India usa dtaa foreign income resident status india

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (168971 Points)
Replied 04 August 2019

Check the status of the assessee. If NRI or RNOR, no tax liability over any income earned outside India.

For ROR, all the global income earned is taxable as per Indian IT act, subject to deduction as per DTAA.

Let him get verification from seniors, before any step forward.

1 Like

Aryan (TaxPayer) (11 Points)
Replied 05 August 2019

Thank you for reply sir .

The status of assessee is resident in both India and USA as per residency test in respective tax financial year. Assessee is an Indian citizen.

The confusion is what is considered as foreign income is not clearly defined. Is it gross foreign income earned before foreign deduction or Net foreign Income after foreign deductions.

Taxes in USA are paid on Taxable Foreign income which is significantly lower than gross foreign income.

For Example:

Monthly Payslip of foreign income is like

Gross Income:$5000

Non taxable Deductibles:$600 part of it is deposited in pension account and rest of amount is paid towards medical insurance plan

Tax on Net Income: $4400 ($5000-$600) =$1400 (this tax includes: Federal Tax, State Tax, Medicare Tax, Social Security Tax)

Net Income in hand:$3000

so for 8 months in USA the assesse received-3000*8=$24,000 in account.

How ever the tax at year end in USA is calculated as follows:

Gross Income for 8 months is- 8* $5000 = $40,000

Income After monthly deductible: $40,000 - 8*$600 = $35,200

Income after standard deductions, other deductions is $35,200 - $10000= $25,200

Now Taxable Income =$25,200

Let us assume Federal tax is 10% then Tax Paid = 10% of $25,200 = $2520

and State tax is 8% then State Tax Paid is = 8% of $25,200= $2016

Now assesse returned to India and earned income in India for 7 Months in India in form of salary.

Now the question is what should be reported as foreign income:$40000 (Gross foreign Income) or 35200 (Income after Monthly Deductible) or 25200 (taxable Income) when calculating global income( foreign income + india income).

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (168971 Points)
Replied 06 August 2019

Can you confirm first whether your status is ROR or RNOR for FY 2018-19?

Aryan (TaxPayer) (11 Points)
Replied 06 August 2019

Hello Sir, My status is resident and ordinary resident as I was in India for more than 182 days during 2018-2019.

Aryan (TaxPayer) (11 Points)
Replied 07 August 2019

Can some one please reply

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (168971 Points)
Replied 07 August 2019

Before concluding to ROR status..... can you confirm ...

whether

i) you had been a resident in India for nine or more out of the 10 years preceding the previous year 2018-19?

ii) you had been in India for a minimum period of 730 days in the seven years preceding the previous year 2018-19?

Or for how many years you were out of India for employment or otherwise?

Aryan (TaxPayer) (11 Points)
Replied 07 August 2019

Please find below i) you had been a resident in India for nine or more out of the 10 years preceding the previous year 2018-19? No ii) you had been in India for a minimum period of 730 days in the seven years preceding the previous year 2018-19? Yes for how many years you were out of India for employment or otherwise? Apr 2014 to Aug 2018