Income earned outside india

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 January 2015 The assessee is resident in india for the previous year and he earned income (tax free) outside india.

whether the same income would be taxable or exempted in india.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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21 January 2015 yes it is taxable as for resident all income including foriegn income is taxable in india unless specifically exempted under the act or rules.

Querist : Anonymous

Querist : Anonymous (Querist)

21 January 2015 thanks for prompt reply
income is exempted in foreign country. whether it would be taxable

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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29 July 2024 When a resident of India earns income outside India, the taxability of that income in India depends on several factors, including the nature of the income, the tax laws of India, and whether the income is subject to any Double Taxation Avoidance Agreement (DTAA) between India and the foreign country where the income was earned. Here’s how it works:

### **1. **Taxability of Foreign Income for Indian Residents**

**General Rule:**
- **Global Income Taxed:** As per the Income Tax Act, 1961, residents of India are taxed on their global income. This means that all income earned by an Indian resident, whether from India or abroad, is subject to Indian income tax.

**Specifics:**

1. **Income Exempted in the Foreign Country:**
- Even if the income is exempt in the foreign country, it is still taxable in India unless a specific exemption applies under Indian tax laws or a DTAA.

2. **Double Taxation Avoidance Agreement (DTAA):**
- If there is a DTAA between India and the foreign country, it might provide for relief or exemption. DTAA agreements typically allow taxpayers to claim a credit for taxes paid in the foreign country against their Indian tax liability or might provide exemption on specific types of income.

### **2. **Exemptions under Indian Tax Law**

**Section 10 of the Income Tax Act:**
- **Section 10(4) and 10(4)(ii):** Provides exemptions for income earned outside India by a resident Indian if certain conditions are met, such as specific types of income or amounts remitted to India.
- **Section 10(7):** Exempts income received by an individual from services rendered outside India as a non-resident, under certain conditions.

### **3. **Tax Credits and Reliefs**

**Foreign Tax Credit:**
- If the income earned outside India is taxed in the foreign country, the taxpayer can claim a credit for taxes paid in the foreign country under Section 91 of the Income Tax Act. This helps avoid double taxation by providing relief for taxes paid abroad.

**DTAA Relief:**
- If a DTAA applies, the taxpayer can benefit from either a tax exemption or credit for taxes paid abroad, as per the provisions of the DTAA.

### **4. **Filing Requirements**

- **Disclose Foreign Income:** Even if the income is exempt under DTAA or Indian law, it must be disclosed in the Indian tax return.
- **Claim Relief:** If applicable, claim relief under the DTAA or under Section 91 for taxes paid abroad.

### **Example Scenario:**

- **Income Earned:** Suppose an Indian resident earns $10,000 from a foreign source and this income is tax-free in the foreign country.
- **Taxability in India:** The $10,000 would be taxable in India as part of the global income.
- **DTAA or Section 10 Exemptions:** Check the DTAA between India and the foreign country or relevant sections of the Income Tax Act for any applicable exemptions or reliefs.
- **Foreign Tax Credit:** If the foreign country has levied tax on the income, the taxpayer can claim a credit for the tax paid against the Indian tax liability.

### **Conclusion:**

The income earned by a resident of India from a foreign source, even if exempt in the foreign country, is generally taxable in India. However, relief might be available through DTAA provisions or tax credits for taxes paid abroad. It’s important to check the specific details of the DTAA, relevant exemptions under the Income Tax Act, and ensure proper reporting and compliance in the Indian tax return.

Consulting a tax professional can provide detailed guidance tailored to specific circumstances and help in accurate tax planning and compliance.

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