India clarifies new tax rule to Indians working abroad

Tax Indian working overseas

A recent proposal on taxation related to Indians in foreign countries generated apprehension among NRIs. A proposal in the Finance Bill 2020 was at the root of the worries. It had proposed that an Indian citizen shall be considered a resident in India if he is not to be taxed in any other country or jurisdiction.

Confusion followed as the proposal was not clearly understood by the NRIs. On the face, it seemed to threaten NRIs, like those in the Middle East, with taxation by India. Many NRIs in the Middle East are not liable to pay income tax.

The Finance Minister came with a clarification soon. She said that the new provision on NRIs was not intended for bona fide workers in foreign countries. It was also made clear that only the Indian income of NRIs was in the proposal to be taxed under the new provision. This clarification put the apprehensions of NRIs, especially in the Middle East, to rest.

The new provision in taxation was not made applicable for merchant navy also. This was because their income does not arise from India.

The provision was also meant to check the practice of people going to live in tax-free countries to evade Indian tax. These people enjoy a non-resident status by staying out for 183 days in a tax-free country. The new proposal intends to curb the practice. The number of days of stay outside India to be considered an NRI is proposed to be increased to 245 days.

To end tax evasions, few other steps have also been proposed in the 2020 budget bill. One of them is that every Indian citizen not to be taxed in another country due to his residence or domicile, will be deemed as a resident of India. This will make his global income taxable in India.

Also, it is proposed that the period of stay in India of Persons of Indian Origin (PIOs) be reduced. It will now be fixed at 120 days, as opposed to 182 days granted earlier, if PIOS have to be categorized as NRIs. If you are looking to Study, Work, Visit, Invest or Migrate to different countries, talk to Y-Axis, the World’s No.1 Immigration & Visa Company.

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Anshul Singhal

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