I am currently employed in India and work for a US-based company, with my salary paid in INR and credited to my Indian bank account. I will be getting married shortly and plan to move to the US thereafter. My employer has asked me to continue in the same role while working from the US, with salary to be credited to my Indian account. From an Indian tax perspective, will this arrangement be valid once my residential status changes to NRI?
Amit Maheshwari, Tax Partner, AKM Global: Under the Income Tax Act, 1961, an individual who moves abroad and becomes a non-resident Indian (NRI) is taxed in India only on income that arises from work performed in India. This means that once you relocate to the United States and begin performing your job duties from there, your salary will be treated as income earned outside India, even if your employer continues to deposit the salary into your Indian bank account. The law focuses on where the work is actually done, not where the money is credited. Therefore, salary relating to services performed from the US will not be taxable in India, while any income earned for work done before leaving India will continue to be taxed in India in the normal manner. After relocation, your salary will will be taxable in the United States, subject to relief available under the India– US Double Taxation Avoidance Agreement.
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