Direct Tax Code---Residential status in India – Restriction of 60 days stay
Does it really apply to all NRIs ?????
Is it exceptional for few?
IT IS EXCEPTIONAL ONLY FOR FEW
The major change introduced by the DTC is in the criteria of determining the residential
status of NRIs who, are working abroad, and come on visit to India. Currently, such
NRIs who are citizen of India or Person of Indian Origin (PIO) are regarded as resident, only
if, they stay in India for 182 days or more in the financial year. However, under the
proposed DTC, any inbound individual (including NRIs/PIO) will become resident, if
they are present in India for 60 days or more in the financial year and 365 days or more
over a period of four years prior to the financial year.
However in general it is not correct to opine that under the proposed provisions of the
Direct Tax Code, in relation to the ‘Residential Status’, the NRI shall be resident in India if
he stays for more than 60 days in India in a financial year (1st April to 31
attract Indian tax liability in respect of his income earned outside India.
In nutshell, we advise that NRI may stay in India for more than 60 days in a financial year
and yet he shall continue to special status of “Resident but Not Ordinarily Resident” under
the Income-tax Act, 1961 for tax purposes and even under proposed DTC and shall not be
liable to tax in India in respect of his income earned outside India. To a large extent, the
majority of the NRI’s may not be adversely affected by the proposed changes.
It is important for NRI to know that if he has stayed in India for less than 364 days in past 4
years or less than 728 days in past 7 years than his tax liability shall be restricted to income
earned in India only even if his stay in India is more than 60 days in a year.
He can stay in India up to 90 to 120 days or may be little more depending upon his past
stay in India and yet not covered by the proposed DTC PROVISION.
We can assist the NRI’s to know his Income tax status under the proposed DTC and no of
days he can stay in India ( even beyond 60 days) for the financial year1st April 2010 – 31
March 2011 and subsequent one to three years