The Muscat Engineer Who Came Home for Five Months
Mr. Rakesh Mohanty, an Indian citizen, has worked as a mechanical engineer in Muscat since 1 April 2018. Oman levies no personal income tax on salaries. He flew to Bhubaneswar on 10 August 2024 when his father fell ill and stayed in India continuously until 31 March 2025, that is 234 days in FY 2024-25. His India day counts for earlier years are: FY 2018-19: 18; 2019-20: 12; 2020-21: 0; 2021-22: 25; 2022-23: 21; 2023-24: 30. From FY 2014-15 to FY 2017-18 he lived and worked in Odisha throughout. During FY 2024-25 he earned salary of ₹12,00,000 in Muscat for April to August, Muscat bank interest of ₹40,000, rent of ₹4,20,000 from his Bhubaneswar flat (the tenant deducts tax at source), and fixed deposit interest of ₹1,80,000 from an Indian bank. His employer is a Muscat company with no Indian operations, and his salary was credited to his Muscat bank account. He wants to know whether the Muscat income must be offered in his Indian return and what records he should preserve.
1. Determine Mr. Mohanty's residential status for AY 2025-26, showing each test you apply.
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Step 1 – Basic test, section 6(1). Stay in FY 2024-25 is 234 days, which is 182 days or more, so he is a resident under section 6(1)(a). The 60-day-plus-365-day alternative is irrelevant once 182 days is crossed. Note that the special 182-day relaxation for citizens leaving India for employment does not help him, because that relaxation only removes the 60-day limb; the 182-day limb still applies and is satisfied.
Step 2 – Ordinary residence, section 6(6). He is RNOR if either limb is met:
- Non-resident in 9 out of the 10 preceding previous years (FY 2014-15 to 2023-24). He was resident in FY 2014-15 to 2017-18, so only 6 of those 10 years are non-resident years. Limb not met.
- Stay in India of 729 days or less in the 7 preceding previous years (FY 2017-18 to 2023-24): 0 + 18 + 12 + 0 + 25 + 21 + 30 = 106 days. Limb met.
Conclusion: Resident but not ordinarily resident (RNOR) for AY 2025-26.
Step 3 – Check section 6(1A). Deemed residence applies to an Indian citizen whose Indian-source income exceeds ₹15 lakh and who is not liable to tax abroad. His Indian income is about ₹6 lakh, and in any case he is already resident under section 6(1), so section 6(1A) is not the operative provision. Even if it applied, a person covered by it is always RNOR.
2. Which items in his FY 2024-25 receipts are taxable in India, and why?
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Taxable in India
- Rent from the Bhubaneswar flat: the property is situated in India, so section 5(1)(b) brings it to tax irrespective of residence.
- Fixed deposit interest from the Indian bank: same reason; interest accrues in India.
Not taxable in India
- Muscat salary of ₹12,00,000. For an RNOR, section 5(1)(c) taxes foreign income only if it is derived from a business controlled in or a profession set up in India. He is an employee of an overseas company with no Indian operations, so the condition fails. Article 15 of the India–Oman DTAA also gives the source state the right to tax employment income for services performed there.
- Muscat bank interest of ₹40,000: foreign income of an RNOR, not from an Indian business or profession.
The fact that the salary was credited in Muscat and not received in India reinforces the conclusion; had it been first received in India by or on behalf of a resident, section 5(1)(a) would have applied. Warn him that the position changes the year he becomes ordinarily resident: worldwide income then enters the return, with DTAA relief and foreign tax credit in Form 67 if any foreign tax is ever paid.
3. What documentation should he keep, and what common mistakes should you warn him against?
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Records to preserve
- Passport with immigration stamps and a signed day-wise stay chart for FY 2014-15 onwards, reconciled to passport entries.
- Oman employment contract, salary certificates and Muscat bank statements showing the salary was credited abroad.
- Rent agreement, rent receipts and the tenant's TDS details, plus Form 26AS/AIS reconciliation of the rent TDS credit.
- Bank interest certificates for the Indian fixed deposit.
- Oman residence or tax-residency certificate and the DTAA text, kept even though no foreign tax credit is claimed this year.
Mistakes to avoid
- Assuming that a long stay makes him ordinarily resident. Ordinary residence is a separate test, and 106 days in seven years keeps him RNOR.
- Assuming that section 6(1A) converts him into a resident who must declare worldwide income. A person covered by section 6(1A) is statutorily RNOR, so foreign income still stays out.
- Treating the Muscat salary as received in India merely because he was physically in India when it was credited.
- Ignoring the TDS mismatch risk: the rent credit must actually appear in Form 26AS before it is claimed in the return.