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T. Banusekar

I WAS in the US from March 1999 to August 2001 on a H1B Visa. I still have a bank account there as I have a refund due from the IRS. I would like to bring the balances in my bank account (earned in the US) to India. On such transfer of balances would there be a liability of tax in India?

Ravi

Reply

On the basis of Section 5 of the Income-Tax Act, the scope of taxation in India will be as shown in the Table.

For taxation on the basis of receipt, it is the place of first receipt after the accrual of income which is to be taken. Once the party entitled to it, in respect of any subsequent dealing with the said amount, receives it, it cannot be said to be received as income.

Thus, in the instant case, the income which is brought into India and which was originally received in the US will not become taxable merely by reason of receipt in India.

However, for the period when the assessee was a resident and ordinarily resident (ROR) in India, the income will be taxable in India except to the extent the benefit was available under the Double Taxation Avoidance Agreement (DTAA) between India and the US.

Up to assessment year (AY) 2003-04, residential status has been determined as follows:

Basic conditions: i) he is in India in the previous year for period(s) aggregating in all to 182 days or more; or ii) having been in India for 365 days or more during the four years preceding the previous year, he has been in India for 60 days or more during the previous year.

Exceptions to the second basic condition: i) In the case of an individual being a citizen of India who leaves India in any previous year as a member of the crew of Indian ship, as defined in the Merchant Shipping Act, 1958, or for the purpose of employment outside India, 60 days shall be substituted by 182 days; and ii) In the case of an individual being a citizen of India or person of Indian origin who being outside India comes on a visit to India in any previous year, 60 days shall be substituted by 182 days.

Additional conditions: i) he has been a resident in India for nine or more years out of 10 years preceding the previous year; or ii) he has been in India for a minimum of 730 days in the seven years preceding the previous year.

Resident and...

An individual will be a resident and ordinarily resident (ROR) in India if he satisfies one or both basic conditions and both additional conditions.

Resident but not...

An individual will be a resident but not ordinarily resident (RNOR) in India if he satisfies one or both of the basic conditions and one or none of the additional conditions.

Non-resident

An individual not satisfying any of the basic conditions will be a non-resident. It is not relevant whether or not he satisfies the additional conditions.

Some difficulty was caused by the Gujarat High Court decision in the Pradip J Mehta case (256 ITR 647) on the interpretation of the meaning of the term RNOR. The court, in the decision referred, had taken a different view of the matter.

An amendment has been made to Section 6(6) of the I-T Act in the definition of the term `Not ordinarily resident' (NOR). This amendment takes effect from April 1, 2004, that is, from AY 2004-05. This amendment, it is stated, will be clarificatory in nature.

Before the Gujarat High Court decision, it was thought that a person would become an ordinary resident only if he was resident for nine out of 10 assessment years.

Conversely, a person would continue to remain `not ordinarily resident' if he was a non-resident in two out of the 10 years. However, the Gujarat High Court held that a person should have been a non-resident in nine out of the 10 preceding assessment years to claim this status.

This amendment seeks to confirm the Gujarat High Court decision. A person cannot claim NOR status unless he was a non-resident for nine out of the 10 previous assessment years. And the amendment now provides that a person can claim NOR status if such individual who has been a non-resident in India in nine out of 10 previous years preceding the year in question, or has during the seven previous years preceding the year in question, been in India for a period of 729 days or less

This amendment is effective only from AY 2004-05 and the old interpretation will continue to have effect until AY 2003-04.

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