Tax for income in finland

Hi Mr. Anwar,

First you have to determine your Residential Status i,e according to the Income Tax act, whether you are a Resident in India or a non Resident.

According to Section 6(1): A Individual is said to be a Resident in India if in any previous year if he fulfills any one of the following basic conditions:

1. He is in India in that previous year for a period or periods amounting in all to 182 days or more. OR

2. He is in India for a period or periods amounting in all to 60 days or more during the previous year and 365 days or more during the 4 years preceeding that previous year.

IF AN INDIVIDUAL DOES NOT SATISFY BOTH THE BASIC CONDITIONS, HE WILL BE A NON-RESIDENT

In your Case, you do not satisfy the first  condition since you were in India for only 4 months during the Current previous year (Prevoius year means the Financial year 2010-2011 for Assessment year 2011-12)

But you do satisfy the second condition that is you have stayed for more than 60 days in India. An as for the Preceeding 4 Previous years you have stayed for MORE THAN 365 DAYS.

Please refer to the date stamps on your passport for knowing the exact dates.

But fortunately there is an exception to this rule/ Explanation (a) to  Section 6(1) says that the period of 60 days has to be extended to 182 days in the below case:

1. An Indian Citizen who leaves India during the previous year for the purpose of employment outside India

Since you were employed by the Software company for the purpose of employment outside India, you can avail the benifit of Extended period of 182 days instead of 60 days.

Since you were not in India for 182 days or more, you become a NON RESIDENT.

Hence Income earned by you abroad is NOT TAXABLE IN INDIA since your Status in a Non Resident.

However if you were a RESIDENT in India, that is if you had stayed for more than 182 days in India, Foreign Income would have been taxable in India.

You would have to see if a DOUBLE TAXATION AVOIDANCE AGREEMENT EXISTS BETWEEN INDIA & FINLAND.

India has entered into double taxation avoidance agreements between many countries. For complete list:-. Please visit https://www.allindiantaxes.com/income-tax-dtaa.php 

CONTINUED IN NEXT POST

Please refer Previous Post before Reading this

Relevant clauses of DTAA are given below:

Dependent personal services

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

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

a)   the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days within any twelve-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, 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

You were a Resident of Finland and hence Accoring to DTAA  Salary of FInland can only be taxed in ndia if such employment/ or part thereof was exercised in India. Since the employment was also exercised in FInland, it cannot be taxed in India

Now an Interesting Case would be if you had been in India for a period exceeding 182 days.

That would have made you a resident in India.

The entire meaning of the paragraph of DTAA would change:

MEANING OF:

Resident of Contracing State:  “Contracting State”, “that state” would mean India

Other Contracting State: Means Finland

Firs t Paragraph of DTAA states that salary is entirely taxable in India and may also be taxed in Finland.

Second Para says:

It is taxable only in India and not in Finland if these conditions are satisfied:

1. Stay in Finland should be for less than 183 days
2. Employer should not be resident in Finland
3. The remuneration should not be borne by your employer from a permanent establishment in Finland.

Conclusion:

1. Since you are a Non Resident in India, Salary Received in Finland cannot be taxed in India.
2. If you were a Resident by staying for more than 182 days in India, then the Salary Income would have been taxable only in India and not in Finland provided your employer should be a resident of Finland and also the remuneration should not be borne by your employer from a permanent establishment in Finland (Obviously you will stay for less than 183 days in Finland if you stay for more than 182 days in India)