Refer to DTAA to keep away from paying tax on similar revenue twice

I’ve been an Australian citizen for greater than 25 years and I additionally maintain an OCI (Overseas Citizen of India) card. I’m thought-about an Australian resident for revenue tax functions in Australia. However, I journey to India frequently to go to household and in addition perform charity work in my ancestral village akin to renovating the varsity, hospital, and many others. I’m getting near retirement and will probably be eligible to attract a tax-free revenue from my pension fund right here in Australia after I retire.

When I retire, I additionally need to spend extra time (three to 4 months a yr) in India with my charity work (whereas persevering with to be an Australian resident). I’ll do that from my private funds and don’t want to declare any tax deductions.

However, I’ve been warned by my buddies in India that if I maintain visiting the nation, I’ll grow to be an Indian resident (for revenue tax functions) and will probably be liable to pay tax on my Australian revenue too. Is that appropriate?

I’ve Indian financial institution accounts (non-resident strange accounts) and small investments in Indian shares and mutual funds. I’ve a PAN card and file revenue tax returns and pay revenue tax in India within the years I’m liable to pay tax. It will not be yearly as my Indian taxable revenue is usually low.

Will I grow to be an Indian resident for tax functions if I proceed to go to India for 3 to 4 months a yr (and even longer)?

I’ve learn the definition of resident and ordinarily resident (ROR), resident however not ordinarily resident and non-resident on numerous web sites and on the face of it, seems to be like I’d grow to be a ROR if I proceed my visits. So, I’ve stopped visiting India quickly till I get some readability on my tax standing.

—Name withheld on request

Firstly, be aware that your residential standing must be decided for every monetary yr (FY). You can take a look at your residential standing within the following method. You should meet any of the next situations and each the extra situations.

a) You are in India for 182 days or extra within the FY; or b) you might be in India for 60 days or extra within the FY and 12 months or extra within the 4 FYs instantly previous the related FY.

In the above situation, the interval of 60 days is substituted by 182 days for a citizen of India or an individual of Indian origin who lives exterior India and comes to go to India within the stated FY. The similar applies for a citizen of India who leaves India within the stated FY for the aim of employment exterior India or as a member of a crew of an Indian ship.

Additional situations: You are a resident in India in two of the ten FYs instantly previous the related FY; and you might be in India within the seven years instantly previous the related FY for 729 days or extra.

If you meet any of the primary set of situations and each the extra situations, you shall be thought-about a resident in India. If you meet any of the primary situations however don’t meet the extra ones, you shall be thought-about a resident however not ordinarily resident in India. If you don’t meet any of the primary situations, you shall be a non-resident in India.

Based on the above, you possibly can decide your residential standing. Should you grow to be a resident by advantage of the above, you possibly can keep away from paying tax on the identical revenue twice by referring to the Double Tax Avoidance Agreement (DTAA) between the 2 international locations.

Archit Gupta is founder and CEO, ClearTax.

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