1. The Finance Ministry has issued a clarification regarding Proposal to Income Tax on Non-Taxpaying NRIs in the Finance Bill 2020. The Clarification said that NRI’s Overseas Income will not be taxed.
2. The Finance Ministry said that the Finance Bill, 2020 has proposed that an Indian citizen shall be deemed to be resident in India if he is not liable to be taxed in any country or jurisdiction.
3. This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India.
4. The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries.
5. In some section of the media, the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in the Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there. This interpretation is not correct.
6. In order to avoid any misinterpretation, it is clarified 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. Necessary clarification, if required, shall be incorporated in the relevant provision of the law.
7. In the Finance Bill, 2020, the Government has made a substitution in Section 6 i.e., the words “one hundred and eighty-two days”, the words “one hundred and twenty days”. An Indian now has to stay abroad for 240 days a year, against 182 previously. In other words, an Indian national, to claim the non-resident status, can’t stay in India for 120 days or more in a year.
8. According to proposed Section 6 (1A), it reads that “Notwithstanding anything contained in clause (1), an individual, being a citizen of India, shall be deemed to be resident in India in any 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.”.
9. A non-resident Indian, who is not taxed in the foreign country, will become taxable in India.