It’s been 41 days since the lockdown was announced in India and flight operations were suspended. Non-resident Indians (NRIs) who came to the country before the lockdown, don’t have an option to return till travel restriction are lifted. However, the number of days these NRIs stays in India decides their onus of income-tax compliance. The recent amendment introduced by the Finance Act 2020 related to the tax residency rules can be a concern for some NRIs. As per the current regulations if an individual stays in India for less than 120 days, then domestic tax is not applied. High net worth individuals often planned their stay in a way that they spent a substantial part of the year flitting between tax havens. Now stuck in India due to travel restrictions, these individuals are in danger of exceeding the number of days’ presence in India and thereby being considered a resident of India for tax purposes.
However, experts say that the number of days an NRI stays in a financial year is not the only criteria to ascertain tax residency status. Besides 120 days in a financial year, one should have stayed an aggregate of 365 days or more in the preceding four years. Also, the new rule of a lower number of days is only applicable to those NRIs whose total income in India exceeds ₹15 lakhs during an FY. For those NRIs having income below ₹15 lakhs, rules remain the same as earlier. Still, an NRI, whose taxable income exceeds ₹15 lakhs and stays in India for 120 days or more in the previous year and had also stayed 365 days or more in the preceding four years, will be treated as a resident individual for income tax purposes. If the government doesn’t come up with a way out or relax the rules for this year, a few NRIs might have to file a return if they qualify as a resident under the new rules. But there is some relief, in such cases, NRI will be treated as “Resident but Not Ordinarily Resident (RNOR),” and thus not required to pay tax in Indian on their foreign income.
Only time will tell if the government will come out with a clarification or not, hopefully, it does because otherwise these new residency rules can be taxing for NRIs stuck in India amid lockdown.
India is a vast country and a mystery to most. Those who live in it, those who now live outside of India or those who are just visiting. We, at NRIClub™, serve as a centralized hub of information for the residents, non-residents and travellers who are not familiar with various aspects of this great country. We are a unique, online portal providing all of the information to our users that could be relevant to them.
India is a vast country and a mystery to most. Those who live in it, those who now live outside of India or those who are just visiting. We, at NRIClub™, serve as a centralized hub of information for the residents, non-residents and travellers who are not familiar with various aspects of this great country.
2024 NRI Club™ © All Rights Reserved.