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NON RESIDENT TAXATION
IN INDIA
General Information
Under
the Income Tax act, every person who is an assessee
and whose total income exceeds the maximum exemption
limit, shall be chargeable to the income tax at
the rate or rates prescribed in the finance act.
Such income tax shall be paid on the total income
of the previous year in the relevant assessment
year. But the total income of an individual is
determined on the basis of his residential status
in India.
Resident and Non Residents
The income tax to be paid
by an individual is determined by his residential
status. An individual can be termed as a 'resident'
if he stays for the prescribed period during a
fiscal year i.e. 1st April to 31st March either
for
- 182
days or more
- 60
days or more (182 days or more for NRIs) and
has been in India in aggregate for 365 days
or more in the previous four years
Any person who does not satisfy
these norms is termed as a 'non-resident'. A resident
individual is considered to be 'ordinarily resident'
in any fiscal year if he has been resident in
India for nine out of the previous ten years and,
in addition, has been in India for a total of
730 days or more in the previous seven years.
Residents who do not satisfy these conditions
are called individuals 'not ordinarily resident'.
In recent times the Government
of India has opened the Indian market and economy
to attract more foreign capital and technical
know-how. The foreign investors may be Indian
Nationals who resided outside India and other
foreign investors including corporations. A person
who resides outside India is technically known
as 'non-resident'. The residential status of an
individual does not depend upon the nationality
or domicile of that person but it depends upon
his stay in India during the previous year.
In case of an assessee, other
than an individual, the residence depends upon
the place from which its affairs are controlled
and managed. If the control and management of
the affairs of a foreign company is, during the
previous year, located wholly in India, it shall
be treated as resident in India. Where part of
the control and management of the affairs of a
foreign company is situated outside India, it
shall be treated as a non resident company.
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Status
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Indian Income
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Foreign Income
|
| Resident
and ordinarily resident |
Taxable |
Taxable |
|
Resident but not ordinarily resident |
Taxable |
Not taxable |
| Non
Resident |
Taxable |
Not taxable |
So far as the
business income is concerned, the source country
gets the right only if there is a 'permanent establishment'
or a 'fixed place of business' there. Taxation
of business income is on net income from business
at the rate prescribed in the Finance acts.
Income derived
by rendering of professional services or other
activities of independent character are taxable
in the country of residence except when the person
deriving income from such services has a fixed
base in the other country from where such services
are performed. Such income is also taxable in
the source country if his stay exceeds 183 days
in that financial year.
Income from
dependent personal services i.e. from employment
is taxed in the country of residence unless the
employment is exercised in the other state. Even
if the employment is exercised in any other state,
the remuneration will be taxed in the country
of residence if
- the
recipient is present in the source state for
a period not exceeding 183 days
- the
remuneration is paid by a person who is not
a resident of that state
- the
remuneration is not borne by a permanent establishment
or a fixed base.
Further
details
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