There are many doubts about NRE status and new IT regulations among seafarers . I am trying to answer the common questions.
Understanding the Indian Financial year for taxation purposes
NRIs may sometimes find it confusing when they hear terms such as previous financial year, assessment year etc. Hear are three points to help clarify these terms and help understand what a financial year is and how a financial year differs from a assessment year.1.The financial year in India begins on the 1st of April every year and ends on 31st March of the subsequent year.2.The year in which the income is earned is known as the previous year. The financial year following a previous year is known as the assessment year. 3.The assessment year is the year, in which the salary earned in the previous year is taxable.
Provisions regarding Resident and Non-Resident under Income Tax Act and Foreign Exchange Regulation Act
The residential status of a person is decided under two different Acts, one under Income Tax Act, 1961, ( I.T. Act) and another under Foreign Exchange Regulation Act, 1973 (FERA). The concept of Non-Resident under FERA is different as compared to that under Income Tax Act. Under Income Tax Act, the residential status of a person is determined on the basis of number of days he stays in India whereas under FERA, it is the intention of a person to be in India or outside India would be an important factor determining his residential status.
Provisions under the I.T. Act
The residential status for the Income Tax Act is determined in section 6 as under:
- An individual will be treated as a resident in India in any previous year if he fulfills any of the following two conditions:
(a) he/she is in India in that year for period or periods amounting in all to 182 days or more, or
(b) Having within the four years preceding that year been in India for a period or periods amounting in all to 365 days or more, and has been in India for 60 days or more in that year.
- Under Explanation to section 6 (1) of the Income-tax Act, the residential status of an individual who is rendering service outside India and who visits India during leave or vacations in any previous year or an individual who is outside India and who comes on a visit to India in any previous year will be determined as under :
(a) An Indian citizen who leaves India in any previous year for the purpose of employment outside India or as a crew member of an Indian ship would be treated as a resident in India if he stays in India in that year for 182 days or more [instead of 60 days as stated in 1 (b) above ]. Conversely, if he stays in India for less than 182 days, he will be treated as non-resident for that year and his foreign income would not attract tax liability.
Further, w.e.f. 1st April, 1999, a crew member will be treated as non-resident in India if he is on board such ship outside the territorial water of India for 182 days or more during any year.