Tax for Indian citizen - comparison of taxability of NR & R-NOR

Are you an Indian citizen going outside India for employment for the first time?

If yes, understand your residential status & tax implications for income tax purposes in India

Before we proceed, I want to tell you that a person can fall into one of these "every year". Either he/she is a

1. Resident (R)

2. Non-Resident (NR)

3. Not Ordinarily Resident (R-NOR)

This needs to be checked every financial year (FY).

If your stay in India, in year you leave India is -

🔹182 days or more, You'll be resident (R).

🔹less than 182 days, You'll be non-resident (NR).

PS: criteria is relevant for FY in which you leave India. Once you've left, from next FY criteria will change.

TAXABILITY (1/1)

If you're a Resident (R), all your income (including income earned from outside India) is taxable in India.

If you're a Non-Resident (NR), only Incomes received or accrued in India are taxable in India.

TAXABILITY (2/2)

If you're a Not Ordinarily Resident (R-NOR), 

Income is taxed in India-

a) Incomes received/accrued in India; &

b) Incomes from a business controlled from, or a profession set up in India.

So taxability of R-NOR is same like a NR (+) point b

SPECIAL SITUATION (1/4)

If income in a FY from Indian source is more than 15L, & you're not liable to pay tax in the country you’ve moved to because you didn't qualify as a tax resident there, then you'll be a "Deemed Resident" here

"Deemed Resident" is always taxed as a R-NOR.

SPECIAL SITUATION (2/4)

Logically checking if whether a person who is leaving abroad for job will be a "deemed resident" or not, in the year he leaves India, is relevant only if he stays less than 182 days.

Else, (more than 182 days) he will anyway become a Resident (R).

SPECIAL SITUATION (3/4)

As discussed in comparison to a NR, the only additional tax incidence a R-NOR faces is that income earned from business controlled from India or profession setup in India is taxable in India.

SPECIAL SITUATION (4/4)

Crux: For anyone leaving for a job abroad, special situation makes a difference in their taxable income, only if they qualify as "Deemed Resident" and have ( & keep running) a business outside IND (controlled from IND) or from a profession setup in IND.

TAX PLANNING (1/2)

So, whenever you move outside India for employment, make sure your stay in the year you're leaving is less than 182 days.

So, ideally, if possible, one should leave India on or before the 28th of September to qualify as a NON-RESIDENT or as a R-NOR for that FY

TAX PLANNING (2/2)

In this way, you can save taxes in India, in the year you leave India, on your global income (including salary from abroad employment).

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