NRO account is taxed at 30% of the total income accrued in India, as per the Income Tax Act of 1961. Additionally, a cess at 3% is applicable to the overall tax liability. Interest earned through such accounts is also taxable.The foreign income i.e. income accruing or arising outside India in any financial year is liable to income-tax in that year even if it is not received or brought into India.India has signed a DTAA with multiple countries with an aim to provide NRIs/PIOs/OCIs relief from double taxation. They are eligible to claim benefits if they are a tax resident in a country with whom India has signed a DTAA.
Handling taxes while being abroad
I'm an educator and work as a freelance teacher for various EdTech companies. I have recently moved to Hong Kong with a valid work visa here. I want to continue teaching from Hong Kong for the Indian EdTech companies. I want to get advice on how to manage my taxes given my resident status will now be in Hong Kong but I will get paid in my Indian NRO account by the Indian company. I need clarity on the following 1. How should my taxes be distributed across India and Hong Kong for earnings in the Indian account? How can the double tax treaty be used in my situation? 2. Is NRO account the right kind of account to get earnings from India? I do not wish to transfer my earnings in India to Hong Kong. 3. Is there also an opportunity to save taxes in my situation? Asking this because Hong Kong tax rate is much lower than Indian tax rate
Asked 1 year ago in Taxation
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4 Answers
NRO account is correct way to get your earnings
2) If you are a Resident in India as per Income Tax Act, income earned by you anywhere in the world shall be taxable in India and has to be included in your total income.
3) If you qualify as a non-resident for a particular financial year, you are generally liable to pay taxes in India only on income earned or received in India. Income earned overseas would generally not be taxable in India for non-residents.
4) if you are an NRI (Non-Resident Indian) and your income is sourced outside India, you will not be liable to pay tax on that income in India. NRIs are only required to pay tax on income that is earned or accrued in India,
1As per the applicable tax laws in india subject to double taxation agreement if any applicable to you
2. yes
3. Yes if you can utilise double taxation law if applicable
Dear client
Here's some guidance on managing your taxes as a freelance teacher in Hong Kong, earning from Indian EdTech companies:
1. Tax Distribution and Double Tax Treaty:
Tax Residency: Since you have a valid work visa in Hong Kong, you'll likely be considered a tax resident there. This means your worldwide income, including earnings from India, could be taxable in Hong Kong.
Double Tax Treaty: Fortunately, India and Hong Kong have a Double Tax Treaty. This treaty prevents double taxation on the same income.
Tax Filing: You might need to file tax returns in both countries, but you can claim a tax credit in Hong Kong for taxes already paid in India under the treaty provisions. A tax advisor can help navigate the specifics.
2. NRO Account:
NRO Account is Suitable: An NRO account is the right choice for your situation. It allows you to receive income from India while residing abroad and hold it in rupees.
3. Saving Taxes:
Limited Options: While Hong Kong's tax rate is lower than India's, you might have limited opportunities for significant tax savings as a freelancer.
Focus on Deductions: You can explore claiming business-related deductions in both India and Hong Kong (if applicable) to reduce your taxable income. These might include internet expenses, professional development costs, or a portion of your home office rent (subject to limitations).
Recommendations:Understand Tax Filing Obligations: Get clarity on whether you need to file tax returns in both countries and the deadlines involved.
Here are some additional resources:
