I live abroad, do I still need to pay tax in India on my Indian income

Question

I moved abroad for work a few years ago but I still have rental income and fixed deposits in India, and I am confused about my tax obligations here. I would rather settle this without going to court if the law allows it, but I need to know my rights before I sign anything. Please tell me what to do first and what document to keep.

MyVakeel Legal Desk · Accepted Answer

Under Indian law, Income-tax Act, 1961, Section 5 is the starting point for this tax law question. What follows is the position in substance, together with the steps that usually make the difference in practice.

Section 6 of the Income-tax Act, 1961 determines residential status based on the number of days you are physically present in India during the year and preceding years, and once you qualify as a non-resident, Section 5 provides that only income received or accrued in India, or deemed to accrue or arise in India, is taxable in your hands, while foreign income is outside the scope of Indian tax.

Rental income from a property situated in India and interest earned on Indian fixed deposits are both income accruing or arising in India, and remain taxable in India for a non-resident under Section 5(2), regardless of where you actually receive the payment or where you reside, since the source of income, not your residence, determines taxability for such income.

Banks are generally required to deduct TDS at a higher rate on interest paid to non-resident account holders, and a non-resident should convert domestic savings accounts to Non-Resident Ordinary or Non-Resident External accounts as required under the Foreign Exchange Management Act, since holding a resident savings account after becoming a non-resident is itself a compliance issue separate from income tax.

Non-residents can claim relief from double taxation, where the same income is also taxed in the country of residence, under the applicable Double Taxation Avoidance Agreement between India and that country, using the tax residency certificate and Form 10F as prescribed, and should file the Indian return declaring only Indian-sourced income along with claiming any applicable treaty relief or foreign tax credit.

In practice, in this order: 1) Determine your residential status correctly for the year under Section 6; 2) Report only Indian-sourced income if you qualify as a non-resident; 3) Convert resident bank accounts to NRO or NRE accounts as required; 4) Obtain a tax residency certificate to claim treaty relief where applicable.

Timing matters here: Income-tax Act, 1961, Section 5 works on limitation periods, so a nri taxation india claim that is right on the merits can still fail if it is brought late. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in tax law.