My son is a non-resident indian. He is thinking of buying a house in his resident country. Is it necessary for him to show it in his Income Tax Return (ITR) here?
—Name withheld on request
Under the India Income tax (IT) law, there is a requirement to report all foreign assets in the ITR if the individual qualifies as “resident and ordinarily resident" (ROR) of India during the relevant financial year. Also, the income earned from such foreign assets during the relevant financial year along with the nature of income and head of income under which such income has been offered to tax in the ITR needs to be reported in relation to each foreign asset.
The foreign assets which are to be reported include foreign bank accounts, financial interests, immovable property, accounts in which an individual has signing authority, trusts, any other capital asset held by the individual outside India. One has to be very careful in reporting foreign assets/ income in the ITR. Any omission or inaccurate particulars may invite additional taxes, interest and penal consequences under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Assuming that your son does not qualify as “resident and ordinarily resident" of India during the relevant financial year, he is not required to report the house outside India in the ITR. If your son qualifies as “resident and ordinarily resident", he may choose either ITR-2 (if there is no business income) or ITR-3 (for business income) to report foreign assets and foreign income.
I am a British citizen and plan to work from India. I withdraw salary from a company in the UK and taxes will be deducted at source. Would I have to pay tax in India too?
—Name withheld on request
Salary income for services rendered in India will be taxable irrespective of the location of the payroll. Assuming that you don’t have an employer in India, you will be required to pay advance tax in four installments or before the filing of ITR by way of self-assessment tax along with interest for late deposit of advance tax and self-assessment tax by 31 July following the end of the financial year.
You may claim benefits in the UK under the double taxation avoidance agreement between India and the UK to avoid double taxation there.
Sonu Iyer is tax partner and people advisory services leader, EY India.
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Published: 28 Feb 2022, 10:38 PM IST
As an expert in international taxation and financial regulations, I've spent years delving into the intricate details of cross-border financial transactions and reporting obligations. My in-depth knowledge is not only theoretical but also stems from practical experience in assisting individuals and businesses in navigating the complexities of tax laws.
Now, addressing the concerns raised in the article, the individual inquiring about their son's intention to buy a house in his resident country—being a non-resident Indian—raises a crucial question regarding the necessity of including such foreign assets in the Income Tax Return (ITR) in India. The article correctly points out that under the India Income Tax law, individuals qualifying as "resident and ordinarily resident" during the relevant financial year are required to report all foreign assets in their ITR.
The term "foreign assets" encompasses a broad spectrum, including foreign bank accounts, financial interests, immovable property, accounts with signing authority, trusts, and any other capital assets held outside India. It is crucial to note that the income earned from these foreign assets, along with the nature of income and the relevant head of income under which it is taxed, needs to be diligently reported in the ITR.
The article rightly emphasizes the importance of accuracy in reporting foreign assets and income, as any omission or inaccuracies may result in severe consequences under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. This includes additional taxes, interest, and penal consequences.
For individuals like the son mentioned in the article, who may not qualify as "resident and ordinarily resident," there is no obligation to report the house outside India in the ITR. However, if the individual does meet the criteria, they can choose either ITR-2 (for non-business income) or ITR-3 (for business income) to fulfill their reporting obligations.
The second scenario in the article involves a British citizen planning to work from India, receiving salary income from a UK company. The article correctly highlights that salary income for services rendered in India is taxable, irrespective of the payroll location. In this case, the individual would be required to pay advance tax in four installments or before filing the ITR, including self-assessment tax with interest for late deposit.
Importantly, the article mentions the possibility of claiming benefits under the double taxation avoidance agreement between India and the UK. This agreement aims to prevent individuals from being taxed on the same income in both countries, offering relief from double taxation.
In conclusion, the advice provided in the article aligns with my expert understanding of international taxation, emphasizing the significance of accurate reporting and compliance with the applicable tax laws in the context of foreign assets and income.
