Know the amended Residency rules for NRI – How it is going to impact you?
- Indian government seeks to tax NRIs carrying economic activity from India.
- Indian Government has also taken cognizance of the individuals who arrange their physical presence in India and abroad such that they are not liable to pay taxes in any country.
CEO Varis Sayed explains the new ruling and its impact on NRIs.
1. Can you explain the changes in the Rule of residency under Finance act 20 and how it is going to affect NRIs income?
Answer. The changes are made in section 6 of the income tax 1961, which deals with the “residential status of a person”. Till the financial year 2019-20, an NRI would be liable to pay taxes as a resident if they stayed 182 days or more in the country or an aggregate stay of 365 days or more in preceding 4 years. However, from financial year 20-2021, The individual who is staying in India for a period of 120 days or more and having income exceeding 15 lakhs (excluding foreign sources) will also be included to be considered as resident of India and would be liable to pay taxes under the jurisdiction of India. Another significant amendment is for individuals who are a citizen of India and is not liable to pay taxes in other countries by the reason of his domicile or residence or any other criteria of similar nature will be considered as resident of India, The condition applies only if the total income other than foreign sources exceeds 15 lakhs.
The second change is in the definition of “not ordinarily resident”. The new rule retains the existing criteria for being qualified as Not ordinary residents along with the addition in the definition. The added criteria include an individual whose income exceeds 15 lakhs from sources in India and they spend between 120 to 182 days in a year in India would be considered as “Not ordinary resident “.
The changes seek to tax individuals who are carrying substantial economic activity in India, these changes would have an impact on the global income of these Individuals.
2. As lots of Indians are working in Middle East countries, according to you what would be the impact of the new ruling for these individuals?
Answer. India has a Double Tax Avoidance Agreement with the UAE; Indian ruling authorities have taken a view that ” liable to tax” need not be equated with “payment of tax”. So, in this context any individual who stays in UAE for more than 182 days in a year is eligible to get “tax residency certificate” and hence, such person would not be covered in residency criteria.
3. Being in residency and citizenship business, how this rule is going to impact your business?
Answer. To minimize residency risks, wealthy NRIs may consider shifting from zero tax residence countries to the country with less taxes as compared to India, more Indians may also likely to consider alternative passports through various citizenship by investment programs in the Caribbean and EU.