Income tax

I found a job in the United States. How my residency status will be determined

My son worked in Bangalore and was taxed as a resident. Then he left to continue his studies in the United States (August 2019 to June 2021), after which he found a job there in August 2021. During this period, his stay in India was also under-

1) 136 days in the 2019-20 fiscal year

2) 36 days in fiscal year 2020-21

3) 37 days in fiscal year 2021-22.

Ask for your opinion on the following points-

A) In FY 20-21, he had about 2 lakhs of income from bank interest and capital gains on stocks in India. No foreign income. What will be their resident status – resident or non-resident? And which RTI form should be filed.

B) In FY 21-22, his income is from salary in USA (Rs. 50 lakhs, which is taxed in USA), capital gains on US stocks ( ??25,000), interest and capital gains on stocks in India (Rs. 4 to 5 lakhs). He invested Rs. 1.50 lakhs in PPF. How will it be assessed in India – as resident or non-resident. And if only his Indian income (interest and capital gains) will be taxed or salary income as well.

The income of a person in a given country becomes taxable on the basis of his residence status determined on the basis of his physical stay in the country or on the basis of the source of the income. In the case of a resident of a country, their overall income is taxed in India. Any income generated in India is taxed in the hands of a person regardless of their residency status under the income tax laws.

To determine whether a person is a resident or not, there are two basic criteria. If one of the criteria is met, he is treated as a resident of India. According to the first criterion, one becomes a resident of India if he has been in India for 182 days or more. Since your son was not physically present in India during these two years, he therefore does not meet the first condition. Under the second condition, a person can still be a resident of India if they have been in India for 365 days or more during the four years preceding that year and have been physically present in India for 60 days or more during the of the previous year. Since your son was not physically present in fiscal year 20-21 and is not likely to be present in India for more than 60 days in fiscal year 2021-22, he will not become not a resident of India even though his total stay in India was more than 365 days in the four years preceding those two years. Since he will be a non-resident for the 2021-2022 fiscal year, he will only have to pay tax on his Indian income.

Thus, for the 2020-2021 fiscal year, he must use the RTI 3 if he wishes to file his RTI although he is not required to file one since his income is below the taxable limit of Rs. 2, 50 lakhs. For the fiscal year, which form to use will depend on the government-notified RTI forms, which is usually done during the month of April of the following year.

Balwant Jain is a tax and investment expert and can be reached on [email protected] and @jainbalwant on Twitter.

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