Taxability of salary for NRI earned outside India and who are stuck in India because of Covid

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Indians have been working all over the world and generally used to visit India just for the vacation of a month or so and hence used to maintain their NRI status because of which only the income earned by them in India would be taxable in India.

They also used to invest or deposit amount in NRE account in India and earn tax free interest.

This year also many people came down to India in February or March for a month of their vacation but due to the Covid situation got stuck in India as all the international flights had stopped operating or many people lost their job and permanently returned to India.

First thing to keep in mind is taxability in India depends on stay in India and not whether you are working for an employer situated outside India or within India.

Now there are two situations in this:

1. Where people are still working for their foreign employer from their home and earning salary.

2. Where people have left their job and returned to India.

In the both the case if a person is still a salaried employee of a foreign employee and if he stays in India for less than 182 days in a Financial year then in most cases he will remain non-resident and his salary won’t be taxable in India.

The only thing he needs to keep in mind is to accept salary in foreign account and then transfer it to Indian account.

If in the above case he stays in India for more than 182 days in a financial year then one need to check the condition mentioned in section 6 (6) of the Income Tax Act and if he fulfills them as well then his global Income shall be taxable.

[Conditions mentioned in section 6(6):

Person becomes resident in 2 out of 10 preceding previous and stays in India for 730 days or more in 7 preceding previous year]

Now, if you become a resident and your Income earned outside India becomes taxable in India as well as source country then in that case we need to check DTAA between India and that country and claim for credit of taxes paid outside India.

This tax planning would be relevant for many Indian resident returning India from USA, Qatar, Kuwait after many governments have decided to reduce foreign immigrants.

You can even consult with our experts for your tax planning by Clicking here and Booking your appointment or getting your return filed with experts.

This article is just for information purpose and are personal views of the author. It is always advisable to hire a professional for practical execution or you can mail us. If you need assistance you can ask a question to our expert and get the answer within an hour or post a comment about your views on the post and also subscribe to our newsletter for latest weekly updates.

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