Indian resident with foreign income under dtaa

This query is : Resolved

Guest

Guest (Querist)

27 July 2012 Dear All,

I want a suggestion on the following issue:

Assessee was in India during the PY for more than 182 days thus an Indian Resident. He was employed in France for 5 months and tax was computed as per the French laws.

He also earned salary in India and TDS was deducted as per Indian law accordingly (for the period he was in India).Now for ITR in India as per provisions of residential status and tax incidence,

1) Will foreign income come under perview of taxation (though there is DTAA existence with France)?

or there is no need to show foreign salary in ITR in India as it has already been taxed in france?

2) What is the tax implication if the assessee transfers the certain amount of his income earned in France (which is already taxed) to his Indian bank account?

Amol S Joglekar

Amol S Joglekar (Expert)
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27 July 2012 DTAA says tax paid FRANCE salary is not taxable in India. For residents, this year onwards, foreign assets are required to be disclosed. So declare the bank account abroad. Remittances are tax free.

Guest

Guest (Querist)

30 July 2012 Thank you so much..

One more query,

What is the tax implication if the assessee transfers certain amount of his income earned in France (which is already taxed) to his Indian bank account?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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01 August 2024 When an Indian resident receives income from a foreign source, such as from France, which has already been taxed in France, there are specific tax implications and compliance requirements under Indian tax laws. Here’s a detailed breakdown of these implications:

### **1. Taxation of Foreign Income in India:**

**a. Global Income Taxation:**
- **Indian Resident Status:** If the assessee is a resident in India for tax purposes, their global income, including income earned abroad, is subject to taxation in India.
- **Foreign Income Reporting:** All income, including the amount transferred from France, needs to be reported in the Indian income tax return.

**b. Tax Credit for Foreign Taxes Paid:**
- **Section 91 of the Income Tax Act, 1961:** To avoid double taxation, the Indian tax system provides relief under Section 91. This allows the assessee to claim a tax credit for taxes paid in France on the income that is also taxable in India.
- **Tax Credit Claim:** The credit is allowed for the lower of the foreign tax paid or the Indian tax payable on the foreign income.

### **2. Declaration of Foreign Income:**

**a. Income Reporting:**
- **Income Tax Return (ITR):** The assessee must declare the foreign income in their Indian tax return under the appropriate head of income (e.g., salary, business income, etc.).
- **Foreign Income Schedule:** Fill out the relevant schedule in the ITR form to report foreign income and claim the foreign tax credit.

**b. Conversion Rate:**
- **Conversion to INR:** Foreign income should be converted into Indian Rupees (INR) using the exchange rate applicable on the date of receipt or the average exchange rate for the financial year.

### **3. Documentation and Compliance:**

**a. Proof of Foreign Taxes Paid:**
- **Documentation:** Maintain proof of taxes paid in France, such as tax certificates or receipts, as these may be required to claim the tax credit in India.
- **Certificate of Tax Paid:** Obtain a certificate from the French tax authorities indicating the amount of tax paid on the income.

**b. Filing Requirements:**
- **Form 67:** If claiming a foreign tax credit under Section 91, the assessee needs to file Form 67 along with the ITR, providing details of the foreign income and taxes paid.

### **4. Transfer to Indian Bank Account:**

**a. No Additional Tax:**
- **No Additional Tax Liability:** Transferring the already taxed income to an Indian bank account does not attract additional tax. The income is taxed in India based on the global income tax principle, not on the movement of funds.
- **Reporting Requirement:** Ensure that the foreign income is properly disclosed in the Indian income tax return, including the details of the funds transferred.

**b. Foreign Exchange Management Act (FEMA):**
- **Compliance with FEMA:** Ensure compliance with FEMA regulations related to receiving foreign funds, such as reporting the receipt of foreign exchange if required.

### **Summary:**

1. **Income Tax in India:** Foreign income is taxable in India if the assessee is a resident. You must report the income and claim a foreign tax credit for taxes paid in France.
2. **Claiming Tax Credit:** Use Section 91 to claim relief for taxes paid abroad, subject to the submission of appropriate documentation.
3. **Reporting Requirements:** Declare the foreign income in the ITR, use the correct conversion rate, and file Form 67 if claiming a tax credit.

Consulting with a tax professional can help ensure compliance with all applicable laws and optimize tax benefits.

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