(Image source from: msbusiness.com)

The Indian government has relaxed the residential provision of FY 2020. During the FY 2019-20, a number of individuals holding the status of RNOR were stranded in India due to the pandemic.

The COVID-19 crisis has brought a huge loss not only to the employees in the country but also to the NRI’s. A lot of non resident Indians (NRI’s) are now looking forward to heading back to their home towns.

If you are also one of them, meticulous planning would be required for a hassle-free relocation.

A generic concern among most of the NRI’s is the tax implications on the income earned during the year in which the NRI returns to India.

The Union Budget of 2020 has reformed certain rules for determining the tax residential status of an individual in India.

Here is a glimpse of the amendments which you need to take a look at.

Rules to determine the residential status of NRI

Residential status of an individual is determined by the period of time an individual stays in India during a financial year.

Finance Minister Nirmala Sitharaman has brought forward some new amendments for the determination of residential status.

If an individual satisfies any of the following two conditions he will qualify as the resident of India or would be an NR in the FY.

• He or she stays in India for more than 182 days of that financial year.
• He or she stays for more than 60 days during a FY and stays 365 days in the preceding 4 FY’s.

If an Indian citizen or a person of Indian origin comes to stay in India then 60 days mentioned in the second point will be extended to 182 days.

Another new RULE says that if an Indian citizen or a person of Indian origin comes for a visit to India and he/she earns more than Rs. 15 lakh during a financial year with a business set up in India, then 60 days in the second point will be replaced by 120 days.

Meanwhile, if the income does not cross Rs. 15 lakh, then the 182 days rule will itself apply.

Deemed residency, a new concept

A new concept of deemed residency has been introduced to plug certain loopholes.

• An Indian citizen who earns more than Rs. 15 lakh per FY and if he is not liable to any tax to a foreign country or territory by reason of his domicile or residency, then he will be deemed to be a resident of India.
• A person of Indian origin whose total income exceeds Rs. 15 lakh through a profession in India and whose stay in India is more than 120 days but less than 182 days will be considered for NOR status.

Relaxations in residential provisions 2020

The inability of people to travel back to India has increased due to the pandemic and this will impact their residential status in India.

To avoid the hassles to such individuals, Indian government has relaxed the norms for the FY 2019-20.

A relaxation was provided wherein the cut off date for considering the physical presence was brought down to 22 March 2020 instead of 31 March 2020 by excluding the lockdown phase.

How the income of ROR, RNOR, and NRI will be calculated?

The tax liability of the individual depends on residential status.

If you are an ROR, you will be taxed in India.

If you qualify as an RNOR or NR, the income only to the extent which arises in India will be taxed.

An RNOR is liable to tax on income or business set up in India whereas an NR is not liable to this.

By Gayatri Yellayi