Understanding Tax Responsibilities Abroad: A Guide for Indian Students in Ireland

When studying abroad, understanding the tax system of your host country is important, especially when it differs significantly from what you’re used to back home. Here’s a comparison between the Indian and Irish tax systems for students planning to go abroad.

Tax Slabs for Non-Residents, Including Students

In Ireland:

• Income Tax: Tax rates start at 20% for the first €42,000 (as of 2024) (higher if married) and 40% on the remaining income.
• Universal Social Charge (USC):  4% Rate for income between €25,760 and €70,044. 8% Rate for income above €70,044.

Understanding the specific requirements in Ireland is key to compliance, especially if you are earning an income while studying. The tax system is more progressive, with higher rates applied to higher income brackets.

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In India:

Income Tax Rates for Non-Residents:

• Up to ₹3,00,000: No income tax.
• ₹3,00,001 to ₹7,00,000: 5% tax rate.
• ₹7,00,001 to ₹10,00,000: 10% tax rate.
• Above ₹15,00,000: 30% tax rate

These tax slabs differ significantly from Ireland’s, where the starting rate is higher, but the tax-free threshold is lower.

Filing Timeline

The income tax filing period begins in January and ends in October for the previous tax year. This differs from India, where the tax filing deadline is usually July 31st. This difference is important for students to note, as it affects when you need to prepare and submit your tax returns.

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Login Requirements for Tax Filing

• Ireland: Tax filing requires students to log into the revenue.ie website using a Government ID or a Personal Public Service Number (PPSN). The “myAccount” portal is essential for managing your taxes and claiming tax credits and reliefs.
• India: Taxpayers use their Permanent Account Number (PAN) and Aadhaar for logging into tax-related websites, such as the Income Tax e-filing portal.

Tax Credits and Reliefs

Ireland offers various tax credits and reliefs that differ from those available in India. These credits can significantly reduce your tax liability:

1. Health Expenses Relief: Relief is available on qualifying medical and dental expenses at rates of 20% and 40%. This is broader than India’s Section 80D, which primarily focuses on health insurance premiums and specific medical treatments.
2. Rent Tax Credit: A significant difference is Ireland’s Rent Tax Credit, which allows students to claim back part of the rent paid. This benefit is not widely available in India, making it a valuable advantage for students studying in Ireland. The Irish Budget 2024 extends this credit to parents of students renting rooms or digs and allows it to be claimed for the 2022 and 2023 tax years.
3. Dependent Relative Tax Credits: If you are supporting a dependent relative, you may qualify for additional tax credits in Ireland. This is somewhat similar to deductions available under Section 80DD and 80DDB in India but may apply in different circumstances.

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Tuition Fee Relief

Ireland offers tax relief on tuition fees for third-level courses, including undergraduate, postgraduate, IT, and foreign language courses. Tax relief is given at the standard rate of 20%, with a maximum qualifying fee of €7,000 per person, per course, per academic year. However, no relief is available for the first €3,000 for full-time students and part-time students for the first €1500. In India, Section 80E provides a deduction for interest on an education loan for higher studies. This is different from Ireland’s system, where education-related deductions might not directly correspond to tax relief on loan interest but are more focused on tuition fees.

Non-Payee Income and Tax Declaration

Students must declare any non-PAYE income, such as social protection payments and foreign income. This is a notable difference from India’s tax system, where non-PAYE income for students might not be as heavily emphasized, depending on the nature of the income.

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Applying for Tax Relief

Students can claim tax relief on tuition fees and other eligible expenses through Revenue’s “myAccount” service or the Revenue Online Service (ROS) for self-employed individuals. The process involves uploading necessary documents like receipts and filling out relevant forms online. Similar processes exist, but the documentation and filing requirements can differ. The process involves filing through the Income Tax e-filing portal and requires submission of documents like Form 16, tuition fee receipts, and interest certificates for claiming deductions.

Review and Accuracy Process

The Irish tax system places a strong emphasis on accuracy in filing, with a rigorous review and declaration process before submission. Mistakes or inaccuracies could lead to penalties or delayed refunds.While India also encourages accurate filing, the process might be less stringent for certain taxpayers, including students. However, errors can still lead to fines or loss of refunds.

Get a Copy of Income Tax Rules with FREE e-book access, Click here

Key Actions to Maximize Tax Benefits for Students

1. Whether in Ireland or India, familiarize yourself with the online tax portals “myAccount” in Ireland and the Income Tax e-filing portal in India. This knowledge will empower you to manage your tax affairs efficiently.
2. Knowing the available tax credits in both countries (such as medical expenses relief, rent credits, and tuition fee relief in Ireland) and how they compare to India’s tax deductions can help maximize your tax benefits.
3. Always keep detailed records and receipts for tuition fees, rent, medical expenses, and other eligible costs, as these will be essential when claiming tax relief.
4. Stay aware of the different filing deadlines in both countries to avoid missing out on potential refunds.

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