
What is tax residential status
When a person pays income tax in India, their residential status is first seen. This decides whether that person has to pay tax on their foreign earnings in India. Your residential status can vary every financial year. Two main things are taken into account to decide this.
How many days did you stay in India in that financial year.
Whether your source of income is in India or abroad.
How is residential status decided
Your status depends on some basic conditions. You must fulfill at least one of these two basic conditions. You must have stayed in India for 182 days or more in the relevant financial year. You must have stayed in India for 60 days or more in the relevant financial year, and have stayed in India for a total of 365 days or more in the previous 4 financial years.
Conditions in special cases
If you are going abroad for a job or are a crew member of an Indian ship, then the 60-day condition will become 182 days. If you are an Indian citizen or of Indian origin and are coming to India from abroad, then you will have to stay in India for at least 182 days; only then will you be considered a resident of India. Apart from this, if the total income (excluding foreign income) of an Indian citizen is more than ₹ 15 lakh in the previous financial year and he does not have to pay tax abroad, then he will be considered a resident of India.
How much tax will be levied on which status?
You can have three types of statuses in terms of tax. Your tax liability is different according to each status.
Resident and Ordinary Resident (ROR)
If you meet one of the basic conditions mentioned above and two additional conditions (resident in India for at least 2 years out of the last 10 years and stayed in India for 730 days or more in the last 7 years), you will be considered a ROR. In this case, you will have to pay tax in India on your entire global income.
Resident but Not Ordinary Resident (RNOR)
If you meet one of the basic conditions but do not meet both the additional conditions, you will be considered an RNOR. In this case, you will have to pay tax only on the income earned in India. You will not have to pay tax in India on the income earned outside India.
Non-Resident Indian (NRI)
If you do not meet either of the two basic conditions mentioned above, you will be considered an NRI. In this case, you will have to pay tax only on the income earned in India.
