Salary and Sec 90

To address your query regarding your tax situation as a resident individual who worked in Malaysia for 3 months and in India for 9 months, here is a structured guide based on current Indian income tax regulations.

1. ITR Form Selection

As a resident individual who has earned foreign salary income and needs to claim foreign tax credit (FTC), you are generally required to file ITR-2. ITR-1 (Sahaj) is not applicable if you have foreign-sourced income or need to claim tax relief under the Double Taxation Avoidance Agreement (DTAA).

2. How to Fill Schedule FSI (Foreign Source Income)

Schedule FSI is where you declare the income earned outside India.

• Identify the Income: Report your Malaysian salary income here.

• Columns to Fill: You will need to provide:

  • Country Code: Select the code for Malaysia.

  • Taxpayer Identification Number (TIN): Enter your tax ID from Malaysia (if applicable).

  • Income from Salary: Enter the amount earned in Malaysia.

  • Tax Paid Outside India: Enter the tax amount deducted under the Malaysian tax law.

  • Tax Relief Claimed: This links to Schedule TR, where you specify the section under which you are claiming relief (typically Article 24/25 of the India-Malaysia DTAA).

• Form 67: You must mandatorily file Form 67 on the e-filing portal before filing your ITR to legally claim the Foreign Tax Credit.

3. Salary under the India-Malaysia DTAA

Under the India-Malaysia DTAA (Article on "Dependent Personal Services"):

• Generally, your salary is taxable in the country where the employment is exercised. Since you performed the work in Malaysia, Malaysia has the primary right to tax that income.

• As an Indian resident, your global income is taxable in India. You report the Malaysian income in your Indian tax return and claim credit for the taxes already paid in Malaysia to avoid double taxation.

4. Conversion Rates

For tax purposes, the conversion of foreign currency to Indian Rupees (INR) follows Rule 26 of the Income-tax Rules.

• Rule: The conversion rate is the Telegraphic Transfer Buying Rate of the foreign currency on the last day of the month immediately preceding the month in which the salary is due or paid.

• Example: For salary received in April 2021, you would use the TT buying rate as of March 31, 2021.

• You can typically find historical "TT Buying Rates" on the State Bank of India (SBI) website or the Reserve Bank of India (RBI) archives.

Summary for Your Filing

• Form: Use ITR-2.

• Compliance: File Form 67 online before submitting your ITR to claim the tax credit.

• Reporting: Declare the Malaysian income in Schedule FSI and claim the tax credit in Schedule TR.

• Currency: Use the TT buying rate from the last day of the month preceding the month the income was earned/paid.