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Country of residence may tax you on global income
October, 23rd 2018

To identify whether your income will be taxed in India, you must consider two aspects—what is your residential status for the financial year and whether your income was earned in India. To be a resident of India for tax purposes, you must meet any of the following conditions and both the additional conditions:

Conditions: a) you are in India for 182 days or more in the financial year (FY); or b) you are in India for 60 days or more in the FY and 365 days or more in the four FYs immediately preceding the relevant FY. Additional conditions: you are resident in India in two of the 10 FYs immediately preceding the relevant FY; and you are in India in the seven years immediately preceding the relevant FY for 729 days or more.

If you do not meet any of the first set of conditions, you would be an NRI. If you meet the first set of conditions but do not meet the additional conditions, you would be resident but not ordinary resident (RNOR) in India.

It appears that you were living in India until July 2018 and then moved to Australia. Therefore, it seems you are resident and ordinarily resident in India in FY18. For FY19, you continue to meet the required conditions for being resident in India and, therefore, your income earned anywhere in the world will be taxed in India.

I have been working with IBM in the US as a permanent employee for the last two years. I’m not earning anything in India and I am a regular taxpayer in the US. I got a mail from the IT department that I have to file Form 67. Do I need to file this form?

Where a taxpayer is a tax resident of one country (residence state) and is in receipt of income from another country (source state), the source state withholds a portion of taxes on the income received by the taxpayer in that country.

The residence state may tax the taxpayer on the worldwide income that would include income from the source state too.

This would result in the taxpayer getting taxed twice on the same income i.e. once in the source state and once in the residence state. To address this, the tax laws in various countries provide for a mechanism whereby the residence state allows a deduction of taxes paid in the source state from the total tax liability in the residence state. The concept of claiming deduction or credit of taxes paid in source state against tax liability in residence state is called foreign tax credit.

Since you do not reside in India and have not earned any income in India, it is unclear why you have been asked to file Form 67. Perhaps, in an earlier year, you may have reported certain foreign income and claimed credit of taxes paid on it outside India. Note that such a claim is allowable only when you are resident in India for the financial year in which you are claiming it.

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