Tax on foreign income

Tax queries 2293 views 8 replies

Satsang Randhelia

Owner

25 Points Joined September 2010

Hi,

I work for an Indian company and have to travel abroad for a couple of months each year. When I'm abroad I get paid salary in the foreign country (mostly USA). For FY 2010-11 I way out of India in USA for a total of 4.5 months during which I received salary on which I payed tax in USA. I've transferred my savings in USD to my India bank account.

I wish to know

a. What is my India IT filing status for FY2010-11. (i belive it would be resident since I was in India for more than 182 days)

b. Should I show my US savings that I transferred to India in the India IT return?

c. If so will it be taxable or not?

d. If it were taxable will I be able to get tax credit for the amount paid by me as income tax in USA?

e. I also received my US tax refund for FY2010 in Mar 2011 which I transferred to my India INR account in July 2011. Should I show that as well in my FY2010-11 IT return?

Your response would help me file my return accurately.

Thanks a lot,
Satsang

Replies (8)

Aparna Raja K.C

Student

520 Points Joined March 2011

1. You will be considered as a resident :)

2. and 3. yes, i guess u might have deposited it in some bank. then the interest u have received on that bank deposit will be taxable under the head 'income from other sources'

4. i guess.. u wont get credit for tax paid in any other country.

5. again.. i assume that u have remited that refund to ur bank a/c, then u will not be required to show it separately..

as the tax on interest includes the interest on the refund u have deposited in bank

wait for other replies :)

Gourav Kapoor

CA Final Student

2977 Points Joined July 2008

Clcik here to get solution of ur query...!

Paras

Mcom CA Final

122 Points Joined July 2009

a. resident

b.showing transfer is not necessary but if any interest accrued on such saving must be declared in the return.

c.yes it will be taxable if interest earned on such account.

d.yes, u will get tax credit under DTAA .

e.tax refund is not an income, u dont have to mention.

Satsang Randhelia

Owner

25 Points Joined September 2010

Thanks a lot Aparna and Paras, your responses have helped me get a better understanding of DTAA.

I’m now looking for some help in determining the amount of US income to include in my India IT return. Say hypothetically for US my income = i, exemptions = e, taxable income = ti = i - e, tax = t and for India income = I.

1. I believe the amount of tax credit I can claim in my India return = US tax = t. Right?

2. Now my question is should I add my US income = i or my US taxable income = ti to my India income = I for computation of India tax. My hunch is I should include only taxable income. Can you pls confirm?

Also I found the following clause on DTAA but could not understand the last sentence of it. Could anyone pls help me understand the same.

2. (a) Where a resident of India derives income which, in accordance with the provisions of this Convention, may be taxed in the United States, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in the United States, 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 the United States.

mandeep

accounts manager

24 Points Joined July 2011

Sir, I think you have to report only indian salary in your ITR If indian company has deducted tax on your foreign salary then you can get take a double taxation relief under section 90 of income tax Otherwise you will have to pay tax only on indian salary

CA. Anuj Gupta

Practices in NRI Int.Tax FEMA TP FD

7024 Points Joined May 2007

Originally posted by : Satsang Randhelia

Hi,

I work for an Indian company and have to travel abroad for a couple of months each year. When I'm abroad I get paid salary in the foreign country (mostly USA). For FY 2010-11 I way out of India in USA for a total of 4.5 months during which I received salary on which I payed tax in USA. I've transferred my savings in USD to my India bank account. I wish to know

a. What is my India IT filing status for FY2010-11. (i belive it would be resident since I was in India for more than 182 days)

Resident and ordinary Resident.

b. Should I show my US savings that I transferred to India in the India IT return?

Yes

c. If so will it be taxable or not?

Yes

d. If it were taxable will I be able to get tax credit for the amount paid by me as income tax in USA?

Yes,but according no income tax was liable to be deducted in US as your stay in US was less than 182 days in terms of Artile 16(2) of India US Treaty.

e. I also received my US tax refund for FY2010 in Mar 2011 which I transferred to my India INR account in July 2011. Should I show that as well in my FY2010-11 IT return?

If the credit for the same was claimed in last year return, then the same shall be income otherwise not liable to tax. Interest if any received onm such refund shall be taxable.

Your response would help me file my return accurately.

Anuj

+91-9810106211

femaquery @ gmail.com

CA. Anuj Gupta

Practices in NRI Int.Tax FEMA TP FD

7024 Points Joined May 2007

Originally posted by : Satsang Randhelia

Thanks a lot Aparna and Paras, your responses have helped me get a better understanding of DTAA.

I’m now looking for some help in determining the amount of US income to include in my India IT return. Say hypothetically for US my income = i, exemptions = e, taxable income = ti = i - e, tax = t and for India income = I.

1. I believe the amount of tax credit I can claim in my India return = US tax = t. Right?

No it is equal to amount of incoem tax payabale on Indian Income.

2. Now my question is should I add my US income = i or my US taxable income = ti to my India income = I for computation of India tax. My hunch is I should include only taxable income. Can you pls confirm?

If the exemptions qualify under sec 80C then you should show "i" as income and then deduct "e" from the same.

Also I found the following clause on DTAA but could not understand the last sentence of it. Could anyone pls help me understand the same.

2. (a) Where a resident of India derives income which, in accordance with the provisions of this Convention, may be taxed in the United States, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in the United States, 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 the United States.

This clause means that credit of US taxes shall not exceed the Indian Income tax payable on the US Income. For ex. in US on income of US$ 10,000/- tax was deducted @ 30% and for the same income in India ,you in tax bracket of 20% then you shall get credit of rupee equivalent of US$ 2,000/- .

Anuj

+91-9810106211

femaquery @ gmail.com