By Homi Mistry, Deepika Mathur and Mona Bhansali
Mr. A, a software engineer, gets an opportunity to work on an assignment in the US for 3-5 years. A calls up his friend B, a tax consultant, to understand the implications of Indian tax regulations in relation to this assignment abroad. As income is taxable in India based on the residential status of an individual and the place of receipt, it is important for A to plan his stay abroad. A seeks B’s advice on double taxation.
B: A, since you are planning to leave India in the second week of October 2015, I would suggest that you leave India by September 28 and not return till April 1, 2016. This way, your stay in India will not exceed 181 days for the tax year (TY) 2015-16 and you will be considered a nonresident in India for TY 2015-16.
This rule is applicable to an Indian citizen only in the year when you are leaving India for the purpose of employment outside the country. If you need to return to India prior to April 1, 2016, then I would suggest that you plan your date of departure from India in a manner that your stay does not exceed 181 days during TY 2015-16. Planning your stay in India will ensure that you are taxable in India only on the income received here, or, it is India-sourced.
Else, your overseas income will also be taxable.
A: For how many days I can visit India in the future and not trigger a tax liability?
B: You can visit India for business as well as personal purposes for up to 181 days.
A: My fiancée is a foreign national. Can she accompany me for the same duration?
B: This extension of 181 days is available only to an Indian citizen or a person of Indian origin. It is also important that you understand the implications if you do not return to India for good in the year your US assignment gets over.
The extension of 181 days is not available in the year of arrival and, if your stay in India exceeds 59 days in the relevant TY (year of arrival) and 364 days in the four (4) preceding TYs, you will be a resident of India. Once you are a resident, you will qualify as an Ordinarily Resident if your stay here in the preceding seven (7) TYs exceeds 729 days and you were a resident of India for any 2 TYs in the 10 years preceding the relevant year for which residency is being determined.
However, if in the year of arrival, your stay does not exceed 59 days or is between 60 and 181 days, but does not exceed 364 days in the preceding 4 TYs, you will be a nonresident. Keep in mind these points:
■ To determine the physical presence in India, the arrival date and the departure date are counted as days spent in India, which is why it is important to ensure that date stamped on the passport is legible.
■ Keep track of the number of days spent in India during a TY. It is advisable to maintain a travel calendar for the number of days’ stay in the current year, in the preceding 10 TYs and each year of assignment.
Homi Mistry is (partner), Deepika Mathur (senior manager) and Mona Bhansali (deputy manager) at Deloitte Haskins & Sells LLP
