Determine your residential status for Income Tax Filing purposes, which is especially crucial for individuals who frequently travel abroad for work or business. By answering a few basic questions, the calculator helps you identify whether you are classified as a Resident, Non-Resident Indian (NRI), Resident Ordinarily Resident (ROR), or Resident but Not Ordinarily Resident (RNOR). Each of these statuses has an impact on your tax liabilities, both for income earned in India and abroad.
It is essential to determine a person’s residential status to assess their tax liability on the total income earned during the financial year. The residential status directly influences which portion of your income is subject to Indian taxation—whether income earned globally or only within India.
Important Changes in FY 2020-21
For FY 2020-21 (AY 2021-22), several key amendments were introduced through the Finance Act, impacting how residential status is determined. These changes particularly affect those who frequently travel between India and other countries for employment or business purposes, altering their tax exposure significantly.
Important Notes
Most NRIs, expatriates, professionals working with multinational companies (MNCs), consultants, and foreign nationals, including seafarers, need to be well aware of their tax residency status in India. This status impacts their tax obligations both in India and their host or home countries. A crucial element to consider is the Double Taxation Avoidance Agreement (DTAA), which helps mitigate double taxation by applying Foreign Tax Credits (FTC) correctly in both countries’ tax filings. Failing to account for these correctly can lead to serious consequences in tax compliance.
This group of taxpayers often has higher income and, at times, lower compliance due to a lack of understanding of the tax laws. Since many of them may spend considerable time abroad, they may not fully grasp India’s tax regulations. Indtaxfilings.com advises these individuals to carefully review their tax residency status and seek professional help before filing their taxes to avoid any legal or financial complications.
Frequently Asked Questions (FAQs)
1. WHO CAN USE THIS TAX RESIDENCY CALCULATOR?
Anyone who needs to determine their residential status for Indian tax purposes, including NRIs, expats, and professionals working abroad, can use this calculator. It helps to assess tax liability based on the time spent in India during the financial year.
2. I AM AN OCI, HOW DO THE NEW TAX RULES APPLY TO ME?
If you are an Overseas Citizen of India (OCI), you will need to determine your tax residency status under the new regulations. If your residential status changes, it could affect how much income you are taxed on in India.
3. I LIVED IN A FOREIGN COUNTRY WHERE I AM NOT LIABLE TO PAY TAX, DO I NEED TO PAY TAX IN INDIA?
Yes, even if you lived in a country where you are not liable for taxes, your tax residency status in India will determine whether you are obligated to pay taxes on your global income.
4. I AM AN NRI AND I DIDN’T STAY IN INDIA AT ALL LAST YEAR. WILL I BE AFFECTED?
If you stayed zero days in India last year, you will most likely retain your NRI status and will not be taxed on your foreign income. However, it’s essential to check the specific criteria under the latest tax rules.
5. WHO IS AFFECTED BY THE NEW TAX RESIDENCY RULES IN INDIA?
The new rules affect NRIs, OCIs, and expats who travel frequently between India and other countries, particularly those who have spent significant time in India. Your residency status may change, impacting your tax liabilities.
6. WHAT IS THE EFFECT OF COVID-19 ON ASSESSING TAX RESIDENCY STATUS?
Due to COVID-19, many people were forced to stay in India longer than expected. Special provisions were introduced by the Indian tax authorities to account for these extraordinary circumstances. It’s essential to verify how this affects your residential status and tax obligations.