Amended definition of Residential status - under Income Tax Act, 1961
In last budget Government has proposed important changes in the definition of residential status of non Resident Indian (NRI).
Now 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 w.e.f. 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. Same has been explained here under :
As per existing definition an Individual is said to resident of India in Financial Year if :
(i) his stay in India 182 days or more during such year :
(ii) his stay in India totaling 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 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 than 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)
he is not liable to tax in any other country on the basis of his domicile, residency etc. than 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 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
01. his stay of more than 120 days but less than 182 days and having taxable income in India exceeds INR 15 lakhs or
02. 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.