11 November 2009
Q1. my friend is working with a foreign company in india, now he has been transfered to U.K.,in the current F.Y. he worked in india from Apr-09 to Oct-09 ie. 214days, now his salay is being t.d.s. at U.K., What will be the tax relief and procedure in computing his tax in the A.Y. 2009-10, Plz if any one can explain with examples.
Q.2)internatioal taxation return filing procedures in india.
11 November 2009
Your friend is resident of India and therefore his worldwide income may be taxed. His salary in UK may be taxed in UK. According to DTAA with UK, they cannot tax your friend under following circumstances:- 1)If he is in UK for less than 183 days. 2)If the remuneration is paid on behalf of non-resident employer. 3)If the remuneration is not deductible as expenses in UK. In absence of any word like or between each sentence above, one will have to assume that all 3 conditions have to be met. Therefore your friend may have suffered TDS in UK on account of one of the conditions above being negative.
What you have to do is file returns in India for your entire worldwide income. 1) Calculate Tax on worldwide Income Gross. 2)Reduce the non-Indian Income on which you suffered tax and calculate the tax. Deduct 1) - 2). Balance will be your Indian Tax on the UK income on which you suffered tax. If you suffered less tax than the difference, you will have to make up with your Indian taxes. If you suffered more tax then you will not get any refund. You still have to adjust your Indian Income Tax on Indian Income with TDS, Advance Tax and Self Assessment Tax paid in India. You cannot adjust excess tax paid in UK to extinguish your tax liability on income accrued in India.
If you file a return in UK and are allowed refund in TDS there, you have to reduce the refund amount and claim relief in India only for what you actually suffer nett of refunds. This is because there are chances you may have refund from UK as they will tax you only on salary earned in UK and not your income accrued in India for that year as you may have non-resident status there on account of Article 4 of the DTAA.
The next year onward when your friend is resident in UK he will have to claim relief on Indian TDS of his interest incomes etc.
The above is for current financial year 2009-10 (AY 2010-11) and forms are not yet notified. However, assuming he is entitled to use ITR 2, he will put his Residential status as applicable and claim relief u/s 90 for the DTAA.
For AY 2009-10, he was in India and he should have filed his returns by July 31.
I regret that my experience is limited to claim relief only for Resident on taxes suffered abroad. Your residential status you have to fill would be either Resident or RNOR. You check this up and then fill the return.
CAclubindia
