Thursday, 21 June 2012

How to calculate your tax liability when you work aboard

Income Tax liability while you work abroadYou are free to work anywhere in the world and now the distance from one country to another is too short through new media’s and internet. You born and brought up in India and now you are out from India due to your job. In such a situation let us check your income tax liability in India.

To check the Income tax liability in India you must check that whether you are a resident Indian citizen or nonresident India citizen (NRI). To check your residential status you must know who resident Indian is and who Non Resident Indian is.

Residential Status: If you are in India for more than 182 days in a financial year OR You are in India for 60 days in a particular financial year and be in India a total of 365 days in the 4 years preceding the financial year you are treated as a resident Indian and if you are not satisfying any one of the above two conditions you are treated as Non Resident Indian.

When a person born and brought up in India and sent out of India for any assignment, he has to check whether he is a resident in India and check whether he is resident of the country where he is staying and working.  Sometimes the person may have residential status in both countries (The condition and day of staying in particular country is different while calculating residential status. And the financial year also may be different. Some countries consider calendar year as financial year.) In such a condition certain countries are entered into an agreement called Double Taxation Avoidance Agreement (DTAA) and in such countries the person those who falls under resident status should pay tax where he or she has a permanent residence.

IF a person is a non resident in India he should pay tax for the income he received in India. His tax may also be deducted asTDS in India in some cases wherever TDS is applicable. But if a person is resident abroad especially in USA they may deduct tax for his global income and the tax payer can claim for refund for the tax he paid in India for his Indian Income. This is due toDTAA between India and the foreign country.

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