Income Tax Filing for foreign nationals

Learn about how to file an Income Tax Return in India if you are a foreign national

Who is an Expat or foreign national?

An expatriate in India is someone who comes to live in India and is not a citizen of India.

Are expatriates liable to pay tax in India?

Even though the expatriate is a citizen of a foreign country any income which is earned by him/her in India shall be taxable in India. This income may have been earned by working in India or by providing services in India.

An income which is earned by an expatriate in India is taxable in India irrespective of the foreign national's citizenship or residential status.This payment may also be subjected to TDS (Tax Deducted at Source) in India.

If your total income is less than the minimum exempt income (Rs 2,50,000 for FY 2014-15) you can get a refund of this TDS by filing an Income Tax Return in India.

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Find out your Residential Status here

How is an expatriate's income taxed when they become a Resident in India?

Taxability of income in India depends upon residential status. For a Resident entire income earned anywhere on the globe is taxable in India. This includes income that may have been earned in the country of citizenship and may also have been taxed there.

If the expatriate is a NRI or a Resident but not ordinarily resident (RNOR) only the income which is earned in India is taxable in India. Therefore, the first step is to find out the residential status. As per the residential status rules of the Indian Income Tax Act, for the first 2 years after your arrival in India you will enjoy RNOR status and will pay tax only on the income which is earned by you in India.

Can foreign national take benefit of DTAA?

Double Tax Avoidance Agreement or DTAA is an agreement between two countries to help avoid taxation of an income in both the countries. If income of an expatriate is taxable in India as well as another country, the expatriate can take the benefit of DTAA and avoid paying double tax on such income. If you have earned an income which is taxable in a foreign country and has to be offered to tax in India as well our CAs can help you take benefit of DTAA.

Amanda is an foreign national working for an International School in Bangalore in India since the past one year. She is a resident of United Kingdom. Amanda receives 1,000 pounds per month for her work at the school.Will Amanda be taxed in India for the payment she receives for teaching in India?

Amanda is liable to pay tax on the 12,000 pounds she receives. This income is earned in India and liable to tax in India irrespective of the residential status. A TDS of Rs 4,00,000 has been deducted on her income by the school. Amanda is an NRI as per the Income Tax Act. However, NRIs are liable to pay tax for income earned by them in India.

Amanda's income from school shall be converted to rupees and she will have to pay tax on this income. She can adjust the tax of Rs.4,00,000 which has been deducted at source from her final tax liability. In case this amount is also taxable in the UK, she can take benefit of DTAA and avoid paying tax in both the countries.

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