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Rental income arising in India will be taxed

Income from renting of immovable property is treated as income arising or accruing in India

Q. I returned to India in June 2013 as my contract was terminated. Now I am a resident here. Is the amount that I earned in the three months (April, May, June) of 2013 taxable? Half of the amount that I have earned is compensation for the termination.

Expert Comment: Since you have stayed in India for more than 182 days during FINANCIAL year (FY) 2013-14, you will qualify to be a resident of India for income tax purposes. A resident in India can either be a resident and ordinary resident (ROR) or resident but not ordinarily resident (RNOR). To qualify as an RNOR, the individual should have been a non-resident in nine out of the 10 previous years preceding that year, or has during the seven previous years been in India for a period of 729 days or less. It appears that you have stayed for less than 729 days during the seven previous years preceding the year April 2013 to March 2014. Assuming that you qualify to be a RNOR for the previous year 2013-14, the scope of your total income taxable in India would be restricted to income received or deemed to be received in India or income which accrues or arises or is deemed to accrue or arise in India. Income which accrues or arises outside India would not be taxable in India. Salary payable towards services rendered in India would be treated as income earned in India. Whereas salary payable for services rendered outside India would be treated as salary earned outside. Assuming that the compensation (including compensation on termination) is payable to you towards services rendered outside India, such compensation would not be treated as income earned in India and would not be taxable.

Q. I will be going abroad for three years. I had recently bought a house. Will I have to obtain a tax clearance certificate? What is the tax implication if I rent out the house?

Expert Comment: Assuming that you are a person domiciled in India, on your departure, you would have to furnish to the tax authorities, in Form 30C, the details pertaining to your Permanent Account Number, purpose of your visit outside India and the estimated period of your stay abroad. It is not mandatory to obtain a tax clearance certificate. However, in certain circumstances, a person may be required to obtain the certificate from the income-tax authorities.

Income from renting of immovable property is treated as income arising or accruing in India and consequently, is taxable, irrespective of the residential status.

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