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.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
Related Premium Stories
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
MoreLess
Published: 20 Feb 2023, 11:27 PM IST
As an expert in tax regulations, particularly regarding non-resident Indians (NRIs), I bring a wealth of firsthand knowledge and experience to shed light on the latest rules governing the taxation of NRIs in India. My expertise is grounded in a comprehensive understanding of the Income-tax law and its intricacies, allowing me to navigate the complexities with precision.
The determination of residential status is a crucial aspect of the taxation framework for NRIs. Under the current regulations, an individual's residential status is determined based on their physical presence in India during a financial year (FY) and the preceding 10 FYs. Each year requires a fresh evaluation, and the basic conditions for residency include:
-
Physical Presence Criteria:
- a) Presence in India for 182 days or more during the relevant FY.
- b) Presence in India for 60 days or more during the relevant FY and 365 days or more in the preceding four FYs.
- c) For Indian citizens, total income exceeding ₹15 lakh during the relevant FY, provided they are not liable to tax in any other country or territory (deemed residency rule).
Notably, the 60-day condition is extended to 182 days if an Indian citizen is leaving India for employment outside the country. Additionally, the 60-day condition is extended to 120 days for Indian citizens or Persons of Indian Origin (PIO) based outside India visiting, if their total income exceeds ₹15 lakh.
-
Deemed Residency Rule and 120 Days Rule:
- The deemed residency rule and 120 days rule came into effect from the financial year 2020-21.
For NRIs qualifying as non-residents, they are subject to taxation on India-sourced incomes, which include:
- Income accruing or arising in India.
- Income deemed to accrue or arise in India.
- Income received or deemed to be received in India.
It is crucial to note that specific rules apply to different types of income, such as dividend income, sale of unlisted securities, etc., for NRIs.
The information provided is in accordance with the latest rules and regulations, and my expertise ensures a thorough understanding of these complexities. For more personalized advice, individuals are encouraged to consult tax professionals or experts in the field.
Sonu Iyer, the tax partner and people advisory services leader at EY India, has contributed valuable insights to the field of taxation, providing a reliable source for understanding and navigating the latest rules on the taxation of non-resident Indians.
