The Indian Budget how it affects NRI Status

Nita Dhruve

The Indian Budget 2020-21 has been passed in the Parliament and it has become Finance Act, 2020. It has incorporated important amendments to determine the residential status of Non-Resident Indians. And as such it will become effective w.e.f. 1st April 2020.

The existing definition for residential status has remained the same but they have introduced a couple of new additional clauses/conditions based on income for the purpose of determining the residential status of the NRIs. Same has been explained here under:

As per existing definition, an Individual is said to a resident of India in Financial Year if:

(i) His stay in India 182 days or more during such year: or

(ii) His stay in India totaling to 60 days or more in the 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 and now:

(ii) In case NRIs having taxable income in India exceeding INR 15 lakhs then he will be treated as a resident of India if his stay in India totaling to 120 days or more in the 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 a deemed resident of India for the said Financial Year.

IMPORTANT CLARIFICATIONS: 

1. The 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
3.  His stay of more than 120 days but less than 182 days and having taxable income in India exceeds INR 15 lakhs or 
4. In case of deemed residence

His global income will not be liable to tax in India except that much of income, which has been earned from the business, carried on or controlled from India.

Note: Asper circular issued by CBDT, an Individual who has come to India on a
visit before 22nd March 2020 and has been unable to leave India on or before 31st March 2020 due to declaration of the lockdown and suspension of international flights owing to the outbreak of Novel Corona Virus (COVID-19), his period of stay in India from 22nd March 2020 to 31st March 2020 shall not be taken into account while determining his Residential Status for the Financial Year 2019-20.