To provide relief to taxpayers facing this difficulty, section 89A has been introduced, which provides that the income of a “specified person” from the “specified account” shall be taxed in the manner and in the year as prescribed by India’s central government. Hence, taxpayers have faced difficulties when claiming foreign tax credit due to the mismatch in tax liability for the concerned financial year. That is because income from such foreign retirement benefits accounts is taxable in some countries on a receipt basis but the amount withdrawn from such an account is taxable in India on an accrual basis. The Finance Act, 2021 introduced section 89A into the Income-tax Act, 1961, effective from FY 2021-22, to provide relief to residents who have income from foreign retirement benefits accounts and face difficulty due to tax liability. New rule to provide tax relief on income arising from foreign retirement funds Resident but not ordinarily resident (RNOR) Non-resident (NR): Non-residents are subject to tax in India only in respect to income that accrues/arises or is deemed to accrue/arise, or is received or deemed to be received in India.Resident and ordinary resident (ROR): They are subject to tax in India on their worldwide income, wherever received.Resident but not ordinarily resident (RNOR): These individuals are subjected to tax in India only in respect to income that accrues/arises or is deemed to accrue/arise in India, or is received or deemed to be received in India, or is from a business controlled in or a profession set up in India. ![]() Non-resident (NR): If none of the conditions specified for residency are met, then the individual will qualify as a non-resident.Resident but not ordinarily resident (RNOR): If the individual qualifies as a resident only based on the deemed residency clause or based on the reduced stay of 120 days or more, and does not satisfy any other basic condition, they will be qualified as an RNOR.The individual’s stay in India during the seven preceding fiscal years immediately preceding the relevant fiscal year is 729 days or more.The individual has been “resident” in India in at least two out of the 10 fiscal years immediately preceding the relevant fiscal year and.Resident and ordinarily resident (ROR): If an individual qualifies the following two conditions, they will be deemed as ordinarily resident.They are present in India for a period of 60 days or more during the relevant fiscal year and a total of 365 days or more during the four fiscal years immediately preceding the relevant fiscal year.They are present in India in the relevant fiscal/tax year for a period of 182 days or more or. ![]()
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