13 August 2014
PERSON GOING ABROAD FOR EMPLOYMENT IN SEP-14 FOR THE REST OF THE FINANCIAL YEAR. WILL THE SALARY EARNED ABROAD IS TAXABLE IN INDIA? CAN HE TRANSFER THE MONEY EARNED ABROAD TO HIS INDIAN SAVINGS ACCOUNT? OR TO HIS PARENTS SAVINGS ACCOUNT? WHAT ARE THE IMPLICATION? GIVE THE DETAILED ANSWER
13 August 2014
there is no tax impact on the remittances made after salary is received outside India. But that is immaterial for this year due to your tax status as resident.
I have referred to section 6 of the Income tax act and other case laws and advance ruling regarding this complex subject. what i conclude in this matter is if a person went abroad for employment basis and remain abroad for more than 182 days, THE CONDITION B IS SILENT ,the status would be non-resident and hence the salary earned is not taxable in india as service rendered outside india and salary also received outside india.
"For example, an Indian citizen going abroad for employment continues to remain a resident of India in the year of departure if he has stayed for more than 182 days in India in that tax year," says Parizad Sirwalla, executive director, Tax, KPMG.
Residence rules
For the purposes of taxation, how is an individual defined as a resident of India?
An individual is said to be resident in India in any tax year if he/she is:
present in India in that year for a period or periods totaling 182 days or more or present in India for at least 60 days or more during the tax year (182 days or more for a citizen of India/person of Indian origin on a visit to India; 182 days or more for a citizen of India who leaves India for employment abroad or as member of a crew of an Indian ship) and 365 days or more during the preceding four tax years.
An individual who does not satisfy either of the above conditions is a non-resident (NR). A not ordinarily resident (NOR) is an individual who:
has been non-resident in India in nine out of the ten tax years preceding that year or has during the seven tax years, preceeding that year, been in India for a total period of 729 days or less.
CIT V AVTAR SINGH WADHVAN3 BOMBAY HC DIT V PRAHLAD VIJENDRA RAO4 KARNATAKA HC AAR - BRITISH GAS RULING
14 August 2014
I believe you are applying explanation (b) to section 6(1). My reading of this section is that it applies to those who reside outside India and come back to India for a certain period. So it should, in my opinion, be applied to cases where somone left India and comes back for holidays or short stay etc. Please note the exact wording of the section "comes on a visit to India in any previous year". So for this explanation to apply to you, you should be coming to India and not going out of it. In your case, you are going out. So, in my opinion, the condition 6(1)(c) should be read as to include 60 days.
However, I do agree that my opinion seems to be contrary to what Sirwalla said in the economic times article. So, let me go through the cases you referred to and see if there is a need for me to change my opinion :)
My amednment to the above, I agree. It seems that I was laying stress on explanation (b) instead of second part of explanation (a). Accordingly, yes the person shall be considered non-resident in this case.
CAclubindia
