Today we will discuss on Residential status of NRI in India. In this blog we will discuss what are the changes done by the income tax act to determine the residential status of the assessee.
CHANGES TO DETERMINE RESIDENCE FOR NON-RESIDENT ON VISIT TO INDIA
Presently, an individual being Citizen of India or a Person of Indian Origin, who being outside India was considered as Non-resident of India, if he/she comes on a visit to India for a period of less than 182 days in a year.
It is now provided to reduce the period of stay in India to less than 120 days in a year to be considered as Non-resident of India –
- for a citizen of India or PIO (who being outside India, comes on a visit to India in any previous year)
and
- having total income of more than ? 15 lacs (other than the income from foreign sources)
This means that the NRI’s coming for a visit to India and having total income of more than ? 15 lacs (other than income from foreign sources) need to limit their stay in India to less than 120 days in a year; Or else they shall become resident in India and may become liable to tax in India on their worldwide income in that year.
Further, the legislature has continued the present provision for the NRI’s coming for a visit to India and having total income of less than ? 15 lacs for the relevant previous year, the limit for their stay in India to less than 182 days. This means that they shall become resident in India and shall be liable to tax in India on their worldwide income only if they exceed this limit of 182 days or more in that year.
NEW PROVISIONS FOR DEEMED RESIDENCE IN INDIA
A new provision is introduced wherein an individual is deemed to be “Resident” in India in the relevant previous year, irrespective of number of days of stay in India if the following conditions are satisfied –
- Individual is Citizen of India;
and
- has total income exceeding ? 15 lacs (other than income from the foreign sources) in India during the previous year;
and
- who is not liable to tax in any country or territory by reason on his domicile or residence or any other criteria of similar
It is likely that those who shall be a resident in India under the aforesaid provision shall be liable to taxation in India in respect of their worldwide income. This will attract heavy Indian taxation for certain persons and create genuine hardships. However, there is a relief introduced for such individuals as explained in the ensuing paragraph 3.
CHANGES TO DETERMINE RESIDENCE AS ‘RNOR’ OF INDIA
At present, an individual is said to be “Resident but not ordinarily resident” i.e. RNOR in the relevant year, if such individual satisfies one of the following conditions:
| Condition | Status | |
| 1. He is non-resident of India for at least 9 out of 10 previous years prior to the previous year under consideration | >> | If yes, he is RNOR |
| 2. His stay in India during the 7 previous year prior to the relevant year under consideration should be 729 days or less | >> | If yes, he is RNOR |
It is now proposed to add two more categories for an individual to be treated as RNOR –
- a citizen of India or PIO and having total income of more than ? 15 lacs during the previous year (other than income from foreign sources) and his stay in India in the previous year is 120 days or more but less than 182
Or
- a citizen of India who is deemed to be resident in India as defined in above paragraph
The hardship and rigours of newly introduced provision of ‘deemed resident’ has been reduced by the aforesaid RNOR provision in as much as such persons who are deemed to be resident shall not be liable to tax in India in respect of any income arising outside India like capital gains, dividend, interest, rentals et cetera other than the income from the business activities outside India which is managed and controlled from India.
