05 August 2010
An Indian Resident receives 5oK USD in US for professional service rendered. Rs.5K is deducted as TDS in US. 1. Is it Taxable in India? 2. What is the Accounting treatment according to Indian IT Act? 3. Documents to be produced while filing returns?
06 August 2010
Indian Residents are taxed on the income in India. Please refer to section 5(1)(c). Accounting treatment remains the same of domestic income. Nothing additional is required to be produced, while filing tax return.
06 August 2010
Here i would differ with Mr Bansal. In fact S.5(1)(c) says to include such income in the case of resident indian, in the total income.
An individual is taxed based on his residential status in India. The residential status, in turn, is determined based on the physical stay of an individual in the relevant financial year (tax year) as well as preceding ten tax years. This is particularly relevant in respect of Indians working overseas or having income/income earning assets outside India.
An individual who is an ordinary resident is taxable on his worldwide income, irrespective of the place of receipt or accrual of such income. Thus, broadly speaking, rental income, business income, interest, dividends, capital gains etc. earned / received overseas would be taxable in India.
In the case of a person who is not Ordinarily Resident, any income other than income accruing or arising outside India is taxable in India. However, in the case of such income that accrues or arises outside India is derived from a business controlled in or a professional set-up in India, then the same would also be taxable in India.
In case an individual is a non-resident, then only income received / deemed to be received or accrued / deemed to be accrued in India is taxable in India. Thus, broadly speaking, his overseas income would not be taxable in India, provided it is first received outside India. It is also important to examine the conditions laid out under the respective Double Taxation Avoidance Agreements (DTAAs), also know as treaties, which India has entered into with other countries to finally determine the taxability or otherwise for any particular source of income.
Generally, the DTAAs provide for taxability of income in one country. Else, if the income is subject to tax in both the countries, then credit could be claimed for tax paid in the other country, subject to the prescribed conditions.
The query starts with giving the status of the assessee as "Indian Resident" That is why I did detailed on relationship between residential status and scope of income from taxability perspective.
06 August 2010
Thank u all for the answers. Mr. Arora, your detailed analysis was of much help. Could u also pls suggest a good book or website to learn about DTAAs...?
08 August 2010
In the present case the first thing that needs to be checked is the status of the Indian Resident. And presuming the status of the person as ROR then the next thing that needs to be checked is the exact nature of services rendered by the person because lot of deductions under sections 80Q to 80RRB(as may be applicable) are available under the Income Tax Act.
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