TDS and Tax Liability in India

The taxability of income of any person in India is generally based on his / her Residential Status and scope of total income determined based on the said Residential Status under the Income-Tax Act, 1961 (IT Act) and Double Tax Avoidance Agreement (DTAA) entered between India and country of residence of the said person.

Further, the scope of total income which is chargeable to tax in India based on the Residential status of the individual, is explained below:

*Please note a person who qualifies as a Deemed Resident of India is considered as RNOR under the IT Act and their scope of total income is determined in the same manner as RNOR, as explained above. Refer FAQ no. 4 of  “Residential Status for conditions to qualify as “Deemed Resident”.

 

The tax liability of various incomes as explained above can be easily understood by the way of the below mentioned table:

Sr. No

Particulars

Residential Status

ROR

RNOR

NR

1.

Income earned from any source in India is taxable in India. E.g.:

Ø Interest from Investments in India;

Ø Capital Gains/Dividend from shares and investments in India;

Ø Income from Immovable Property located in India;

 

 

Taxable

 

 

Taxable

 

 

Taxable

2.

Any other income earned or received in India is taxable in India

Taxable

Taxable

Taxable

 

3.

Income earned outside India from business controlled or profession set-up in India is taxable in India

 

Taxable

 

 

Taxable

 

Not Taxable

4.

Income earned outside India

Taxable

Not Taxable

Not Taxable


Key Points to be kept in mind:

If income of a person is taxed in India based on his residential status as explained above and the same income is also taxed in other country, then appropriate benefit/relief/credit of taxes paid on such income in either country can be claimed while paying taxes in the other country as per DTAA between India and other country.


For slab rates applicable in case of taxable income earned by a NR please refer FAQ no. 5 of TDS and Tax Liability in India.


For rates of taxes and withholding tax rates (i.e. tax deducted at source, TDS rates) applicable to NR please refer FAQ no. 7 of TDS and Tax Liability in India.



                                                                                                                                                                                                              - Updated 02/2024