• Notification Date: 03-04-2024
• Notification No: N/A

Tax Rules for Remotely Working NRIs from India

The Covid-19 pandemic has introduced new work norms like work from home, and work from anywhere. Along with the job flexibility that it has brought, it also carries significant tax implications, especially for Non-Resident Indians (NRIs) working remotely for foreign employers. This article delves into the tax ramifications for NRIs under India's domestic tax laws and Double Taxation Avoidance Agreements (DTAA) concerning income earned while working from India. 
 

Taxation of Salary Income While Working from India: 

Under the Income-Tax Act, 1961, salary income is deemed to be earned in India if the services are rendered within its borders. Thus, irrespective of the individual's residential status and the place of salary receipt, income derived from services rendered in India is subject to taxation in India. 

Exemptions Available: 

The Act provides an exemption for non-citizen individuals receiving salary income from a foreign employer, provided certain conditions are met: 
 
1. The foreign employer is not engaged in any trade or business in India. 

2. Aggregate physical stay in India during the financial year is ≤ 90 days. 

3. The salary received is not deductible from the employer's Indian taxable income. 

4. Specific exemptions may apply to NRIs employed by foreign ships or governments. 

Exemptions Available under DTAA: 
DTAA provisions concerning "Dependent Personal Services" typically offer exemptions from Indian taxation for employment income earned in India, subject to specified conditions. These conditions include physical presence in India, residency in the overseas country, salary cost borne by an Indian entity, or a deemed taxable presence of the overseas entity in India. 

To avail of DTAA benefits, NRIs must qualify as residents of the foreign country and obtain a Tax Residency Certificate (TRC) from the foreign tax authorities. In cases where the TRC lacks specified particulars, a separate Form 10F must be filed along with the TRC copy. 
 
Disclosure Requirements for NRIs: 
NRIs must report salary income received from a foreign employer while working from India in their Indian tax returns under the appropriate schedules. Additionally, they must monitor their physical presence in India during the previous year to prevent any change in their residential status, which may lead to taxation of global incomes and reporting of foreign assets in India. 

Considerations for NRIs and Employers: 
NRIs and their employers must also evaluate other factors such as employer tax implications, immigration, and social security before opting for remote work arrangements from India.