What is the tax liability for RNOR citizens in India?

—Name withheld on request

There are three types of residential status in India: resident and ordinarily resident (ROR), resident but not ordinarily resident (RNOR) and non-resident (NR).

The residential status in India is determined on the basis of the total physical presence in India in the current financial year (FY) and the amount of income of India in the last 10 financial years as well as in the current financial year. The residential status requires a fresh assessment every financial year.

A person who qualifies as ROR is taxable on worldwide income in India and is required to report foreign income and assets held outside India in the tax return. A person who qualifies as an ‘NR’ or ‘RNOR’ is not liable to tax in India on his foreign income (unless received in India).

Since you are a US citizen and have come back to India in July, you may qualify as RNOR of India for FY 2022-23 if your presence in India is during the period from 1st April 2015 to 31st March 2022 729 days or less or you qualify for NR of India in 9 of the last 10 financial years. As an RNOR, you are taxable on the following incomes in India:

– Income received or deemed to be received in India;

– Income which accrues or arises in India;

– Income deemed to accrue or arise in India;

Income earned or arising outside India from business or profession established in India

Salary income is deemed to be ‘accrued or originated in India’ for services rendered in India. Thus, salary earned by you while working in India from August will be taxable in India even if it is paid in US account. As RNOR, salary earned in the US will not be taxed in India until July 2022. As the salary is received in the US, it may also be taxable in the US. In such a case, you can claim reasonable benefits (either exemption or foreign tax credit) under the Double Taxation Avoidance Agreement (DTAA) between India and the US in that country to avoid double taxation.

Sonu Iyer is EY India’s Tax Partner and People Advisory Services Leader.

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