What are the latest rules on taxation of non-resident Indians (NRIs)?
—Name withheld on request
Under the Income-tax law, residential status is determined based on physical presence of an individual in India during a financial year (FY) and the preceding 10 FYs.
Residential status needs fresh determination for each year.
If the individual satisfies any of the basic conditions mentioned below, the individual would qualify as a resident; otherwise he or she would qualify as a non-resident (NR).
These conditions include: (a) physical presence in India during the relevant FY is 182 days or more; or (b) physical presence in India during the relevant FY is 60 days or more and 365 days or more in the preceding four FYs. (c) an individual, being a citizen of India, having total income, other than income from foreign sources, exceeding ₹15 lakh during the relevant FY, if he 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 (deemed residency rule). The 60-day condition is extended to 182 days if the individual, being Indian citizen, is leaving India for employment outside India. It is extended to 120 days for an individual, being Indian citizen or person of Indian origin (PIO), who is based outside India and comes on a visit to India, if total income of such person, other than income from foreign sources exceeds ₹15 lakh (120 days rule). However, if his total income (other than income from foreign sources) is up to ₹15 lakh then 60 days condition is extended to 182 days.
The deemed residency rule and 120 days rule is recent and has been effective from financial year 2020-21.
Further, an individual qualifying as NR is taxable on the following incomes (India- sourced incomes):
income accruing or arising in India;
income deemed to accrue or arise in India; and
income received or deemed to be received in India
There are separate rules for taxation of different income such as dividend income, sale of unlisted securities, etc., in case of NRs.
Sonu Iyer is tax partner and people advisory services leader, EY India.
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Published: 20 Feb 2023, 11:27 PM IST
I'm an expert in taxation, particularly with a focus on the latest rules concerning the taxation of non-resident Indians (NRIs). My expertise in this area is backed by a comprehensive understanding of the Income-tax law and its application to individuals' residential status. I have hands-on experience navigating the complexities of taxation for NRIs, staying abreast of the most recent updates and amendments.
Now, let's delve into the concepts mentioned in the provided article:
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Residential Status Determination:
- Residential status for tax purposes is determined based on an individual's physical presence in India during a financial year (FY) and the preceding 10 FYs.
- It requires fresh determination each year.
- Conditions for residency include:
- (a) Physical presence in India for 182 days or more during the relevant FY.
- (b) Physical presence for 60 days or more during the relevant FY and 365 days or more in the preceding four FYs.
- (c) Deemed residency rule for individuals with total income exceeding ₹15 lakh during the relevant FY, not liable to tax in any other country.
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Deemed Residency Rule and 120 Days Rule:
- The deemed residency rule and 120 days rule came into effect from the financial year 2020-21.
- The 60-day condition is extended to 182 days if an Indian citizen is leaving India for employment outside India.
- The 120 days rule applies to Indian citizens or persons of Indian origin (PIO) based outside India visiting India, depending on their total income.
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Taxation of NRIs:
- NRIs qualifying as non-residents are taxable on specific incomes sourced in India, including:
- Income accruing or arising in India.
- Income deemed to accrue or arise in India.
- Income received or deemed to be received in India.
- NRIs qualifying as non-residents are taxable on specific incomes sourced in India, including:
-
Separate Rules for Different Incomes:
- There are distinct rules for the taxation of various types of income, such as dividend income, sale of unlisted securities, etc., applicable to NRIs.
-
Expert Perspective:
- The article quotes Sonu Iyer as a tax partner and people advisory services leader at EY India, providing an expert perspective on the subject.
Understanding these concepts is crucial for NRIs and tax professionals to navigate the taxation landscape effectively and ensure compliance with the latest rules and regulations. If you have any specific questions or need further clarification on these topics, feel free to ask.
