Is Salary from Abroad Taxable in India? Understanding the Tax Implications for Marine Engineers

As a marine engineer working abroad and residing in India for more than 6 months, understanding the tax implications regarding your salary can be crucial. This article will delve into the tax rules for residential status under the Income Tax Act 1961, and how it affects the taxation of your salary earned from abroad.

1. Determining Residential Status

According to the Income Tax Act 1961, an individual's tax liability in India is determined by their residential status. Here are the three categories that distinguish residential status:

1.1 Resident and Ordinarily Resident (ROR)

Presence in India for 182 days or more in a financial year Presence in India for 60 days or more in a financial year and having been in India for 365 days or more in the preceding four years

1.2 Resident but Not Ordinarily Resident (RNOR)

Having been a non-resident in nine out of the ten preceding years, or having stayed in India for 729 days or less during the preceding seven years.

1.3 Non-Resident (NR)

Not fulfilling any of the above conditions.

2. Tax Implications Based on Residential Status

The taxability of income in India varies depending on the individual's residential status. Let's explore how your global income is treated under each category.

2.1 Resident and Ordinarily Resident (ROR)

All income, whether earned in India or abroad, is taxable in India. This includes your salary from abroad. However, you can claim double taxation relief if tax has been paid on your income in the foreign country under the provisions of the Double Taxation Avoidance Agreement (DTAA).

2.2 Resident but Not Ordinarily Resident (RNOR)

Your salary earned abroad is not taxable in India, provided it is not received in India during the year. This includes salaries credited directly to your foreign bank account and later transferred to India.

2.3 Non-Resident (NR)

Your salary earned abroad is not taxable in India, even if it is transferred to an Indian bank account.

3. Applying These Rules to Your Situation

Given your circumstances:

You work as a marine engineer and earn a salary abroad. You reside in India for approximately 182 days, making you likely a Resident according to the Income Tax Act.

Based on the information provided:

3.1 If You Are a Resident and Ordinarily Resident (ROR)

Your global income, including the salary earned abroad, is taxable in India. You will need to include your foreign salary in your total income and pay tax accordingly. You may claim relief under the DTAA if tax has already been paid on this income abroad.

3.2 If You Are a Resident but Not Ordinarily Resident (RNOR)

Your salary earned abroad is not taxable in India, provided it is not received in India during the year.

3.3 If You Are a Non-Resident (NR)

Your salary earned abroad is not taxable in India, even if it is transferred to an Indian bank account.

4. Conclusion

In summary, based on the information provided and assuming you qualify as a Resident and Ordinarily Resident (ROR), your salary earned abroad will be taxable in India. You will need to include this foreign salary in your income tax return and pay the applicable taxes. You can claim double taxation relief under the DTAA if tax has already been paid on this income abroad. It is advisable to consult with a tax professional or a chartered accountant to accurately assess your residential status and plan for any tax liabilities.

For more detailed guidance, we recommend consulting a tax professional or a chartered accountant to navigate the complexities of international taxation and optimize your tax obligations.