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Gifts given to some relatives are tax-exempt

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During the last financial year, I worked for seven months in India and the rest five months overseas. How will my earnings be calculated? Will there be any tax on my overseas earnings?

—Name withheld on request

To find out how your income will be taxed for a particular year, you must identify your residential status. A taxpayer would qualify as a resident if he satisfies one of the following two conditions and some additional conditions.

Conditions: 1) stay in India for a year is 182 days or more or 2) stay in India for the four preceding years is 365 days or more and 60 days or more in the relevant financial year.

In the event a citizen leaves for employment during a financial year, she will qualify as a resident only if she stays in India for 182 days or more. Such individuals are allowed a longer time greater than 60 days and less than 182 days to stay in India. Effective financial year 2021, this period of 60 days has been changed to 120 days or more for such an individual whose total income (other than from foreign sources) exceeds 15 lakh.

Additional conditions: you are resident in two of the 10 financial years immediately preceding the relevant financial year; and you are in India in the seven years immediately preceding the relevant financial year for 729 days or more.

If you meet any of the first set of conditions and both the additional conditions, you shall be considered a resident in India. If you meet any of the first conditions but do not meet the additional conditions, you shall be considered a resident but not ordinarily resident (RNOR) in India. If you do not meet any of the first conditions, you shall be a non-resident in India (NRI).

NRIs and RNORs are only taxed on income which is earned, accrued or received in India. Those who are residents must pay tax on their global income. Since you have spent seven months in India, you are likely to be resident in India for the last financial year.

I am living in the US for over 15 years. I want to buy an apartment in Delhi for my brother. What are the tax implications if I buy a two- or three-bedroom apartment and gift it?

—Name withheld on request

An NRI is eligible to purchase property in India. There are no tax implications on the gift of this property by you to your brother. Gifts given to certain relatives are exempt from tax, and brother is included in such a list of relatives, as per the tax law.

Archit Gupta is founder and chief executive officer, ClearTax. Queries and views at [email protected]

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