Residential Status and Foreign Salary of an Indian Citizen Abroad
Ms. Kavya, an Indian citizen, has been working in Singapore since 2019. Her stay in India during FY 2024-25 was 200 days. She was resident in India in 2 of the 10 years preceding FY 2024-25, and her total stay in India during the 7 years preceding FY 2024-25 was 500 days. During FY 2024-25 she earned salary of ₹24,00,000 from a Singapore employer for services rendered entirely in Singapore; the salary was credited to her Singapore bank account and never remitted to India. She also earned interest of ₹1,20,000 on an Indian bank fixed deposit and received rent of ₹3,60,000 from a house property in Pune. She gifted ₹5,00,000 to her brother in London out of her Singapore savings. She is not liable to tax in Singapore on the salary because of a special exemption. Determine her residential status and taxability in India for AY 2025-26.
1. Determine Ms. Kavya's residential status for AY 2025-26. Show the tests and explain whether she is resident and ordinarily resident, resident but not ordinarily resident, or non-resident.
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Step 1: Basic condition. Under section 6(1)(a), an individual is resident in India if she is in India for 182 days or more in the previous year. Ms. Kavya stayed 200 days, so she is resident.
Step 2: Additional condition for ROR. She is ROR only if both conditions are satisfied: (i) resident in India in at least 2 out of the 10 preceding previous years; and (ii) stay in India of 730 days or more in the 7 preceding previous years. She satisfies (i) but her stay is only 500 days, below 730. Therefore she is resident but not ordinarily resident (RNOR).
Step 3: Deemed residence check. Section 6(1A) does not make her deemed resident because her Indian income is only ₹4,80,000, below ₹15 lakh, and she is also not liable to tax in Singapore. In any case, the exception for an Indian citizen leaving India for employment outside India is relevant. Her status is RNOR.
2. Explain the taxability of the Singapore salary, Indian interest, rent and the gift in her hands for AY 2025-26. Would your answer change if she were ROR?
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For an RNOR, the scope of total income under section 5(1) covers: (i) income received or accrued in India; (ii) foreign income from a business controlled in India or a profession set up in India; and (iii) foreign income from an asset situated in India. Salary for services rendered entirely in Singapore, paid by a Singapore employer and received in Singapore, is neither received nor accrued in India and does not fall in (ii) or (iii). It is not taxable in her hands as RNOR. Remittance to India is irrelevant if the income was received outside India.
The Indian bank interest of ₹1,20,000 and rent of ₹3,60,000 are received/accrued in India and are taxable. The gift from her brother is a gift from a relative and is exempt under section 56(2)(x), irrespective of residential status.
If she were ROR, her global income would be taxable, so the Singapore salary of ₹24,00,000 would also be taxable in India, subject to relief under section 90/91 if Singapore taxed it.
3. If Ms. Kavya had stayed in India for only 100 days in FY 2024-25 and her Indian income other than foreign sources were ₹20,00,000, what would her residential status be? Give reasons.
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She is an Indian citizen who comes to India on a visit. Under section 6(1)(c), the 182-day threshold is replaced by 120 days if her total income other than income from foreign sources exceeds ₹15 lakh. Here that income is ₹20,00,000, so the 120-day rule applies. Her stay is only 100 days, so she fails the 120-day test. She also fails the 182-day test in section 6(1)(a). Therefore she would be non-resident for AY 2025-26.
If her Indian income other than foreign sources were ₹15 lakh or less, the 120-day rule would not apply and the ordinary 182-day threshold would apply; with 100 days she would still be non-resident.