—Name withheld on request
There are three types of residential status in India: Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR) and Non Resident (NR)
Residential status in India is determined based on total physical presence in India in the current financial year (FY) and preceding 10 FYs as also quantum of India sourced income in the current FY. Residential status needs fresh determination in each FY.
An individual qualifying as ROR is taxable on worldwide income in India and is required to report foreign incomes and assets held outside India in the tax return. An individual qualifying as a ‘NR’ or ‘RNOR’ is not liable to tax in India on his foreign incomes (unless received in India).
As you are a US citizen and moved back to India in July, you may qualify as RNOR of India for FY 2022-23 if your presence in India is 729 days or less during the period 1 April 2015 to 31 March 2022 or you qualify as NR of India in 9 out of 10 preceding FYs. As an RNOR, you are taxable on following incomes in India:
-Income received or deemed to be received in India;
-Income that accrues or arises in India;
-Income deemed to accrue or arise in India;
-Income accruing or arising outside India from business or profession set up in India
Salary income for services rendered in India is considered as ‘deemed to accrue or arise in India’. Thus, salary earned by you while working in India from August will be taxable in India even if it is paid in the US account. As an RNOR, salary earned in the US till July 2022 will not be taxable in India. As the salary is received in the US, it may be taxable in the US also. In such case, you may claim appropriate benefit (either exemption or foreign tax credit) under the Double Taxation Avoidance Agreement (DTAA) between India and the US in that country to avoid double taxation.
Sonu Iyer is tax partner and people advisory services leader, EY India.
