Taxation (Income Tax) of a Non- Resident Indian

Why is residential status of an Individual Important for Taxation?

The incidence of income tax payable by an individual in India varies according to his residential status. There are 3 categories of residential status for any Individual -

** 60 days shall be replaced by 182 days in case in case of an Indian citizen or a person of Indian Origin coming on a visit to India or in case of an Indian citizen going abroad for an employment during the previous year

Taxability for Non Resident

In respect of a Non Resident only that Income which is received or deemed to have been received in India by or on his behalf and income that accrues or arises or is deemed to accrue or arising in India is Taxable in India.  The taxability of the NRI has been explained in the diagram below:

#1 What is Business Connection in India for an Non Resident to determine the Taxable Income?

·         Business Connection or  Profession Connection includes a person

·         Who has an authority to conclude contracts on behalf of the nonresident.

·    Who does not have such authority but habitually maintains stock of goods or merchandise in India from which he regularly delivers the goods or merchandise on behalf of the non resident.

·       Who habitually secures orders (wholly or mainly ) for the non resident or for non residents under same management. – Here the words wholly or mainly are very important. This signifies that major proportion of the total activity carried out by the person should be for the non resident.

·         Following operations are not considered to be a Business Connection:-

ü  Purchase of Goods in India for the purpose of export i.e to be sent to a non resident.

ü  Collection of news & views in India for transmission out of India by a non resident engaged in the business of running a news agency or publishing news papers, magazines or journals.

ü  Shooting of any cinematograph film in India by a non resident individual who is not a citizen of India, or a firm which does not have any partner who is a citizen of India or a resident in India, or a company which does not have any shareholder who is a citizen of India or is a resident in India.

Disclaimer:

No assurance is given that the revenue authorities/courts will concur with the views expressed herein. My views are based on the existing provisions of law and its interpretation, which are subject to change from time to time. I do not assume responsibility to update the views consequent to such changes. The views are for the general use by public at large and the author does not undertake any responsibility for the use / misuse of the same or any damage that may be caused because of such use / misuse. It is strongly recommended that before implementing any of the above options, the subject matter expert be consulted.