Non-resident

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 March 2014 one of my client had gone to abroad for employment purpose in dubai..
departure date : 14/11/2009
arrival date : 16/07/2012
and he was receiving salary from that dubai's company in U.A.E DIRHAMS (currency).
i want to file his return for a.y 12-13..he is non-resident...whether his salary income is taxable ?...and how should i convert this salary in rupees ?

Sandeep Dharar

Sandeep Dharar (Expert)
Follow

24 March 2014 U can find the residential status via following link:-

http://www.taxpointindia.com/residentialstatus.html

U have to convert the income in rupee by the exchange rate which changes day to day....

Querist : Anonymous

Querist : Anonymous (Querist)

24 March 2014 i know he was non-resident in a.y 12-13..but while filing IT return...whether i have to consider this salary income or not ? in my opinion it is not taxable bcoz he earned in dubai...pls correct me if i m wrong...

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
Follow

03 August 2024 For the Assessment Year (AY) 2012-13, the taxation of salary earned by a non-resident is governed by the provisions of the Income Tax Act, 1961. Here’s how you should approach the situation for your client:

### **1. **Determine Residential Status**

For AY 2012-13, the residential status is crucial to determining the taxability of income in India. The status is defined as follows:

- **Resident:** An individual is considered a resident if they satisfy at least one of the following conditions:
- They are in India for 182 days or more in the financial year.
- They are in India for 60 days or more in the financial year and 365 days or more in the preceding 4 years.

Given the dates:
- Departure Date: 14/11/2009
- Arrival Date: 16/07/2012

For AY 2012-13 (FY 2011-12), your client was present in India from 01/04/2011 to 13/11/2011 (about 225 days) and from 16/07/2012 to 31/03/2012 (about 259 days). Therefore, in the financial year 2011-12, he was in India for more than 182 days, which qualifies him as a **Resident** for that period.

### **2. **Taxability of Salary Income for a Non-Resident**

As per Section 5 of the Income Tax Act:
- **Non-Resident:** Income earned or accrued outside India is not taxable in India.

Given that your client was working in Dubai and receiving a salary from a Dubai-based company while staying in Dubai, this income is classified as "income earned outside India" and is **not taxable** in India. Thus, his salary from Dubai for the AY 2012-13 is not subject to tax in India.

### **3. **Filing the Return**

Even though the salary is not taxable in India, you may still need to file the income tax return to comply with reporting requirements:

- **Declare Salary Income:** In the Income Tax Return, you should declare the salary received in Dubai in the appropriate section (such as "Income from Other Sources" or as per the specific income section for employees), but clearly state that it is not taxable due to non-residency status.

- **Convert Salary to INR:** To report the income, you need to convert the salary amount from UAE Dirhams to Indian Rupees. Use the exchange rate prevailing on the date of receipt or a reasonable average rate for the financial year as prescribed by the Reserve Bank of India (RBI) or the Income Tax Department.

**Exchange Rate for Conversion:**
- You can use the exchange rate published by the RBI or the average exchange rate for the financial year as provided in tax laws or guidelines.

### **4. **Steps for Conversion**

1. **Determine the Exchange Rate:** Find the applicable exchange rate for UAE Dirhams (AED) to INR for the financial year 2011-12. For instance, if the average exchange rate was 1 AED = 14 INR, and your client earned AED 100,000, then:

**Income in INR = AED 100,000 × 14 INR/AED = INR 14,00,000**

2. **Report the Income:** On the Income Tax Return form, report this amount under the respective income section but ensure to mention it as non-taxable.

### **Summary**

- **Residential Status for AY 2012-13:** Resident
- **Taxability of Salary:** Not taxable in India as it is earned outside India.
- **Conversion of Salary:** Convert the salary from AED to INR using the applicable exchange rate for the financial year 2011-12.
- **Filing Requirement:** You should file a return disclosing the salary income but specifying that it is not taxable due to non-residency.

Thus, your client’s salary earned in Dubai is not taxable in India for AY 2012-13, but the income should be disclosed in the return.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now