Rules tightened for NRI status to curb tax evasion

Muscat: In a major announcement in the Indian Budget 2020, Finance Minister Nirmala Sitharaman has tightened the rules for Indian citizens to claim NonResident Indian (NRI) status.

According to a proposal in the budget presented on Saturday, the number of days required to stay abroad to become an NRI has been increased to 240 days instead of 182 days.

For this purpose, the Indian government is expected to modify residency provisions. This, according to experts, will put a leash on the tax evaders. For years now, a person who stayed in a foreign country for more than 182 days had earned numerous tax reliefs in India. Especially, the amount earned aboard was not taxable in India.

“The new proposal will cover such persons who go abroad and provide their services in different countries without paying tax. They will now be taxed in India if they are in the income tax bracket,” said Jose Chacko, a finance expert.

This provision will hit those who have moved to tax havens and are yet to take up citizenship, he added. According to the budget document, instances have come to notice where period of 182 days specified in respect of an Indian citizen or person of Indian origin visiting India during the year is being misused. “Individuals, who are actually carrying out substantial economic activities from India, manage their period of stay in India, so as to remain a non-resident in perpetuity and not be required to declare their global income in India,” the document said.

Later in the day, India’s Revenue Secretary Ajay Bhushan Pandey was quoted as saying that changes have been made in the Income Tax Act where if an Indian citizen stays out of the country for more than 182 days, he becomes a non-resident.

“So we’ve made some changes, now in order to become non-resident he has to stay out of the country for 240 days,” he was quoted as saying by a news agency. According to him, an Indian

citizen, staying in different foreign countries for a certain period and does not pay tax, will be considered a resident of India and his worldwide income will be taxed in India.

“Some people are residents of no country. They may be staying in different countries for a certain number of days,” he said. Jose said that the Indian rupee could get stronger if investors,

especially the foreign investors, react positively to the budget proposals.

At the same time, the Budget 2020 has proposed a new tax regime slashing income tax rates and rejigging income tax slabs to reduce total tax payable by individuals in India.