WHY NRI’S NEED TO LOOK INTO THE BUDGET 2020 CAREFULLY?

Budget 2020 Capsule-2

 WHY NRI’S NEED TO LOOK INTO THE BUDGET 2020 CAREFULLY?

The Income of any assessee is taxed in India on the basis of “Residential Status” as enshrined under section 6 of the Income Tax Act, 1961. The Budget 2020, has brought in the tremendous changes in the said provision which particularly brings NRI’s income to Tax in India.

Why Residential Status plays a vital role in Taxation?

The taxation of Income depends upon the residential Status as mentioned below.

Ø  For “Ordinarily Resident” Income earned in India and also income earned outside India (Global Income) is Taxable.

Ø  For “Not Ordinarily Resident” Income Earned in India is only Taxable.

Ø  For “Non-residents” Income earned in India is only Taxable.

The Changes made in the Budget regarding the Residential Status in a nutshell –

Residential Status	Pre- Budget	Post Budget
Resident in India	If an individual stays in India in Previous Year for a period(s) of 182 days or more OR If an individual stays in India in Previous Year for a period(s) of 60 days or more and also stays for 365 Days or more within the four years preceding that Previous Year.	Following addition is made to the existing provision. An individual, being a citizen of India, is not liable to tax in any other country or territory by reason of his domicile or residence shall be deemed to be resident in India.
Resident in India - In case of an Indian Citizen/Person of Indian Origin who is residing outside India, comes on a visit to India in any previous year.	If an individual stays in India in Previous Year for a period(s) of 182 days or more OR If an individual stays in India in Previous Year for a period(s) of 182 days or more and also stays for 365 Days or more within the four years preceding that Previous Year.	If an individual stays in India in Previous Year for a period(s) of 182 days or more OR If an individual stays in India in Previous Year for a period(s) of 120 days or more and also stays for 365 Days or more within the four years preceding that Previous Year.
Non resident	If the above conditions are not satisfied an individual shall be treated as “Non-resident”.	If the above conditions are not satisfied an individual shall be treated as “Non-resident”.
Not Ordinarily Resident	an individual who has been a non-resident in India in 9 out of the 10 previous years preceding that year. OR has during the 7 previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and 729 days or less;	an individual who has been a non-resident in India in 7 out of the 10 previous years preceding that year
Ordinarily Resident	A Person who is Non resident in India for a lesser period as mentioned above for a “Non-Ordinarily Resident”	A Person who is Non-resident in India for a lesser period as mentioned above for a “Non-Ordinarily Resident”

IMPACT ASSESSMENT:

Ø  Person of India Origin/India Citizen who regularly stays outside India, comes to India on holiday or for whatever reasons and stays in India for a period more than 120 days (as against 180 days earlier) in India, his GLOBAL INCOME will also be taxable.

Ø  A person being an Indian Resident and earing income outside India and his income is not taxed in such countries on the basis of his residential status in such countries, he will be brought to tax in India as per his Residential Status in India.

Ø  To avoid taxing the “GLOBAL INCOME”, one must prove his Residential Status as “Not Ordinarily Resident”. Earlier, if an individual is non-resident for 9 out of 10 preceding previous years, he was declared as “Not ordinarily resident”. Now the same has been brought down to 7 out of 10 preceding Previous years.

✍

Sanjay R Shetty

Chartered Accountant

                                                                                                                                       Date : 04th February, 2020