Budget 2020 has proposed some changes on NRI definition. Also it has changed few rules regarding taxation of income & investments. Here are the changes made in Budget 2020 impact on NRIs.
Also Read:
Budget 2020 – Highlights & Key Provisions
Budget 2020 – Impact on Tax & Investments
Budget 2020 Impact on NRIs
Definition of Residency has changed
– A visiting NRI (NRI & PIO) need to stay 245 days outside India rather than 182 days as used to be earlier.
So from Apr 1, 2021, resident Indian will be one who’s in India for 120 days or more.
Important To Note
The reduced period of 120 days shall apply, only in cases where the total Indian income (i.e., income accruing in India) of such visiting individuals during the financial year is more than Rs 15 lakh. A visiting NRIs whose total income (which is defined as taxable income) in India is up to Rs 15 lakh during the financial year will continue to remain NRIs if the stay does not exceed 181 days, as was the case earlier.
Definition of NOR (Not Ordinarily Resident) has also changed
Criteria of determining NOR also modified as under:
⎼ Individual who is NRI in 7 out of 10 preceding years
⎼ For HUF, the Manager has been an NRI in 7 out of 10 preceding years
Few More Changes
– The tax Slabs have changed, in case you forgo exemptions as mentioned in this Budget 2020 article.
Here are the slabs.
– If an NRI does not belong to any country (living in a different country or on an offshore vessel), he has to pay tax on his global income in India.
This means mariners & people working in multiple countries will have to present income for tax.
– If an NRI is living in zero tax country and is enjoying tax-free benefits in your country of stay, your home country (India) will still tax you.
Clarification: The government clarified in a press release that the intention behind this rule is not pressuring NRIs who are bonafide workers in another country. They are behind people who manage “NRI Taxation” just to escape the Indian Tax payment. My interpretation is that if you have a work visa or residence visa, you are a bonafide worker. So NRIs specially in Gulf Countries do not need to panic.
– The benefit of Withholding tax rate of 5% under section 194LD extended to more instruments including Municipal Bonds and the lower withholding tax rate will be available for more time. So lower TDS will be applied.
– TCS @ 5% on Foreign Remittance through Liberalised Remittance scheme for remittance exceeding Rs. 7 Lacs p.a.
– TCS @ 5% on Seller of an overseas tour package who receives any amount from the buyer.
The rate of tax will be at 10 percent in the case the sender does not have of PAN or Aadhar.
Meaning: New Tax Collection at Source if you are sending Rs 7 Lakhs or more under LRS to your children for studies, buying a property abroad or paying for a foreign tour.
Non Residents are exempted from filing of Income Tax Returns in certain conditions where their income consists of dividends, Interest, Royalty and Fees for technical services if the same has been subjected to TDS as per the rates specified in the Income Tax
Act.
– Certain specified categories of G-secs would be opened fully for NRIs.
– Business Connection Income Attribution clarified for Budget 2020 impact on NRIs
Scope of income attributable to Indian operations expanded to include:
- Income from advertisements targeted to Indian resident customers.
- Sale of data collected from Indian residents.
- Sale of goods and services using data collected from Indian residents
We are in the process of getting more information & clarifications. I will keep on adding those.
