residential status & tax

Dear Rohan,

The residential status of a person in FY 2009-2010 is Resident & Ordinarily Resident In India

This means that his global Income(i:e earned outside India as well) in respect of FY 2009-2010 will be taxabkle in India..

Further, If has paid any taxes in Foreign country in the form of TDS..then if India has DTAA with that country thenthat amount will not be taxable in India...If India is not having DTAA with that country then he can claim Relief u/s 91 in respect of the taxes paid in Foreign Country..

Perfect Amir....

Thank u very much for the reply . ...  still i would like to clarify    with regards to the same  query .....

Assume  X ( a global management Co.- having operations all over world ) eg X ( India ) ,  X ( switzerland )  .. 

Now if   X ( india Ltd. ) employs Indian citizen in India.

In F.Y. 09 - 10 .... he is an employee  of  X ( india ltd. ) from april'09 - 15th june'09 ..receives salary upto 15th june'09.

person leaves India.. He is employed by  X ( switzerland Ltd. )  he signs new employment contract and receives employment letter from X ( switzerland )

will receive salary for work in  X (switzeralnd ) ( swiss currency ) ...no salary from X ( india ) ..

he joins X ( switzerland ) on 18th june'09....

from 18th june ' 09 to 30th Dec' 09 ....... works  for X ( switzerland )

from 31st Dec'09 to 15th Jan'09 ----        is in India....on leave ...

from 16th Jan'09    ----   returns to work place & continues work  for X ( switzerland ) till dec 2010 .                

Is an Indian resident from  F.Y :- 2001 - 2002 

For F.Y. 2009 - 2010 will he be treated as Resident in India or non - resident ....  if we look at

 section 6 ( 1 ) alongwith explanation ( a ) to section 6  (  1 ) which states that   :-

6. For the purposes of this Act,

(1) An individual is said to be resident in India in any previous year, if he

       (a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or

       (b) 45[* * *] - omitted.....

       (c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or            more, is in India for a period or periods amounting in all to sixty days or more in that year.

      46 [Explanation.In the case of an individual,

         (a) being a citizen of India, who leaves India in any previous year [as a member of the crew of an  Indian ship as defined in clause (18) of              section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or] for the purposes of employment outside India, the provisions of sub-clause (c)              shall apply in relation to that year as if for the words sixty days, occurring therein, the words one hundred and eighty-two days had been              substituted ;

Will explanation ( a ) be effective in this case as he is   leaving India for purpose of employment .... 60 days extendend to 182 days....(  in 2nd  basic condition )  

or he will still be treated as  resident and ordinarily resident in India ,, if so then India has DTAA with Swiss confederation ( switzerland )..

he needs to go thru agreement and will he need to file his return in India  including foreign income + Indian income....
 
foreign company deducts tax @   10.31 % on basic salary and also deducts contribution towards unemployment insurance and pension fund from gross salary
can he claim that in Indian return.
 

Dear Rohan,

The Explanation cntaining the  words for the "purposes of employment outside India" would have applied had he stayedout of India for the entire FY.But in ur case this fellow has returned to India in the same FY..

I know what i am saying is not coming out on reading of the section or explanation..But trust me that's the way it works...

As regards ur query regarding deductions towards unemployment insurance & pension in foreign is concerned, this amount is not eligible for deduction under Indian Income Tax Act..

But If he had paid "Professional Tax in the nature of Employment Tax" then that amount would be deductible under Indian Income Tax Act..

thank u Amir....

As per India - Switzerland DTAA ....

ARTICLE 15: Dependent Personal Services.--

1. Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar  remuneration derived by a resident of a Contracting State   ( suppose India )
   in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State ( switzerland ) . If the    employment is so    exercised, such remuneration as is derived therefrom may be taxed in that other State.( switzerland )
 

2.   Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State ( India ) in respect of an employment exercised      in the other Contracting State ( switzerland)  shall be taxable only in the first-mentioned State ( India )  if,--

         (a)        the recipient is present in the other State ( switzerland ) for a period or periods not exceeding   in the aggregate 183 days in any 12-month period            commencing or ending in the   fiscal year concerned, and

        (b)        the remuneration is paid by, or on behalf of, an employer who is not a resident of the other                    State ( switzerland ) , and

        (c)        the remuneration is not borne by a permanent establishment or a fixed base which                  the   employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in    international traffic, by an enterprise of a Contracting State may be taxed in that State.

ARTICLE 23: Elimination of double taxation.--

1. (a) Subject to any provisions of the law of India which may from time to time be in force and which relates to the relief of taxes paid in a country    outside India, where a resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in Switzerland,     India        shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in Switzerland whether directly or by           deduction. Such deduction shall not, however, exceed that part of the income-tax (as computed before the deduction is given) which is attributable to         the income which may be taxed in Switzerland.

   (b) Where a resident of Switzerland derives gains from the alienation of shares which may be taxed in India according to Article 13, paragraph 5,        sub-paragraph (b), India shall allow as a deduction from tax on that income, an amount equal to the income-tax paid in Switzerland on these capital        gains. The deduction shall not, however, exceed that part of the Indian income-tax, which is imposed on these capital gains.

Does Article 15.. clause 1 & clause 2 (a).... suggest person should be taxed only in switzerland..

if not .... AS PER Article 23 ..     if we consider person as ROR ( india ) for  F.y :- 2009 - 2010. having Indian Income= Rs.4 lacs & tds ( @ 20   %) = 77,000 /= 
and foreign income = Rs. 37 lacs & tds =  3,75,000 /= ( deducted in foreign country ).    then will total foreign income be exempted or only credit of tds deducted ( foreign income ) will be given..

Salary income ( India ) -                       4,00,000
Salary income ( foreign ) -                 37,00,000
                                                               ---------------
Gross Total Income                           41,00,000

Less :- Deduction U/s.80 C                1,00,000
             Ded. U/s.     80 D                        15,000
             Ded. U/s.     80 G                     2,00,000   ( 4 lacs @ 50 % )
                                                           ------------------
Net Income                                         37,85,000
                                                              -------------

total tax payable                                 10,70,685

Less :- Tds ( India )                               77,000

Less :- Tds ( switzerland )                 3,75,000

                                                             ----------------
Net Tax Payable                                  6.18,685

Any time brother,

 now u convinced na.................

WRONG INTERPRETATION BY MEDIA

Nobody has mentioned about the exempted categories at all.

Look at the text of the bill carefully.4. (1) An individual shall be resident in India in any financial year, if he is in India—

(a) for a period, or periods, amounting in all to one hundred and eighty-two days

or more in that year; or

(b) for a period, or periods, amounting in all to—

(i) sixty days or more in that year; and

(ii) three hundred and sixty-five days or more within the four years immediately preceding that year.

(2) The provisions of clause (b) of sub-section (1) shall not apply in respect of an

individual who is—

(a) a citizen of India and who leaves India in that year as a member of the crew of an Indian ship; or

(b) a citizen of India and who leaves India in that year for the purposes of employment outside India.

It clearly exempts sailors and persons who go out of the country for employment purposes. The analysts have goofed up in their interpretations.