IMPACT ON NRIs Residential Status qua Income earned : CA NITIN PATHAK

Dear Friends,

Please take a note of there are many changes in NRIs reseidential status from F.Y.2020-21 

The Union Budget was presented in Parliament on 1^st February 2020 by the Finance Minister Nirmala Sitharaman and received the assent of the president on 27^th March, 2020. In this article some of the important changes made in the Finance Act 2020 which will be applicable to Non Resident taxpayers are discussed.

1. Definition of Residency Changed as under:

Sr. No.	No. of Days Stay in India	Residential Status
1	Less than 120 days
	If Total Income* does not exceeds Rs. 15 Lakhs	Non-Resident
	Individual, being a citizen of India, whose Total Income* exceeds Rs. 15 Lakhs	Deemed Not-Ordinary Resident (See Note-1)
2	120 days or more but less than 182 days
	If Total Income* does not exceeds Rs. 15 Lakhs	Non-Resident
	If Total Income* exceeds Rs. 15 Lakhs	Ordinary Resident/Not-Ordinary Resident (See Note-2)
3	182 days or more	Ordinary Resident/Not-Ordinary Resident (See Note-2)

*Total income means Indian Income and the income which accrue or arises outside India from a business controlled in or a profession set up in India shall be included.

Note – 1: Deemed Residency in India:

In case of an Individual, being a citizen of India, whose Total Income exceeds Rs. 15 Lakhs and who is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature will be treated as ‘Deemed Not-Ordinary Resident’.

 

Note – 2

If an Individual satisfy any one of the two following additional conditions, then he will treated as NOT-ORDINARY RESIDENT, otherwise he will be treated as ORDINARY RESIDENT:

Condition-1: Non-Resident in India in 9 out of 10 Preceding Previous Years

Condition-2: Total No. of days stay in India during 7 Preceding Previous Years are less than 730 days    

2. Impact on taxability of Income:

Taxability of Income

For Non-Resident

Income Received / deemed to be received / accrued or arisen / deemed to accrue / arise in India is Taxable in India.

For Not-Ordinary Resident / Deemed Not-Ordinary Resident

Income Which is Received / deemed to be received / accrued or arisen / deemed to accrue / arise in India & Income Which accrues or arises outside India being derived from a business controlled in or profession set up in India is Taxable in India.

For Ordinary Resident

Income Which is received / deemed to be received / accrued or arisen / deemed to accrue / arise in or Outside India. i.e. Global Income is Taxable in India.

Consequences of becoming resident in India: 

In case if you become resident of India, then you need to disclose all your global income in Indian tax return. In such case, you will get the credit of tax paid if any outside India, against the tax payable on such foreign income in India, so to say there will not be double taxation. But this will enhance compliance and unnecessary complications.

Our Advice: - If your total Indian Income exceeds Rs. 15 Lakhs, then You plan your trip to India in FY 2020-21(April 2020 to March 2021) in such a way that your stay in India less than 120 days.

   

Regards,

    CA Nitin Pathak & Team