Salary in NRE account may not be taxable in India
The mere transfer of overseas salary to your NRE account will not make it taxable in India
Q. I have been working in the UAE for the past eight months. I earn the equivalent of Rs.1 lakh in Indian currency per month. I transfer this amount to my non-resident rupee (NRE) and savings accounts. I opened the NRE account just last month. Do I need to pay any income tax on these credits? I had an education loan, which I have cleared. Recently, I purchased a property of about Rs.10 lakh.
Expert Comment: Taxation of salary income earned by you outside India would depend on your residential status. If you qualify to be a resident in India, the entire income earned by you in India or outside India would be taxable in India. However, if you qualify to be a non-resident, you will be subject to tax only on such income which is received in India or is deemed to be received in India or income which accrues or arises or is deemed to accrue or arise in India. A person leaving India on employment is considered to be a resident of India if he is in India for 182 days or more during the current year.
Depending on the number of days you were in India, you may qualify to be a resident or a non-resident for the financial year (FY) 2013–14.
For FY2014–15, I am assuming that you will qualify to be a non-resident as you have been working in the UAE for the past eight months, and would continue to do so.
If you qualify to be a resident for FY2013–14, your entire income, irrespective of where it is earned, would be taxable in India.
For FY2014–15, only such income that accrues or arises to you in India would be taxable in India.
Salary income earned by you by rendering services in the UAE would be treated as income accruing or arising outside India and consequently the same would not be taxable in India. The mere transfer of such salary to your NRE account will not make it taxable in India.
Q. I want to send money to my parents in India. My annual income is about Rs.40 lakh. Out of this amount, I plan to send Rs.15 lakh to India. Will the amount received by my parents be taxable?
Expert Comment: If any individual receives money in excess of Rs.50,000 in any financial year without any consideration, such money will be taxed as income from other sources in the hands of the recipient. However, this rule does not apply to money received by any relative, the definition of which includes your parents, and so it will not be taxable.