Get the tax residency certificate to avoid double taxation

Split-year residency position is not specifically provided under the Indian tax law, but there are certain favourable decisions by Indian courts in this regard.

I am not a non-resident Indian (NRI). I have been living in Singapore since November 2015. I have paid taxes in there for November and December 2015. Under the Double Taxation Avoidance Agreement (DTAA), I don’t have to pay taxes for these months in India. But Singapore follows a January-December financial year (FY), and I haven’t yet got my tax receipts for January-March 2016. As the Indian FY is from April to March, how do I avoid double taxation for this period?

—Amit Jakhar

Taxability in India depends on source of income and residential status. Residential status is determined on the basis of physical presence of an individual in India during the relevant FY and the last 10 years. And Indian citizen leaving India for taking up employment abroad may qualify as an NRI if he has spent less than 182 days in India during the relevant FY. But as you started your overseas assignment in November 2015, you may qualify as a tax resident of India for FY16, assuming you had stayed in India for at least 182 days in FY16. A resident individual can qualify as a resident and ordinarily resident (ROR) of India in case he satisfies these conditions: the individual qualifies as a resident of India in at least two FYs out of the 10 FYs preceding the relevant FY, and stay in India, during 7 FYs preceding the relevant FY, is 730 days or more. If both the above mentioned additional conditions are satisfied, you are most likely to qualify as an ROR for FY16 and would thus be taxable in India on your global income, including income (assuming salary) earned in Singapore.

For determining any benefit available under the DTAA, you would first have to determine your residency as per Article 4 of the applicable DTAA, which is dependent on your residential status in Singapore and other personal factors. Typically, in case you qualify as a treaty resident of India, your Singapore-sourced salary income would be taxable in India. In a situation where you qualify as a treaty resident of Singapore, you may be exempted in India on your Singapore-sourced income, subject to the provisions of the DTAA.

Also, you would be required to obtain a tax residency certificate from the Singapore tax authorities (for the period when you qualified as a treaty resident of Singapore), as the same can be requested from you by the Indian tax authorities. Also, split-year residency position is not specifically provided under the Indian tax law, but there are certain favourable decisions by Indian courts in this regard. Tax return should be filed in India, if any benefit is claimed under DTAA.

The taxability of lump sum amount of the retirement benefit earned or received abroad would be case specific and would depend on the individual’s facts.

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