Is income earned in Dubai taxable in India? What about gifts to children?

Many Indians work in the Gulf, particularly in Dubai, attracted by higher salaries and the absence of personal income tax. A common question that arises is whether income earned tax-free abroad becomes taxable when the money is transferred to India. Another area of confusion relates to gifts made out of such overseas earnings, especially when parents transfer money to their children in India.

Today's Q&A explains such details in response to a query by a reader.

Likewise, for a person who is a non-resident of India for tax purposes, he is liable to pay tax here in India on the income which is received or accrues in India subject to the double tax avoidance tax agreement between the two countries.

So for the doctor who is non-resident and working in Dubai, the income is not taxable in India when it is first received by him in Dubai. Subsequent transfer of money to his bank account in India will not attract any tax liability in India.

The tax liability will not change even if he gifts the money to his children in India. Since the parents are covered under the definition of specified relative for taxation of gifts, the gifts so received by his children are not taxable in their hands irrespective of the quantum of gift made.