Income tax: I got a job in US. How my residential status will be determined


My son was working in Bangalore and was being taxed as resident. Then he went for further studies in US (Aug, 2019 to June, 2021) after which he got a job there in Aug, 2021. During this period, his stay in India was as under-

1) 136 days during financial year 2019-20

2) 36 days in financial year 2020-21

3) 37 days in financial year 2021-22.

Request for your advice on following points- 

A) In financial year 20-21, he had income of about 2 lakhs from bank interest and capital gains on shares in India. No foreign income. What will be his residential status- resident or non-resident? And which ITR form is to be filed.

B) In financial year 21-22, his income is from salary in US (Rs. 50 lakhs, which is being taxed in US), capital gains on shares in US ( 25000), interest and capital gains on shares in India (Rs. 4 to 5 lakhs). He has invested Rs. 1.50 lakhs in PPF. How will he be assessed in India- as resident or non-resident. And whether only his Indian income (interest and capital gains) will be taxed or salary income also.

Income of a person in a particular country becomes liable for taxation on the basis of his residential status determined on the basis of his physical stay in the country or on the basis of source of the income. In case of a resident of a country, his global income is taxed in India. Any income which has arisen in India is taxed in the hands of a person irrespective of his residential status under the income tax laws.

For determining whether a person is resident or not, there are two basic criteria. If one satisfies any one criteria, he is treated as resident of India. Under the first criteria one becomes resident of India if he has been India for 182 days or more. Since your son was not physically present in India during both these years so he does not satisfy the first condition. Under the second condition a person can still be a resident of India if he has been in India for 365 days or more during the four years prior to that year and was physically present in India for 60 days or more days during the relevant previous year. Since your son was not physically present in financial year 20-21 and is not likely to be present in India for more than 60 days during the financial year 2021-22 he will not become a resident of India even if his aggregate stay in India was more than 365 days during four years preceding both these years. Since he will be a non-resident for financial year 2021-2022, he will have to pay tax only in respect of his Indian income. 

So for the financial year 2020-21 he has to use ITR 3 if he wishes to file his ITR though he is not required to file one since his income is below the taxable limit of Rs. 2.50 lakhs. For the financial year which form to use will depend on the ITR forms notified by the government which is generally done during April of the next year. 

Balwant Jain is a tax and investment expert and can be reached on and @jainbalwant on Twitter.


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