Tuesday, 17 November 2015

Am I Eligible For Relief For Tax Paid Abroad?

I came in for employment purpose and working here. Now after completing my 3 years tenure I am expected to come back India finally by 31.07.2007. What would be the Tax liability on me in India as I would not be a NRI for the Financial year 2007-08 under the following income structure and tax paid in Fiji.
  1. My total salary income in Fiji (April07 to July-07)around Rs.379184/- + Rs.189592/-(payment for accrued overseas leave ). Tax paid in Fiji Rs.136506/-
  2. My Indian salary for remaining period around Rs180000/-. What would be my Tax liability in India?.
    Whether I am entitled to get any benefit under Section 91 0f I.T.Act?
  3. Finally how much Tax I have to pay.
First of all , you should note that since you will come in India by 31/7/2007 , you will stay in India for more than 182 days and thus become Resident as per section 6 of the I T Act.As soon as you become resident , your global income i.e all income whether earned in India or abroad shall become taxable in India . Accordingly your salary plus the accrued leave salary shall become taxable in India . Therefore , total taxable salary for Fy 2007-08 should be Rs 748776(Rs.379184/- + Rs.189592 +180000). Tax liability (without considering any saving for 80C deduction) on Rs 748776 will be Rs 1,78 ,872.
Will You get benefit of section 91 ?
Yes, it seems that section 91 of the I T Act is applicable in your case. The said section 91 is exactly to mitigate the hardship of double taxation on any income which has been taxed in a country with which India has no Double Taxation Avoidance Agreement signed. For those country with which DTAA is signed, section 90 is there in Income Tax Act.The section 91(1) is given as under:
If any person who is resident in India in any previous year proves that, in respect of his income which accrued or arose during that previous year outside India (and which is not deemed to accrue or arise in India), he has paid in any country with which there is no agreement under section 90 for the relief or avoidance of double taxation, income-tax, by deduction or otherwise, under the law in force in that country, he shall be entitled to the deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income at the Indian rate of tax or the rate of tax of the said country, whichever is the lower, or at the Indian rate of tax if both the rates are equal”
How to compute the tax relief?
Total income in India 1,80,000
Income earned outside India 5,68,776
Total Income 748776
Indian tax 1,78,872
Avg. tax on doubly taxed income (178872 x 568776)/748776 = 135872
Therefore relief claimable u/s 91 is Rs 1,35,872
The third answer is (without considering deduction under chapter VI-A which you may claim if investments are done ) , you will have to pay Rs 43,000 more in India.

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