How will my salary arrears be taxed in India?


I worked for an Australian firm in that country from June 2012 to May 2022 and was thereafter transferred to its India office. The company has now decided to pay me some salary arrears. Will this amount be taxable in India?      —Name withheld on request

 

 

How your income will be taxed in India depends on your residential status, and whether such payment has been earned in India. Also, in some situations, such income may be taxable in India if it is received in India. 

 Based on the information given by you, it seems you have been a  non-resident Indian (NRI) for income tax purposes so far.

However, since you have returned to India in May 2022, you are likely to be resident but not ordinarily resident in India for tax purposes for FY 2022-23. Please note that residential status must be determined for every financial year. Since you are resident but not ordinarily resident, the income which is earned and received outside India shall not be taxed in India. It may be taxed locally. Where these dues are received in India directly, you may have to see whether these are included in your Form 16 in India and in such a case you may have to pay tax in India on them. 

 

I have been living in the UK for five years now and started investing in Indian stocks this year. Is there a limit on dividend income for  (NRIs) and how will the dividend be taxed?       —Name withheld on request

 

Effective 2020-21, dividend income earned from shares held in Indian domestic companies are taxable in the hands of shareholders. For resident shareholders, such dividend income is taxable at income tax slab rates applicable to them. However, in case the shareholder is non-resident in India, such dividend income shall be taxable at 20% (additional surcharge and cess as applicable). 

Note that the company paying dividend to you shall deduct TDS at 20% (including surcharge and cess) or at a lower rate if available as per DTAA. To apply a lower rate by virtue of the DTAA between the country of your residence and India, you shall have to submit a tax residence certificate of the country where you are resident to the company making the TDS deduction. 

Archit Gupta is founder and chief executive officer, Clear.in.

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