Rnor tax status - tech services to foreign company
This query is : Resolved
07 November 2016
I am Indian citizen that returned to india after 10 years of stay in USA. I qualify for RNON status thus came to know that my foreign income is not taxed in India. My employer wants me to provide consulting services even after my return back to India. (software toubleshooting/maintenance services) My employer/client has no presence in India. Work will be performed over the internet by connecting to servers in USA.
INDIA-US DTAA: relevant article
ARTICLE 15 Independent Personal Services 1. Income derived by a person who is an individual or firm of individuals (other than a company) who is a resident of a Contracting State from, the performance in the other Contracting State of professional services or other independent activities of a similar character shall be taxable only in the first-mentioned State except in the following circumstances when such income may also be taxed in the other Contracting State: (a) if such person has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State; or (b) if the person's stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 90 days in the relevant taxable year. 2. The term “professional services” includes independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants.
My questions: The india-USA DTAA seems to suggest i cant be taxed in USA as i am resident of India for tax purposes. Am i interpreting this right ? If i earn income by independent consulting for my US clients.So will i, as an RNOR be exempt from Indian taxes for the next 2 years of RNOR on this income in India.? Seems too good to be true but just checking ..... :)
thank you
INDIA-US DTAA: relevant article
ARTICLE 15 Independent Personal Services 1. Income derived by a person who is an individual or firm of individuals (other than a company) who is a resident of a Contracting State from, the performance in the other Contracting State of professional services or other independent activities of a similar character shall be taxable only in the first-mentioned State except in the following circumstances when such income may also be taxed in the other Contracting State: (a) if such person has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State; or (b) if the person's stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 90 days in the relevant taxable year. 2. The term “professional services” includes independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants.
My questions: The india-USA DTAA seems to suggest i cant be taxed in USA as i am resident of India for tax purposes. Am i interpreting this right ? If i earn income by independent consulting for my US clients.So will i, as an RNOR be exempt from Indian taxes for the next 2 years of RNOR on this income in India.? Seems too good to be true but just checking ..... :)
thank you
07 November 2016
Now that you have come to India, having the status "Resident but not ordinarily resident", your income of providing ervice to US company over internet using US servers, is TAXABLE in India.
(Just to make it clear, income earned in INDIA, is taxable in all cases i.e. resident, non resident, resident but not ordinarily resident)
The DTAA is saying that it is NOT taxable in India if the same is taxable in USA.
(Just to make it clear, income earned in INDIA, is taxable in all cases i.e. resident, non resident, resident but not ordinarily resident)
The DTAA is saying that it is NOT taxable in India if the same is taxable in USA.
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07 November 2016
thank you sir, for taking the time.....
http://www.incometaxindia.gov.in/Tutorials/9.%20Non-resident.pdf
this is saying the income accrued outside india is not taxable for RNOR (taxable if Income from salary in respect of services rendered in India is taxable). The income earned by me via deposit to US bank account in Dollars, providing service to Client in US who has no connection to India ie services are not consumed in India. Similar kind of service provided by indian individual/company to US client is also exempt from service tax in India as service is treated to not be rendered/consumed in India. If for service tax purpose this service is treated as service rendered out of India, why is it treated differently for income tax purpose?
thanks you...
http://www.incometaxindia.gov.in/Tutorials/9.%20Non-resident.pdf
this is saying the income accrued outside india is not taxable for RNOR (taxable if Income from salary in respect of services rendered in India is taxable). The income earned by me via deposit to US bank account in Dollars, providing service to Client in US who has no connection to India ie services are not consumed in India. Similar kind of service provided by indian individual/company to US client is also exempt from service tax in India as service is treated to not be rendered/consumed in India. If for service tax purpose this service is treated as service rendered out of India, why is it treated differently for income tax purpose?
thanks you...
07 November 2016
service tax and income tax are on different footing.
Under service tax Place of Providing Service plays major role in deciding the TAXABILITY of service.
Under income tax,Residential status of person plays major role in deciding the TAXABILITY of income.
So far as income tax is concerned, your income is accruing in India, although received outside India. (This is for the simple reason that your profession of providing consultancy is set up in India.
Your views please.
Under service tax Place of Providing Service plays major role in deciding the TAXABILITY of service.
Under income tax,Residential status of person plays major role in deciding the TAXABILITY of income.
So far as income tax is concerned, your income is accruing in India, although received outside India. (This is for the simple reason that your profession of providing consultancy is set up in India.
Your views please.
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