According to the latest announcement by the Authority of Advance Rulings, non-resident individuals of India won’t be charged tax over the money they send to India or even if the salary is sent to an Indian bank account. This news is going to benefit lakhs of workers living abroad. Previously, they were required to pay double taxes, that of India and the US.
When it comes to white-collared jobs, a part of the salary sent to the worker’s bank account in India, which becomes taxable income. It allows the worker to help pay loans back home or pay for his family’s expenses.
Typically, we consider a person living out of India and a non-resident Indian, but it actually depends on the number of days the person is out of the country. Whatever resident individuals earn around the world is taxable in India but that’s not the case for non-residents.
The money that comes in their bank account for work done in India is only taxable. Then, there is the third category – resident but not ordinarily resident, for whom the same rules apply to non-residents.
What does the constitution say?
According to the Constitution of India, if you are in India for a minimum of 182 days in one financial year, i.e., April 1 to March 31, then you are a resident of India.
Another condition that makes you a resident is that if you’ve lived in India for 60 days in one financial year and 365 days in the four years before that.
If a resident of India pays tax in the US, he will get a tax credit in India. According to the Authority of Advance Rulings, a person should be taxed where he earns money and not where he has a bank account.
Such rules are especially helpful when the home country doesn’t have such treaty, or the person is unable to submit proofs to help the ruling.