Union Budget 2020: 'NRIs that do not pay taxes will be taxed in India'

NEW DELHI: Non-resident Indians who do not pay taxes in any foreign country will now be taxed in India, the Union Budget for 2020-21 has proposed.

At present, if an Indian or a person of Indian origin achieved their stay in India in such a way that he remained a non-resident in perpetuity, he was not required to pay taxes on his global income in India.

He has now proposed to introduce a provision that considers that any Indian citizen who is not subject to taxation in any other country, by virtue of their domicile or residence, will be considered a resident of India. Consequently, their overall income would be subject to taxes in India.

By tightening the residency provisions, he also proposed reducing the period of stay in India to 120 days from 182 days before for people of Indian origin (PIO) to be classified as non-resident Indians (NRIs).

Live plus ... In many cases, we have discovered that some people do not reside in any country in the world, it is possible that they stay a certain amount of days in different parts of the world. Then ... any Indian citizen, if not a resident of any country in the world, will be considered a resident in India, and then his world income will be taxed, said the Secretary of Revenue, Ajay Bhushan Pandey.

Amending Section 6 of the IT Law, the Budget proposed that Notwithstanding anything contained in clause (1), an individual, being a citizen of India, shall be considered resident in India in any previous year, if he is not responsible of tax in any other country or territory due to your domicile or residence or any other criteria of a similar nature.

When re-elaborating the definition of NRI, the Budget document says that the I-T Law states that an Indian citizen or a person of Indian origin will be an Indian resident if they are in India for 182 days in that year.

Esta disposición brinda relajación a un ciudadano indio o una persona de origen indio que le permite visitar India por un período plus prolongado sin convertirse en residente de la India. Las instancias se han dado cuenta cuando el período de 182 días especificado con respecto a un ciudadano o persona india de origen indio que visita India durante el año está siendo mal utilizado.

The people, who are actually carrying out substantial economic activities from India, manage their period of stay in India, in order to remain as non-residents in perpetuity and are not required to declare their overall income in India, said the Memorandum to the Budget.

Pandey said changes have been brought about in the Income Tax Act, which states that if an Indian citizen stays plus than 180 days out of the country, he becomes a non-resident.

Then we have made some changes there. Now, in order to become a non-resident, you must stay out of the country for 240 days, Pandey said.

The Budget also proposes to rework the definition of ordinary non-resident in India, if the individual has not been resident in India in 7 of the 10 years prior to that year. Previously, for an individual to be considered an ordinary non-resident, he had to be a non-resident in India in 9 out of 10 years.

The president of Nangia Andersen, Rakesh Nangia, said: Residence provisions have been tightened with the purpose of imposing taxes, specifically for stateless persons, who are not subject to taxes in any country or jurisdiction. This could affect non-resident Indians who remain in countries such as the UAE that do not impose income tax on individuals under local tax laws.

The founder of Transaction Square, Girish Vanvari, said: These changes in the definition would deter people from coming to India and some may even think of renouncing Indian citizenship.

Gopal Bohra of NA Shah Associates said today that it is entirely possible for people with high net worth to organize their affairs in such a way that they are not subject to taxes in any other country or in India.

The new provision will negatively affect people of high net worth who use the domicile mechanism to evade taxes worldwide, he said.