N

Non Resident Indians

Determining residential status

A. Individuals

a. An Individual is regarded as ‘Resident’ of India if:

  1. He stays in India for 182 days or more during a previous year;
    OR

  2. He stays in India for 60 days or more during a previous year, and 365 days or more during the 4 years preceding that previous year.

The short period of stay in India of "60" days, however gets extended to 182 days in following conditions (i.e., even though an Individual is in India for 365 days or more during preceding 4 previous years).

  1. An Indian citizen who leaves India in any previous year for employment or as a member of the crew of an Indian Ship;

  2. An Indian citizen or a person of Indian origin, who is abroad, comes on visit to India in any previous year.

Further, in case of an individual being citizen of India and member of crew of foreign bound ship leaving India, the period or periods of stay in India, in respect of such voyage shall be determined in manner and subject to conditions as may be prescribed.

b. An Individual is regarded as ‘Resident but not ordinarily Resident’ if:

  1. He is a non-resident in India in 9 out of 10 previous years preceding the previous year;
    OR

  2. He has stayed in India for 729 days or less during 7 years preceding the previous year.

c. An Individual is regarded as ‘Non-Resident’ if:

He doesn’t satisfy any of the conditions mentioned in (a) above.

B. HUF/FIRM/AOP

  1. Resident – They are regarded as resident, even if part ‘control and management of its affairs’ is in India.
    [Note: An HUF will be ‘Resident but not ordinarily resident’ if it is a resident and its manager fulfils any one of the conditions as mentioned in A (b) above]

  2. Non-resident – They will be regarded as non-resident, if control and management is wholly outside India.

 

C. Company

An Indian company is always treated as resident in India. Any other company would be a resident if its ‘place of effective management (POEM)’ is in India, .

For a company there could be many place of management but POEM will always be one. POEM is a place where key management and commercial decisions necessary for the conduct of the business as a whole are made. It is not sufficient to hold Board Meetings & AGM in the overseas jurisdiction but the team implementing such decisions should not be resident of India. Key Management Personnel such as CEO/CFO etc., should be resident of overseas jurisdiction where the foreign company is locat

Taxation and income from abroad

Resident: A resident will be charged to tax in India on his global income i.e. income earned in India as well as income earned outside India.

NR and RNOR: Their tax liability in India is restricted to the income they earn in India. They need not pay any tax in India on their foreign income.

 

In a case of double taxation of income where the same income is getting taxed in India as well as abroad, one may resort to the Double Taxation Avoidance Agreement (DTAA) that India would have entered into with the other country in order to eliminate the possibility of paying taxes twice.

Why should a NRI File Income tax returns in India??

Any NRI who earn more than INR 2,50,000 in a Financial Year is liable to e-file income tax return in India.

Apart from the same an NRI's needs to e-file income tax returns for the following reasons:

  • To claim a refund of the TDS deducted on Income Earned in India

  • To carry forward a losses if any incurred in India

  • The only income earned from selling an asset in a financial year where TDS has been deducted are not required to e-file income tax return for that year.

Last date of filing Income Tax Return in IndiaJuly 31st
 
Do NRI's need to pay advance tax in India?

 

NRI's with tax liability exceeding INR 10,000 in a financial year, are required to pay advance tax. If advance tax payments are missed in a year than interest need to be paid for that as mentioned under Section 234B and Section 234C.

Benefit's of RNOR status for NRI's

Any person apart from a resident Indian Citizen's are liable to file Income tax returns in India only on Income Arised or Accrued in India. The provisions of the Act can be used as an advantage for NRI's as they will not be liable to pay Income tax on following Income:
  • Interest on FCNR deposits and NRE deposits if you convert that to RFC (Resident Foreign Currency Account)
  • Withdrawal from offshore retirement accounts
  • Rent received abroad
  • Capital Gains made abroad
  • Interest/Dividend received on Investments/Securities abroad

Deemed to be Not Ordinarily resident

An individual, being a citizen of India, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year shall be deemed to be resident in India in that previous year, 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

However, as per the clarification from CBDT via press release dated 2nd February 2020 to clarify that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession.

The condition for deemed residential status applies only if the total income (other than foreign sources) exceeds Rs 15 lakh and nil tax liability in other countries or territories by reason of his domicile or residence or any other criteria of similar nature.