Under the income tax laws of India, the taxability of an individual depends upon his residence. Residence is determined on the number of days of stay in India.

1. Under the income tax laws of India, the taxability of an individual depends upon his residence.
Residence is determined on the number of days of stay in India.
A “resident”of Indiaisliable topay tax on his global income. But a “non-resident” (NRI) is liable to pay
income tax in India when his income received in India is taxable in India. The taxability of income of a
NRIis basedonthe principle thatthe income should be receivedorbe deemedtobe receivedinIndiaor
accrues in India or is deemed to accrue in India. It is also taxable if such income arises in India or is
deemed to arise in India.
For a residentIndianhistotal income, nomatteritisreceivedoraccrued,will be taxable inIndia. Onthe
otherhand, for an NRI, the salary creditedtohisNRE accountis taxable if the income isreceivedinIndia
or is deemedtobe receivedin India or it accrues in India or is deemed to accrue in India as provided in
Section 5 of the Income Tax Act.
Who qualifiesasa residentforIncome Tax purposes?
An individual isconsideredasa ‘Resident’of Indiaif fulfillsanyof the followingconditions:
(1) StaysinIndiafor at least182 days duringa previousyear;
(2) StaysinIndiafor at least60 daysduringa previousyearandfora periodof at least365 daysduring
the last fouryearsin connectionwiththe previousyear.
Tax incidence ofNRE account ofa “resident” anda “non-resident”:
For a residentof India, histotal salaryearnedwill be taxableinIndia. Itmeansthatonlythe global
income of a residentistaxable inthe country.
But the NRIsenjoyspecial benefitsatthe time of computingtheirincome tax. Fora non-resident, within
the meaningof section6 of the Income Tax Act, the taxabilitydependsuponwhetherthe salarycredited
to hisNRE account isreceivedordeemedtobe receivedoraccrue or isdeemedtoaccrue in India.
A NonResidentExternal SavingsAccount (NREAccount) givesthe advantage of tax-freeinterestto NRIs.
All interest earned are totally exempted from tax in India.
Section 9 of the Income Tax Act, 1961 also contains the deeming provisions which provide that the
incomesof an NRI will be deemedtoaccrue or arise inIndia,eventhough they do not practically accrue
or arise in India:
 Income from a business connection in India;
 Income earned from an immovable property situated in India;
 Capital Gains from transfer of any asset located in India;
 Income from a service which is rendered in India;
 Income froma service whichisrenderedtothe Governmentof India by an Indian Citizen while
working out of India;
 Income through dividend paid by Indian Company outside the territory of the country;
 Income through interest in some cases;
 Income which is earned as Royalty in some cases;
 Income which is earned as fees for Technical Services.
Recent decision in connection with NRE accounts of NRIs:

2. The Agra Bench of the Income Tax AppellateTribunal inthe case of Arvind Singh Chauhan vs. ITO, being
ITA No. 319 Agra/2013 and 320/Agra/2013 has recently held that the income earned by an assessee
froma shippingcompanyandcreditedto hisNREaccount in India is not taxable as it does not accrue or
arise inIndiaand isalsonot deemedtoaccrue or arise inIndia due to the reason that the services were
not rendered in India. Moreover the ITAT held that the income should be considered to be received
outside India as the assessee was entitled to receive his salary outside India which was subsequently
transferred to India.
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