Money earned outside india

POSTED BY VIGNESH BASKARAN ON January 31, 2012 7:05 pm COMMENTS (8)

Dear members,

I need to thank this jagoinvestor forum(Manish) for providing exceptional advice on financial problems.

I have suggested many people to see this forum.

My friend went to Gulf to work in Gulf company. He wants to send some money to his parents. the income whatever earned there is tax free in gulf.

1. How it is treated in India?

what are all the steps should he need to take to avoid any problems?

Pls help him.

Thanks to all

8 replies on this article “Money earned outside india”

  1. VIGNESH BASKARAN says:

    Dear ashal and BFA

    Thanks for Clearing the doubts.

    regards
    Vignesh.

  2. BFA says:

    Hi Vignesh,
    Income earned by employees in Gulf area are generally tax free – Yes Tax free! That is the main reason why people want to work in Gulf area.

    If an employee has been outside India for more than 182 days, then they are considered as per Income Tax Act of India as ‘Non Resident’. Non Residents are not required to pay tax in India on their incomes outside India.

    If this tax free money is sent to India, it would not be taxed in India. However any income which the employee earns in India on this remitted funds in India, will be taxed in India. For example, if your friend got Rs. 20 lacs in Gulf as tax free salary and he remits 15 lacs in India, entire 20 lacs is tax free for India as well. However, if that 15 lacs are invested some where and lets say Rs. 15 lacs result in providing income of Rs. 2 lacs, then the additional 2 lacs would be liable of taxation in India. There are several provisions in Income Tax Act whereby even such income in India can be planned to make your tax liability in India as zero.

    If your parents (blood relatives) use your funds, then it is not liable for tax for them as well.

  3. Dear Vignesh Bhaskaran, normally the earnings in gulf countries are tax free for workers of other countries (Indian, Pakistanis, ………). that’s why there is no tax on his income in gulf. As he is already outside of India & working, he is eligible for NRI status & due to this his NRI income in gulf is tax free.

    Now if he is sending this money to India to his parents. At the time of receipt, the money is tax free to parents. the investment done by parents ‘ll be treated as their own investments & accordingly the income from these investments ‘ll be taxable for parents only, if the income is taxable at all.

    Thanks

    Ashal

  4. shiv.emf says:

    if person is not staying in India then he need not pay INCOME tax. I am not sure why Gulf is not deducting tax !

  5. VIGNESH BASKARAN says:

    Dear ashal

    Situation is like this.

    My friend went to gulf he is working there for the next two yrs. what is the procedure for him to pay tax for the money earned over there.? They are not deducting any tax in Gulf.Should he need to file income tax returns like us during this preiod?

    I understood ur point that Money earned by him sent to his parents will not have any tax. The tax acquired on the interest form the investment solely depends on father and mother tax bracket.

  6. Dear Vignesh, are you asking for your own money invested under your name in India or your money transferred to India & invested under parents’ name?

    Please clarify.

    Thanks

    Ashal

  7. VIGNESH BASKARAN says:

    Dear ashal

    thank you. how he need to pay tax in india for his own income?

    How is his personal income taxed? is it normal how we pay our tax according to the tax slabs for our money earned in india? or anything different slabs for the money earned in abroad?

    Pls guide him.

    regards
    Vignesh

  8. Dear Vignesh Bhaskaran, the amount remit to India to the parents ‘ll be tax free at the time of receipt by the parents. When the amount is invested in the name of father or mother & any taxable income is earned from that amount say bank FDs for example – the income ‘ll be taxable in the name of the person (father or mother) having the basic investment.

    Thanks

    Ashal

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