Residence principle of taxation

Tax Glossary Definition

Residence principle of taxation

Residence-based taxation is the principle that residents of a country are taxed on their global income, meaning all income earned both domestically and abroad is subject to taxation in their home country. In contrast, non-residents are taxed only on income derived from sources within that country.

Example: An Indian resident earning salary income in India and interest income from the U.S. must pay tax on both in India. However, a U.S. resident earning income only from Indian sources is taxed in India only on that Indian income.

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