Changes in NRI definition in India

Nita R Dhruve

RAJKOT, INDIA: In the last Budget, the Indian Government has proposed important changes in the definition of residential status of Non Resident Indian (NRI).

The budget has been passed in parliament and it has become Finance Act, 2020. It has incorporated important amendments to determine residential status of Non Resident Indian. And as such it will become effective from 1st April, 2020.

Existing definition for residential status has remained the same but they have introduced couple of new additional clause/conditions, based on income, for the purpose of determining the residential status of the NRIs.

This is explained as under:

As per existing definition an Individual is said to be resident of India in the  Financial Year if: (i) His stay in India is 182 days or more during such year:or, (ii) His stay in India totals to 60 days, or more, in relevant year in addition to his stay totaling to 365 days or more in immediately preceding 4 years.

However, the second condition of 60 days stay does not apply to NRIs visiting India and as such 182 days or more stay in India will be applicable to NRIs.

Finance Act, 2020 has added one condition based on income:

(ii) in case NRIs having taxable income in India exceeding INR 15 lakhs then he will be treated as resident of India if his stay in India totaling to 120 days or more, in relevant year in addition to his stay totaling to 365 days or more in immediately preceding 4 years.

Now by Finance Act, 2020 government has incorporated deemed provision in which case also NRIs will be treated as Resident of India :

(i)   In case of Indian Citizen (having Indian Passport) if he is having taxable income in India of more than 15 lakhs (including income earned from the business /profession operated/controlled from India)AND he is not liable to tax in any other country on the basis of his domicile, residency etc. then he will be treated as deemed resident of India for the said Financial Year.

IMPORTANT CLARIFICATIONS : 

1. Definition has mentioned taxable income hence income earned from NRE Fixed Deposit as well as NRE saving account and also interest income from FCNR deposit will not be included while calculating limit of taxable income INR 15 lakhs.
2. It has also been enacted in the Finance Act, 2020 that if NRIs becomes resident on account of, (I). His stay of more than 120 days but less than 182 days and having taxable income in India exceeds INR 15 lakhs or, (II). In case of deemed residence his global income will not be liable to tax in India except that income, which has been earned from the business operated or controlled from India.