BackWhat are the latest rules for NRI taxation in India?
What are the latest rules on taxation of non-resident Indians (NRIs)?—Name withheld on requestUnder 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
PremiumWhat 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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