Budget 2020 and action items for nrisfirst came the shock and that followed by some clarifications. Nris, it appeared would be taxed on the global incomes here in india. While that seemed onerous and unfair, it was later clarified that it applies to only those who tax residency is ambiguous. Also, the tax net now falls on nri who have incomes generated here in india but still did not end up paying taxes. A few of the important changes and clarifications provided by the government that impact the nri community from april are –1. Nri are liable to pay taxes on the global income in an event their residency status is ambiguous or cannot be established2.
Nri’s located in tax-free jurisdictions (like the middle east and having residency there) are not impacted. 3. Nri will continue as before to pay taxes on their incomes earned in india#1 is the most important change or rather a loophole that has been plugged during the current budget that is applicable from april 1, 2020. There are number of nris who are wealthy and do not have any single permanent residency status and often end up dodging many tax jurisdictions. These individuals would now be liable to pay taxes on their global income here in india. This loophole has therefore been plugged, however, there can still be many tax-free jurisdictions that might offer an escape route for the nris like in the middle east or other tax havens with liberal residency laws. #2 has been more of a clarification in the post budget interaction sessions and this therefore is a status quo from the earlier period where tax-free domiciled residents will not be taxed on the income from those jurisdictions as has been the case till now. #3 as a result applies to nri to pay taxes on all indian origin incomes as before.
There has been a clarification that this will not change. Residency provisions tweakedanother anti-abuse provision that was used by some nri was the rule of no. Of days stay. Now the rule of minimum 183 day stay out of india for being nri has been raised to 240 days and this makes frequent travellers claiming nri status a little more difficult. Another loophole being plugged, albeit partially.