I am working in Cambridge university as a researcher. I will be here from August 5, 2007, up to 2 years. I am in the service of Government of India and presently I am on leave. I get a salary of £26000 p.a in Cambridge (from UK project), with no remuneration in India. I was told that I am provisionally exempt from UK tax laws under double taxation agreement. What it means?
(a) Do i need to pay taxes (~30%) in UK and get relief in India or vice verse
(b) What kind of taxes I should pay in India once I go back.
(c) I am paying pension/CGHS for family in India, who are staying there. Can I pay, in UK, income tax and claim relief from National Insurance?
Sridhara
Your questions relate to taxation laws of two countries-India and United Kingdom.
Taxation in U.K.
There is Double Taxation Avoidance Agreement between India and UK .The DTAA provides specific clause regarding the remuneration from research in a university. The said clause is given as under:
ARTICLE 22 – Teachers – 1. An individual who visits a Contracting State for a period not exceeding two years for the purpose of teaching or engaging in research at a University, college or other recognised educational institution in that State, and who was immediately before that visit a resident of the other Contracting State, shall be exempted from tax by the first-mentioned Contracting State on any remuneration for such teaching or research for a period not exceeding two years from the date he first visits that State for such purpose.
As is clear from the aforesaid clause , you – an individual visited a contracting state (UK) for a period of 2 years for the purpose of research at a University (Cambridge) and you immediately before such visit was resident of the other contracting state (India) , so the remuneration shall be exempt in the first mentioned contracting state (UK). In simple terms , for first two years ,the remuneration for research in a University in UK is exempt from tax in UK.
Taxation In India
Section 5(2) of the I T Act is regarding the scope of total income in case of non residents. The said section 5(2) states as under
(2) the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which
(a) is received or is deemed to be received in India in such year by or on behalf of such person ; or
(b) accrues or arises or is deemed to accrue or arise to him in India during such year.
As it appears in your case , for Fy 2007-08 ,and 2008-09 , when your status will be that of Non Resident,the remuneration is neither received in India nor deemed to be received in India.It has neither arisen in India nor accrued in India as the remuneration is paid and accounted in UK by UK university only.
As far as “deemed to arise” is concerned, section 9(1)(ii) is specific to salary. This provides that salary is deemed to arise in India if it is earned in India or given by Govt of India. Both these conditions are not fulfilled in your case.
Therefore, in my opinion remuneration for FY 2007-08 and 2008-09 shall neither be taxable in India nor in UK. For FY 2009-10, I would suggest , you some how spend time for more than 182 days outside India so that you remain non resident for Fy 2009-10 , if you want to make your remuneration tax free in both countries.
That answers all your queries. Your remuneration is completely ,on the facts stated by you, tax free in both countries.
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