Money gifted to your wife won’t be taxable
I have been working in the US for the past six years. In May, I came to India for personal reasons. I continue to work for a US company (on US projects) remotely from India. I continue to receive salary in dollars in my US account. I’m not sure when (or if at all) I will go back to the US. My understanding is that from December, I will qualify as an RNOR and have to file returns in India. Would my US salary be considered India-sourced income, and would I have to pay taxes in India on this salary?
—Name withheld on request
To find out whether your income shall be taxed in India, you need to establish your residential status as per the I-T Act of India for the relevant financial year (FY). Note that this status may change year after year and therefore it needs to be determined for every FY. You can test your residential status in the following manner.
Conditions: a) you are in India for 182 days or more in the FY; or b) you are in India for 60 days or more in the FY and 365 days or more in the four FYs immediately preceding the relevant FY. Additional conditions: You are resident in India in two of the 10 FYs immediately preceding the relevant FY; and you are in India in the seven years immediately preceding the relevant FY for 729 days or more.
If you meet any of the first set of conditions and both the additional conditions, you shall be considered a resident in India. If you meet any of the first conditions but do not meet the additional conditions, you shall be considered a resident but not ordinarily resident (RNOR) in India. If you do not meet any of the first conditions, you shall be a non-resident in India. So long as you are a non-resident or RNOR in India, the income that is earned and received by you outside India shall not be subject to tax in India.
I’m an NRI staying in the UAE for more than 10 years. I transfer my savings to an NRI account in India. Every month, I transfer a fixed amount to a joint account that I hold with my wife. My wife has no income of her own. Will any income tax be levied on this savings account?
—Name withheld on request
The money gifted to your wife will not be subject to tax in India as she is a specified relative as per the I-T Act. The money received by her shall not be taxable in your or her hands. In case she invests this money and an income is earned from it, there may be tax implications for you.
Archit Gupta is founder and chief executive, ClearTax.
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