If you qualify as an RNOR, your global income will become taxable in India2 min read . Updated: 13 Apr 2020, 10:48 PM IST
Those with RNOR status in India are also required to report assets held outside the country in their tax returns
We are a group of non-residents working in the Gulf region. Our employers are Gulf-based companies, and we have non-resident external (NRE) accounts in India. Our problem is that we work for 35 days on-job abroad and off-duty in India for the next 35, and so on. This is in accordance with our job contracts, since we work in the oil and gas industry. So, considering the travel days, we are staying abroad for 175 days in a year, and the remaining 190 days are spent back in India. Do we have to pay tax on our income in this case?
— Jobby Mathew
Residential status in India is determined based on total physical presence in India in the current FY and the preceding 10 FYs and needs fresh determination in each FY.
According to the Income-tax Act, given your physical presence in India (190 days), you may qualify as resident and ordinarily resident (RNOR) in India if:
(a) Your physical presence in India is 182 days or more during the relevant FY; (b) Your physical presence in India is 730 days or more in seven FYs preceding the relevant FY; and (c) You qualify as “resident" of India in any two out of 10 FYs preceding the relevant FY.
Through a proposal made in Budget 2020, the condition mentioned in (b) has been deleted and the condition mentioned in (c) has been amended to qualifying as resident of India in four out of 10 FYs preceding the relevant FY.
With an RNOR status, your worldwide income in India will be taxable and you are required to report assets held outside the country in your income tax return (ITR). So salary income received from your Gulf-based employers is taxable in India.
After the last budget, how many days do I need to stay outside India to qualify as a non-resident?
—Rajesh Singh Gulia
Under the India Income-tax law, an individual who satisfies any of these basic conditions would qualify as a “resident"; otherwise he/she would qualify as a “non-resident":
(a) Physical presence in India during the relevant financial years (FY) is 182 days or more; or (b) physical presence in India during the relevant FY is of a period of 60 days or more and 365 days or more in the preceding four FYs.
The period of 60 days will be substituted by 182 days in the following circumstances:
(a) For a citizen of India, who leaves India during the relevant FY for the purpose of employment outside India or as a member of the crew of an Indian ship; or (b) For a citizen of India or a person of Indian origin, who being outside India, comes on a visit to India during the relevant FY.
Accordingly, a citizen of India or a person of Indian origin residing abroad, who comes on a visit to India during the relevant FY is considered as a resident of India if he/she is physically present in India for a period of 182 days or more during the FY. Budget 2020 has proposed to replace 182 days to 120 days. The amendments have come into effect FY21 onwards.
Assuming you are a citizen of India or a person of Indian origin, if you are based outside India, you may visit India for less than 120 days to maintain your non-resident status in India. “Visit" generally refers to temporary stay in India, however, it is a fact-sensitive issue.
Sonu Iyer is tax partner and people advisory services leader, EY India. Queries and views at firstname.lastname@example.org