Taxes in India for Foreign residents

mefisto9

hi all !

I'm starting to get worried about taxation India. I dont know how taxes work for resident foreigners like me here.

My country has double taxation avoidance agreement with India. Yet I have no clue how it works.

So far I get my salary in India in rupees, and every month the accountant in my office will deduct some TDS. Then there are some benefits under the Indian Tax law, like the 1 lack investment. My doubt is if that investment must be made in India or in my country.

I have a mortgage in my country....Could I deduct the interest in India?

Any help will be very welcome ! March is comming !!!

wonderwomanusa

If you are from the US, you may be able to exclude some of your India wages from US tax, or get a foreign tax credit for any double-taxed income.

I suspect the 1-lak investment exclusion applies only to investments in India; your US investments will be taxed by USA.

You will have to see an Inidan tax professional for more info on your taxes there. And if you are a US citizen, you still have to file a US tax return, so be sure your taxperson back home understands these issues.

mefisto9

Hi again,

Im from Portugal, if its of any help.

As far as I understand, when there is a double taxation avoidance agreement with India, then all taxes should be paid only in one country, either Portugal or India. Since Im a resident in India, I have to pay taxes in India even for the income generated in Portugal.

In theory for exemptions the logic should work the same way, therefore if I am entitled to get an exemption on investments in India, those investments could have been done in Portugal.

yet usually in Practice things go differently, that's why I need first hand advice on this matter, either any of you who has face the same dilemmas or an professional on double taxation agreements who could advice me on the matter.

thnx again

Indojingai

I love Nuno Bettencourt's music!

Having lived in places with double taxation prevention laws (but not Portugal) you should only pay tax on Indian income in India.

Tax benefits in India based on investments are excellent (as compared to other places), use them much as possible. They are usually max. when investing in public funds but things may have changed since I left India.

Income in Portugal *should* be taxed only there.

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Nick-H

My best friend in UK is an accountant. He is not working for me, and I don't like asking him to talk shop or advise me for free, but, in a quick chat over lunch he told me that it is not as simple as we are imagining --- country A income taxed by A; country B income taxed by B.

He has no idea about India, but has clients who are 'resident' or earning money in other countries or more than one country.

I got the impression that one has to declare global income to the country in which one is resident, that one gets credit for tax paid elsewhere, but will end up paying whichever country has the highest rate.

We've just got a new accountant here, and I hope to know something more soon.

Bugrad

I am an expat living in India. If I live in India for more than 184 (I think this is correct number of days) in one calendar year (I believe this is also the calendar year of the company you are working for), than you are taxed in India on your worldwide income. You will also prepare taxes for the country from which you came and will receive a tax credit for taxes paid here in India....but India gets paid first.

Hope that helps.

Puck

If you live in India for more than 182 days (including days of arrival or departure) in an Indian tax year (1st April to 31st March, not a calendar year) then you become resident in India for tax purposes. Your worldwide income in that Indian tax year will be taxable in India.

That is not quite the same as "you are taxed in India on your worldwide income" because it is likely that India will have a double taxation agreement with the countries your income arises in. For example, between India and UK there is the "UK/INDIA DOUBLE TAXATION CONVENTION". Having looked at a summary of the UK's agreements, I believe such agreements are broadly the same, intended to allow tax to be taken where income arises and to facilitate trade including labour mobility.

I spent a long time learning about this (and have a lot still to learn ). Informative sites include http://www.indialiaison.com/residential_status.htm (even if it is intended more for Indians going abroad than foreigners coming to India), http://moia.gov.in/showinfo1.asp?linkid=240 and, for the UK, http://www.hmrc.gov.uk especially http://www.hmrc.gov.uk/cnr/faqs_general.htm#2nr.

Truly it makes my head spin, reading the legislation and explanations. I've come to the conclusion that it would be useful to discuss my particular financial arrangements with an expert on the "UK/INDIA DOUBLE TAXATION CONVENTION". Perhaps arrangements, designed for tax efficiency in UK, are inefficient under the convention.

How to find such an expert?

Best

Charles

wonderwomanusa

I would advise you to contact a tax professional in your home country.

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Nick-H

... about your home-country tax liability?

If you were very, very lucky, he might know something about liability in India too.

At least any amount that you earn in India has to be accounted to the Indian authorities: best to talk to an Indian accountant about it.

To catch up from just over a year ago, when I posted above, I can say that the accountant we went to seems to have known his stuff, and to have steered us through a couple of years of returns to the Indian tax people, and that part of that included that my UK income had already been subject to UK tax, and India wasn't going to get another bite of it.

It's a while since I looked at the UK forms, but seem to remember that taxation on the basis of where the income arose, if it was not repatriated to UK, was fine by them.

But those comments underline the need for an accountant. Or accountants!

whynot222

What is the best way to find an accountant? Or if you know of any good ones in Mumbai, let me know!

Thanks!

Nick-H

And here I am struggling with them now, with just over week to the on-line submission.

Apparently (I asked), the British Tax guys are not interested in my income from employment or investment outside of UK for any year in which I am not resident in UK --- but I have to fill in the forms showing the basis on which I claim not to be resident there.

Disclaimers... Not a professional... casual conversation, not advice... and so on