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Income can be subject to double taxation when it is taxed both in the country where it's earned, often referred to as the 'source country,' and in the country where the person earning the income resides, known as the 'residence country.' For instance, consider a scenario where a Non-Resident Indian (NRI) resides in the USA but earns income in India. In such cases, the NRI is liable to pay taxes on their income both in the source country, India, and in their residence country, the USA.
A Double Taxation Avoidance Agreement (DTAA) is executed by both countries to mitigate the double or larger tax in the above situation and also to promote and foster economic trade and investment between the two countries.
DTAA makes provision for elimination on double taxation in one of the following manner:
We at Dinesh Aarjav & Associates offer DTAA advisory and tax compliance services to both Indian & Multinational Clients. And provide tax management services to NRIs too, by following the jurisdiction of the Indian laws and regulations along with overseas countries & Double Taxation Avoidance Agreements (DTAA)
A person who is not a resident of India is considered to be a Non-Resident of India (NRI). You are a resident if your stay in India in a given financial year for : 182 days or more 60 days or more and 365 days or more in the 4 immediately preceding previous years. In case you do not satisfy either of the above conditions, you will be considered an NRI.
An NRI, like any other individual taxpayer, must file his return of income in India if his gross total income received in India exceeds Rs 2.5 lakh for any given financial year. Further, the due date for filing a return for an NRI is also 31 July of the assessment year or extended by the government.
An NRI’s income taxes in India will depend upon his residential status for the year as per the income tax rules mentioned above. If your status is ‘resident’, your global income is taxable in India. If your status is ‘NRI,’ your income earned or accrued in India is taxable in India. 1. Salary received in India or salary for service provided in India, income from a house property situated in India, capital gains on transfer of asset situated in India, income from fixed deposits or interest on a savings bank account are all examples of income earned or accrued in India. These incomes are taxable for an NRI. 2. Income which is earned outside India is not taxable in India. 3. Interest earned on an NRE account and FCNR account is tax-free. Interest on NRO accounts is taxable in the hands of an NRI.
No, The Income tax Act applies to all persons who earn income in India. Whether they are resident or non-resident.
In case of resident individuals and companies, their global income is taxable in India. However non-residents have to pay tax only on the income earned in India or from a source/activity in India.
Yes, if an NRI’s tax liability is expected to exceed Rs. 10,000 in a financial year, he must pay advance tax. Interest under Section 234B and Section 234C will be levied if advance tax is not paid.
It is also good to check whether the country of migration has a DTAA (Double Tax Avoidance Agreement) with India. There are many countries with which India has a tie-up to ensure there is no double taxation on income earned in one country and taxes are paid in both countries. This is to ensure that taxes are not paid twice.
The dividend income earned by a non – resident individual from an Indian Company is taxable in India as per recent amendment in the Act as passed by Indian Parliament in the month of February, 2020. However, rate of taxation of such dividend income will be as per the rate mentioned in DTAA Agreement or tax rates as provided in the Income Tax Act, 1961 whichever is beneficial to the assesse. Generally, the rate of taxation for NRI varies from 5-10% on dividend income.
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