Are the Stranded NRI’s up for Income Tax Problem?
With the COVID-19 crisis impacting the aviation industry along with other industries, 44 days have passed since the announcement of the lockdown in India and the suspension of flight operations as well. This has put the Non-resident Indians or NRIs in a spot, as many of them arrived in India prior to the lockdown. With no way of heading back, it could impact their NRI status as well as taxes, especially due to the Finance Act 2020’s latest amendment that was introduced pertaining to rules of tax residency for NRIs.
Earlier an NRI visiting India was considered to be a resident if they have spent about 182 days in the earlier year in India, however from the financial year 2020-21, this threshold period has been brought down to 120 days. There are chances of the lockdown getting extended or even the ban on international travel might not be lifted for the next few months. However, according to the new rule, the lower amount of days is applicable to NRIs having a total income exceeding 15 lakhs in India during the financial year. For the NRIs with the income lesser than 15 lakhs, the earlier rules will be applicable.
What Must an NRI do?
NRIs have to maintain track of the days they reside in India in any financial year. Furthermore, they have to estimate the income generated by them from their investments, assets, or business run and operated in India, because these would be part of the taxable income in the country. Many other changes have to be made note of when estimating the taxable income. Take the example of dividend distribution tax- from the present financial year, any dividend that is distributed by Indian firms will be a part of an individual’s taxable income.
The various changes brought about in tax rules could make it tough for the high net-worth NRIs to have substantial income sources from India, to establish their tax residence. Such NRIs might have to file their tax returns not just in India, but also in the country of residence.
