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    Group 2

    11th

    February 2012

    Group 2

    11th

    February 2012

    Expatriate TaxationExpatriate Taxation

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    ContentsContents

    General Overview of Expatriate tax regime in

    India:

    Residency RulesResidency Rules

    Section 90Section 90

    Computation of Tax CreditComputation of Tax Credit

    Tax EqualizationTax Equalization

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    Residential statusResidential status

    Residential status

    Resident

    Resident andOrdinarily Resident

    (ROR)

    Resident but NotOrdinarily Resident

    (NOR)

    Non Resident

    (NR)

    Residency is determined by physical number of days stay in India

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    Residential status ..ContdResidential status ..Contd

    None of the

    conditions

    satisfied

    Any one of

    the two

    conditions

    satisfied

    ROR / NOR NR

    Basic conditions:Basic conditions:

    182 days or more in a financial year182 days or more in a financial year

    60 days* or more in a financial year plus 365 days or more in four60 days* or more in a financial year plus 365 days or more in fourfinancial years preceding the relevant financial yearfinancial years preceding the relevant financial year

    *60 days gets substituted for 182 days only in the year of departure for an Indian citizen proceeding abroad for the purposes

    of employment. In the year of arrival to India for resuming employment, the threshold limit is 60 days.

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    Residential status ..ContdResidential status ..Contd

    Additional conditions:Additional conditions:

    Resident in India in atleast two out of ten financial years precedingResident in India in atleast two out of ten financial years precedingthe relevant financial year; andthe relevant financial year; and

    Present in India for 730 days or more during the 7 financial yearPresent in India for 730 days or more during the 7 financial yearpreceding the relevant financial yearpreceding the relevant financial year

    ROR NOR

    Both the

    conditions

    satisfied

    One or

    none of the

    conditions

    satisfied

    Generally, an expatriate coming to India for the first time will qualify as ROR in the 3rd or4th year.

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    IllustrationIllustration

    Date of first arrival into India 5 April 2008

    Date of departure from India 31 December2011

    Tax Year Days Cumm.

    stay

    Res.

    status

    Remarks

    20082008--0909 361361 361361 NORNOR Not a resident in 2 out of 10 precedingNot a resident in 2 out of 10 preceding

    years; andyears; and< 730 days in the 7 preceding years< 730 days in the 7 preceding years

    20092009--1010 365365 726726 NORNOR -- dodo --

    20102010--1111 365365 10911091 NORNOR Resident in 2 out of 10 precedingResident in 2 out of 10 preceding

    years; butyears; but

    < 730 days in the 7 preceding years< 730 days in the 7 preceding years

    2011-12 275 1366 ROR Resident in 2 out of 10 preceding

    years; and

    > 729 days in the 7 previous years

    NR/ NOR Taxed in India only on Indian sourced income

    ROR Taxed in India on worldwide income

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    Section 90 of The Income Tax Act,1961Section 90 of The Income Tax Act,1961

    7

    Section 90. AGREEMENT WITH FOREIGN COUNTRIES.

    (1) The Central Government may enter into an agreement with the Government

    of any country outside India -

    (a) For the granting of relief in respect of income on which have been paid bothincome-tax under this Act and income-tax in that country, or

    (b) For the avoidance of double taxation of income under this Act and under the

    corresponding law in force in that country.

    (2) Where the Central Government has entered into an agreement with theGovernment of any country outside India under sub-section (1) for granting relief

    of tax, or as the case may be, avoidance of double taxation, then, in relation to

    the assessee to whom such agreement applies, the provisions of this Act shall

    apply to the extent they are more beneficial to that assessee

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    Tax TreatiesTax Treaties

    8

    Define which taxes are covered and who is a resident and eligible for benefits,

    reduce the amounts of tax withheld from interest, dividends, and royalties paid

    by a resident of one country to residents of the other country,

    Limit tax of one country on business income of a resident of the other country tothat income from a permanent establishment in the first country,

    Define circumstances in which income of individuals resident in one country will

    be taxed in the other country, including salary, self employment, pension, and

    other income,

    Provide for exemption of certain types of organizations or individuals, and

    provide procedural frameworks for enforcement and dispute resolution.

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    Computation Of Tax CreditComputation Of Tax Credit

    RsTaxable income in India: 576,040

    Tax on this income 79,116

    Doubly Taxed Income (DTI) 330,774

    Income Tax paid in the foreign country ( A)

    Income excluding DTI (576040-330774) 245,266

    Tax payable had DTI not been included 8,782

    Attributed Tax on DTI (79,116- 8,782) (B) 70,334

    Foreign taxes available in India as credit as per Article xx of

    India-xxx DTAA (lower of A orB) 67,015

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    Overview of Tax Equalization/ ProtectionOverview of Tax Equalization/ Protection

    Home

    Country

    Income Tax

    Tax

    EqualizationCost

    Hypothetical

    Home

    CountryIncome Tax

    Host and

    Home Actual

    Income Taxes

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    Case StudyCase Study

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    HOME COUNTRY: INDIA HOST COUNTRY: US Rs

    GLOBAL INCOME; HOME(70),HOST(30) 100

    Home Country Income Tax: (30% on 100) 30

    Host & Home Country Income Tax 40

    Hypothetical Home Country Income Tax (30% on 80) 24

    Tax Equalisation (40-24) 16

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    THANK YOU :THANK YOU :--))