Back in India, still working abroad? Understand your tax implications
Rising global tensions prompt Non-Resident Indians to return home, working remotely. This shift creates tax concerns as physical presence in India can trigger tax liability. Indian tax laws consider days spent in the country to determine residenti...
By ET Online | Updated:
Agencies
Rising geopolitical tensions are pushing many non-resident Indians (NRIs) to return to India or move to safer locations, even as they continue working remotely. According to Lubna Kably's report in Times of India, airports are seeing a steady flow of professionals arriving from West Asia and the US, often with plans to work while staying with family. However, this shift is raising concerns over tax liability in India, especially for those unaware of how their stay could impact their tax status.
Tax implications in India depend on an individual’s residential status, which is based on the number of days spent in the country during a financial year and previous years. Even if a person remains a non-resident, income earned for services performed while physically present in India may become taxable.
“As countries move to plug tax avoidance through tightening of residence rules, the problem often may arise in genuine cases where a person is forced to spend more days in India due to geo-political events. The emergence of remote working coupled with the concept of residence based on physical presence in India has given rise to these problems, since these residence rules are meant for cases of physical work at the place of employment. People working in countries other than their place of primary employment need to carefully check the impact on their salary or professional income, in the country where they would be residing,” Gautam Nayak, tax partner at CNK & Associates told Lubna.
“If you are working remotely from India, the first thing is to get clarity on your residential status in India under the Income-tax (I-T) Act for the particular financial year. If you end up being treated as a Resident and Ordinarily Resident (ROR), India will tax your income earned anywhere in the world, though relief may be available under tax treaties to avoid double taxation. Even if you are a Non-Resident or Not Ordinarily Resident (RNOR), India can still tax the part of your salary that relates to work you do, while staying in India.” He added, “That said, Indian tax law and tax treaties do recognize short and temporary stays. If you meet the required conditions, such as staying in India only for a limited period (one of the conditions), you may not have to pay tax in India on that income,” said Amarpal Singh-Chadha, tax partner and India mobility leader at EY India, as quoted by Lubna in TOI.
Residential status drives tax liability
Under Indian tax law, an individual becomes a resident if they stay in India for 182 days or more in a financial year, or meet a combination of shorter stays across years. For Indian citizens and persons of Indian origin visiting India, relaxed rules may apply unless their Indian income exceeds Rs. 15 lakh.
This highlights that non-resident status alone does not exempt foreign salary from Indian tax if work is performed within the country.
Foreign citizens may get relief
The tax outcome differs for foreign citizens. In another case, a US citizen visiting India for about 15 days and working remotely qualified for exemption under Section 10(6)(vi) of the Income-tax Act. This applies if the stay does not exceed 90 days, the employer has no business presence in India, and the income is not linked to taxable operations in India.
As a result, her salary for work done during the short stay remained tax-free in India, as per Lubna's TOI report. This distinction shows how citizenship and duration of stay can significantly impact tax treatment.
Role of tax treaties
Tax treaties between India and other countries may provide relief. Provisions under agreements such as those with the US and UAE allow income to remain taxable only in the country of residence if certain conditions are met, including limits on the number of days spent in the other country.
“While such treaty provisions offer important relief, it is equally important to recognise that exposure under the I-T Act (domestic tax law) arises in the first instance, and the treaty protection must then be invoked to mitigate double taxation. Consequently, professionals who temporarily relocate to India and continue working remotely should carefully evaluate their day-count, the structure of their employment, and the potential applicability of treaty relief to avoid unintended tax consequences,” said Ameet Patel, tax partner at Manohar Chowdhry & Associates to Lubna.
RNOR status and deemed residency
Individuals may also fall under the Resident but Not Ordinarily Resident (RNOR) category, where only Indian-sourced income is taxed. This applies to those who meet specific conditions related to past residency and duration of stay.
Another provision is the deemed residency rule, which can apply even with a short stay in India. If an Indian citizen earns over Rs. 15 lakh from Indian sources and is not liable to tax in any other country, they may be treated as a resident under this rule.
An example shows that an individual working remotely from India for about 90 days and earning Rs. 20 lakh could trigger deemed residency if not taxed elsewhere. This would classify them as RNOR, making Indian income taxable while generally excluding foreign income.
“This illustrates how, even with a relatively short stay in India, the interaction of domestic tax rules can create unexpected residency implications, underscoring the need for individuals working remotely from India to carefully assess both their income profile and tax exposure,” Patel added.
As remote work becomes more common and global uncertainties continue, tax rules linked to physical presence are gaining importance. Professionals returning to India temporarily may need to review their tax position to avoid unexpected liabilities.
(With TOI inputs)
Tax implications in India depend on an individual’s residential status, which is based on the number of days spent in the country during a financial year and previous years. Even if a person remains a non-resident, income earned for services performed while physically present in India may become taxable.
“As countries move to plug tax avoidance through tightening of residence rules, the problem often may arise in genuine cases where a person is forced to spend more days in India due to geo-political events. The emergence of remote working coupled with the concept of residence based on physical presence in India has given rise to these problems, since these residence rules are meant for cases of physical work at the place of employment. People working in countries other than their place of primary employment need to carefully check the impact on their salary or professional income, in the country where they would be residing,” Gautam Nayak, tax partner at CNK & Associates told Lubna.
“If you are working remotely from India, the first thing is to get clarity on your residential status in India under the Income-tax (I-T) Act for the particular financial year. If you end up being treated as a Resident and Ordinarily Resident (ROR), India will tax your income earned anywhere in the world, though relief may be available under tax treaties to avoid double taxation. Even if you are a Non-Resident or Not Ordinarily Resident (RNOR), India can still tax the part of your salary that relates to work you do, while staying in India.” He added, “That said, Indian tax law and tax treaties do recognize short and temporary stays. If you meet the required conditions, such as staying in India only for a limited period (one of the conditions), you may not have to pay tax in India on that income,” said Amarpal Singh-Chadha, tax partner and India mobility leader at EY India, as quoted by Lubna in TOI.
Residential status drives tax liability
Under Indian tax law, an individual becomes a resident if they stay in India for 182 days or more in a financial year, or meet a combination of shorter stays across years. For Indian citizens and persons of Indian origin visiting India, relaxed rules may apply unless their Indian income exceeds Rs. 15 lakh.ADVERTISEMENT
According to Lubna's TOI report, in one case, an Indian citizen working in the UAE who returned to India for a short stay and worked remotely remained a non-resident as his stay was below 182 days. However, since he performed services while in India, the salary earned during that period became taxable in India.This highlights that non-resident status alone does not exempt foreign salary from Indian tax if work is performed within the country.
Foreign citizens may get relief
The tax outcome differs for foreign citizens. In another case, a US citizen visiting India for about 15 days and working remotely qualified for exemption under Section 10(6)(vi) of the Income-tax Act. This applies if the stay does not exceed 90 days, the employer has no business presence in India, and the income is not linked to taxable operations in India.
As a result, her salary for work done during the short stay remained tax-free in India, as per Lubna's TOI report. This distinction shows how citizenship and duration of stay can significantly impact tax treatment.
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Role of tax treaties
Tax treaties between India and other countries may provide relief. Provisions under agreements such as those with the US and UAE allow income to remain taxable only in the country of residence if certain conditions are met, including limits on the number of days spent in the other country.“While such treaty provisions offer important relief, it is equally important to recognise that exposure under the I-T Act (domestic tax law) arises in the first instance, and the treaty protection must then be invoked to mitigate double taxation. Consequently, professionals who temporarily relocate to India and continue working remotely should carefully evaluate their day-count, the structure of their employment, and the potential applicability of treaty relief to avoid unintended tax consequences,” said Ameet Patel, tax partner at Manohar Chowdhry & Associates to Lubna.
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RNOR status and deemed residency
Individuals may also fall under the Resident but Not Ordinarily Resident (RNOR) category, where only Indian-sourced income is taxed. This applies to those who meet specific conditions related to past residency and duration of stay.
Another provision is the deemed residency rule, which can apply even with a short stay in India. If an Indian citizen earns over Rs. 15 lakh from Indian sources and is not liable to tax in any other country, they may be treated as a resident under this rule.
An example shows that an individual working remotely from India for about 90 days and earning Rs. 20 lakh could trigger deemed residency if not taxed elsewhere. This would classify them as RNOR, making Indian income taxable while generally excluding foreign income.
“This illustrates how, even with a relatively short stay in India, the interaction of domestic tax rules can create unexpected residency implications, underscoring the need for individuals working remotely from India to carefully assess both their income profile and tax exposure,” Patel added.
As remote work becomes more common and global uncertainties continue, tax rules linked to physical presence are gaining importance. Professionals returning to India temporarily may need to review their tax position to avoid unexpected liabilities.
(With TOI inputs)
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