22 January 2013
Mr. A is an Indian citizen. He has stayed in since his birth. He has a joint bank account with his father in India. He got a job in Dubai (U.A.E.) in a hotel for a salary of 720000 per annum. He took the flight on 29/10/2012 for Dubai. Mr. A is remitting 1950 Dihram (i.e. 29000 INR approximately) at the end of every month in the joint acccount in India. Out of Rs.29000, Rs.10000 is used for payemnt of installment of his educational loan. Is Mr. A required to pay Tax in India (his income is not taxable in U.A.E) Whether is he required to file return? Is he required to take prior permission from RBI for remitting the money?
24 January 2013
Thank you Sir for your valuable suggestion.I have read article 15 of DTAA with UAE, but I'm not able to conclude whether Mr. A is required to pay tax in India or not. Kindly clarify it with reference to the DTAA with UAE
24 July 2024
Mr. A, an Indian citizen, working in Dubai (U.A.E.), has specific tax implications under Indian tax laws and the Double Taxation Avoidance Agreement (DTAA) between India and the UAE. Here’s a breakdown based on the information provided:
### Taxability of Income:
1. **Residential Status in India:** - Mr. A is an Indian citizen and has stayed in India since birth. As per the Indian Income Tax Act, his residential status would be determined based on the number of days he stays in India during the financial year. If he meets the criteria of a resident (either resident and ordinarily resident or resident but not ordinarily resident), his global income would be taxable in India.
2. **Income in Dubai (U.A.E.):** - Mr. A’s salary income of 720,000 AED per annum earned in Dubai is taxable in the UAE. According to the DTAA between India and the UAE, income from employment (salary) is taxable only in the country where the employment is exercised (i.e., in this case, UAE). Therefore, this income is not taxable in India.
### Remittance of Funds:
1. **Remittance to India:** - Mr. A is remitting 1,950 AED (approximately 29,000 INR) monthly into a joint account in India. Out of this amount, 10,000 INR is used for paying his educational loan installment. - The remittance of Mr. A’s salary earned in Dubai to India does not by itself create a tax liability in India since the income is not taxable in India as per the DTAA.
2. **RBI Regulations:** - Under the Liberalized Remittance Scheme (LRS) of the Reserve Bank of India (RBI), an Indian resident can remit up to a certain limit per financial year for specified purposes, including maintenance of close relatives abroad, education abroad, etc. There is generally no requirement to obtain prior permission from RBI for remitting the salary earned abroad unless the remittance exceeds the LRS limit.
### Educational Loan Installment:
- The use of part of the remitted amount (10,000 INR monthly) for paying an educational loan installment in India is a permissible utilization under the LRS. However, Mr. A should ensure that the overall annual remittance does not exceed the prescribed LRS limit to avoid any RBI scrutiny.
### Conclusion:
- **Tax Liability in India:** Since Mr. A’s employment income is earned in Dubai and taxed in Dubai under the DTAA, it is not taxable in India. - **Filing Tax Return:** If Mr. A’s income in India (from any other sources) exceeds the taxable threshold or if he wants to claim a refund of TDS (Tax Deducted at Source), he may need to file an income tax return in India. - **RBI Permission:** Generally, remittance of salary earned abroad by an Indian resident does not require prior permission from RBI under LRS, provided it is within the prescribed limits.
For specific advice tailored to Mr. A’s situation, especially regarding any potential tax implications in India beyond his UAE salary income, consulting with a tax advisor or chartered accountant familiar with international taxation and DTAA provisions would be advisable. They can provide guidance on compliance, tax planning, and filing requirements based on Mr. A’s specific circumstances.
CAclubindia
