I am a salaried individual in India and have been allowed remote work by my employer. My husband is a non-resident Indian (NRI). If I were to live with my husband abroad for over six months in a year, how will it impact my residency status and subsequently tax liability and tax returns filing? Can I start a systematic investment plan (SIP) in mutual funds jointly with my husband?
—Name withheld on request
Taxability of an individual depends on the residential status in India under the domestic tax laws, which in turn is dependent on the physical presence in India in the relevant financial year (FY) i.e. period from 1 April to the following 31 March and in the past seven of 10 preceding FYs.
If your physical stay in India during FY 2023-24 exceeds 59 days, you are likely to qualify as a Resident and Ordinarily Resident (ROR) in India for FY 2023-24.
Also, for FY 2024-25, assuming the same arrangement continues, the same residency threshold should apply subject to actual examination. Residency for future FYs would need to be evaluated based on specific facts and circumstances for that FY.
However, considering that a remote working situation (through an Indian employer) may not arguably tantamount to leaving India for the purpose of employment or being outside India and coming to India on visits, there can be a view that the said extended residency thresholds may not be applicable to you and this will require detailed examination.
As an ROR, your global income shall continue to be taxable in India. In case of double taxation of any income, relief under the relevant Double Taxation Avoidance Agreement (DTAA) may be separately analysed.
You would be required to file your ITR in India in case your taxable income exceeds the maximum amount not chargeable to tax or any relief is claimed under DTAA or if any other prescribed conditions are met.
As for the SIP, from a tax perspective, as the situs of these MFs will be in India, any income or gains earned therefrom will be taxable in India in the proportion of your funding towards acquiring these mutual funds, even if any of you qualifies as a non-resident in India, subject to benefits under the relevant DTAA.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
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Published: 22 Apr 2024, 10:19 PM IST