Earning income in India while living abroad? Whether you're an NRI, OCI, or foreign national, you may be required to file a tax return under Indian law.
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Any person other than a resident Indian citizen is required to file income tax returns in India only on income that arises or accrues in India. The provisions of the Act can be advantageous for NRIs as they are not liable to pay income tax on the following income:
a. An Individual is regarded as ‘Resident’ of India if:
The short period of stay in India of "60" days, however gets extended to 182 days in following conditions (i.e., even though an Individual is in India for 365 days or more during preceding 4 previous years).
b. Further, in case of an individual being citizen of India and member of crew of foreign bound ship leaving India, the period or periods of stay in India, in respect of such voyage shall be determined in manner and subject to conditions as may be prescribed. b. An Individual is regarded as ‘Resident but not ordinarily Resident’ if:
c. An Individual is regarded as ‘Non-Resident’ if:
An Indian company is always treated as resident in India. Any other company would be a resident if its ‘place of effective management (POEM)’ is in India.
For a company there could be many place of management but POEM will always be one. POEM is a place where key management and commercial decisions necessary for the conduct of the business as a whole are made. It is not sufficient to hold Board Meetings & AGM in the overseas jurisdiction but the team implementing such decisions should not be resident of India. Key Management Personnel such as CEO/CFO etc., should be resident of overseas jurisdiction where the foreign company is located.
An Indian company is always treated as resident in India. Any other company would be a resident if its ‘place of effective management (POEM)’ is in India.
For a company there could be many place of management but POEM will always be one. POEM is a place where key management and commercial decisions necessary for the conduct of the business as a whole are made. It is not sufficient to hold Board Meetings & AGM in the overseas jurisdiction but the team implementing such decisions should not be resident of India. Key Management Personnel such as CEO/CFO etc., should be resident of overseas jurisdiction where the foreign company is located.
An individual, being a citizen of India, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year shall be deemed to be resident in India in that previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.
However, as per the clarification from CBDT via press release dated 2nd February 2020 to clarify that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession.
The condition for deemed residential status applies only if the total income (other than foreign sources) exceeds Rs 15 lakh and nil tax liability in other countries or territories by reason of his domicile or residence or any other criteria of similar nature.
Any NRI who earn more than INR 2,50,000 in a Financial Year is liable to e-file income tax return in India.
Apart from the same an NRI’s needs to e-file income tax returns for the following reasons:
Do NRI’s need to pay advance tax in India?
NRI’s with tax liability exceeding INR 10,000 in a financial year, are required to pay advance tax. If advance tax payments are missed in a year than interest need to be paid for that as mentioned under Section 234B and Section 234C.