The government said it doesn’t intend to tax income that bona fide workers earn overseas, allaying concerns about a budget proposal relating to non-resident Indians (NRIs) that said those who weren’t taxed in another country were liable to pay tax in India. This had caused Indians working in the Middle East to panic as many countries in the region don’t levy income tax. The government said the provision was an “anti-abuse” one and will only apply to income that is generated locally. “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,” the Central Board of Direct Taxes (CBDT) said in a statement on Sunday. “The new provision is not intended to include in tax net those Indian citizens who are bona fide workers in other countries.” Read more 

Budget 2020: In areas of ease of compliance, one such amendment proposed by the Finance Minister is to extend exemption to non-residents from filing annual income-tax return in India in additional cases. Budget 2020 was presented by the Hon’ble Finance Minister on 1 February 2020. The Budget is woven around three prominent themes “Aspirational India, Economic Development for All and A Caring Society”. From the tax perspective, apart from the reform measures already taken so far, it is focused on crucial aspects such as ‘stimulate growth, simplify tax structure, bring ease of compliance, and reduce litigations’. The current government has put a lot of thrust on manufacturing in India, promoting start-ups, developing job opportunities, widening and deepening of tax base, tax certainty, reducing litigations and simplifying tax laws. In areas of ease of compliance, one such amendment proposed by the Hon’ble Finance Minister is to extend exemption to non-residents from filing annual income-tax return in India in additional cases. Under the provisions of the Income Tax Act, 1961 (the Act), specific tax rates have been prescribed for different categories of income. Further, a non-resident is currently not required to file his return of income, if his total income consists only of dividend or interest income and TDS on such income has been deducted according to the provisions of the Act. Non-residents earning royalty or fees for technical services (FTS) from India were, however, still required to file their return of income in India. Read More

The Finance Ministry has issued a clarification that clears the air over a contentious anti-tax abuse Budget proposal that had raised the hackles of many non-resident Indians. As per the proposal, “an Indian citizen who is not liable to tax in any other country or territory shall be deemed to be resident in India”. The implication was that such a person may become liable to pay tax in India. This key change could also have had the unintended consequence of bringing into the Indian tax net the incomes earned abroad by bonafide NRI workers in countries that don’t levy income tax. For instance, it could impact NRIs staying in countries such as UAE which do not impose income tax on individuals under local tax laws. This had raised worries among many NRIs who work in such jurisdictions. Thankfully, the Finance Ministry has now clarified that the new provision is not intended to include in the tax net those Indian citizens who are bonafide workers in other countries. It clarifies 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. Making its intent clear, the clarification says, “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 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.” It adds that necessary clarification, if required, shall be incorporated in the relevant provision of the law. Read More

The budget has turned out to be taxing for the non-resident Indian. Firstly, to be categorised a non-resident, 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. “We’ve made changes in Income Tax Act where if an Indian citizen stays out of the country for more than 182 days, he becomes non-resident,” said revenue secretary Ajay Bhushan Pandey.  “Now in order to become non-resident, he has to stay out of the country for 240 days.” The second rule is more deadly: a non-resident Indian, who is not taxed in the foreign country, will become taxable in India. The government said it is introducing this provision to prevent tax abuse. Read more

If the payee qualifies as an NRI during the relevant financial year, the payer is required to deduct TDS at a specified rate on the taxable income of the payee It is advisable to document the gift through a gift deed. The taxability of receipt of gift in the US may need to be analyzed separately What is the procedure for applying for a nil or low TDS (tax deducted at source) certificate on a non-resident Indian’s (NRI) income? Will I need the help of a tax expert? Under the India income tax law, if the payee qualifies as an NRI during the relevant financial year, the payer is required to deduct TDS at a specified rate (plus applicable surcharge and health and education cess) on the taxable income of the payee. The payer or payee may approach the income tax officer to apply for lower or nil TDS certificate under the following provisions: (a) If the payer believes that his income is not fully taxable in India, he may file an application with the income tax officer. There has been an amendment to prescribe the form for such application (with effect from 1 November 2019). However, the form has not been prescribed yet. Read more  

Over the years, non-resident Indians (NRIs) have invested substantial sums into Indian real estate, either purely from an investment perspective or due to an emotional attachment to the country of origin. Either way, the Indian government sees this as an important source of fund inflows. And, to make real estate buying even more attractive for NRIs, it offers multiple benefits to NRIs by way of tax exemptions. To start with, the term NRI is legally defined under the Foreign Exchange Management Act (Fema), 1999 and the Income Tax Act, 1961. Fema defines an NRI as a citizen of India who either resides outside the country or is a person of Indian origin (POI) and doesn’t reside in India for at least 183 days or more. Tax benefits on home loans Several banks and non-banking financial institutions offer home loans to NRIs. However, the tenure of the home loan may vary, and the rate of interest is usually higher for them. So, let’s understand some of these major benefits. 1. Deduction on principal repayment and stamp duty and registration charges: As per Section 80C of the Income Tax Act, NRIs can claim tax deduction on home loans on repayment of the principal amount and also avail deductions for stamp duty and registration charges paid to purchase the property. The maximum deductions on both these amounts available are Rs150,0000 (Dh7,786.70) per annum. However, to claim this benefit, the house should not be sold within five years of possession. 2. Deduction on repayment of interest charges Under Section 24 of the Income Tax Act: One can claim tax deduction on the interest amount of the EMI up to a maximum of Rs200,000 per annum for a self-occupied house. Budget 2019 further extended the benefit of self-occupied property to two houses, which means that if one occupies more than one property, the notional rental income on second property is exempted from income tax. Read the full article here 

A public notice issued on Sunday by India’s Income Tax Department called for linking of Permanent Account Number (PAN) details and Aadhaar cards by December 31. The deadline was revised to December 31 after an extension in September – the initial deadline was September 30. What are these cards? A PAN is issued by the Income Tax Department in the form of a card – it is necessary for filing income tax returns and is also used as a form of identity documentation within the country. The card is a mandatory requirement in many financial transactions. Aadhaar, on the other hand, is issued by the Unique Identification Authority of India (UIDAI) to Indian residents which can be used for various documentation requirements as a proof of identity. Non-resident Indians (NRI) were not allowed to hold Aadhaar cards but this has changed. All Indian expats in the UAE, along with NRIs in other countries, with a valid passport can now apply for the unique biometric identity card in India Who should link their cards? According to the notification issued earlier this year, any citizen who has been issued a PAN card as of July 2017 is supposed to link the card with their Aadhaar card. The authority has also issued details about the various methods to complete this linking; via SMS, online or through designated service centres. The linking was first proposed to be enforced in 2017 but the deadline has been extended several times since then. What can happen if it is not done? Your PAN card could become ‘inoperative’ as per the latest budget rules released in July. This can affect all future financial transactions you wish to perform back home. How exactly the PAN will be made inoperative is yet to be announced and is unclear to most experts, according to reports. It is clear, however, that since PAN is mandatory for many transactions in India from bank procedures to purchase of land/property, it can adversely affect financial decisions if not done. Source :  

It is quite common for people from India to go and settle abroad. Indian citizens who do so for employment or carrying out a business or vacation there or for any other purpose due to which their period of stay outside India is uncertain, would be considered (NRIs). Nonetheless, many such NRIs prefer to retain the bank accounts they had held in India. This could be for easy repatriation of income made abroad to the home country. Or they might want to keep income earned in India in India itself. In such cases, one can either open a Non-Resident account or a Non Resident Ordinary rupee (NRO) account. Let’s understand these two accounts and their characteristics a little more in detail. The need for an and account First and foremost, one needs to understand that once an individual moves out of India, he is not allowed to hold a resident savings account. It would be considered as a violation of the Foreign Exchange Management Act or FEMA regulations. Hence, it is essential for an NRI to immediately re-designate his/her savings account as either an or an account by providing due intimation to the bank in this regard. Account An NRE account is an Indian Rupee denominated account. Funds from abroad, say, income earned abroad can be periodically deposited easily into an NRE account in foreign currency. This gets converted to INR the moment the money is deposited to the account at prevailing exchange rates. Further, you can also freely repatriate the funds in this account along with the interest without any hassles outside India. No limit has been prescribed to restrict the amount that can be repatriated from an NRE account. Moreover, the income earned from an NRE account is exempt from income tax. Please note that an NRI can hold an NRE account jointly with another NRI only. Read More

OCI vs NRI vs PIO? Here is all you need to know about the different statuses Ever wonder what happens to your legal standing and rights as an Indian citizen when you live overseas for a while? Or if you marry and have a family with someone who isn’t Indian–do your children have to get a visa to visit the country? Here is your explainer on the different immigration statuses India offers. Who is an OCI and what is the OCI card?  An Overseas Citizen of India (OCI) is a person who is technically a citizen of another country, but is granted several rights and freedoms enjoyed by Indians. An OCI card then, is a long-term visa available to such citizens of other countries who have familial links to India. It entitles them to a lot of the same benefits as NRIs and Indian citizens. OCI vs NRI: what’s the difference? An NRI, or Non-Resident Indian, is anyone who holds an Indian passport but lives and/or works overseas. NRIs enjoy all the benefits afforded to any citizen living in India. OCIs don’t have many of these rights. NRIs have full voting rights for all Lok Sabha, Rajya Sabha and Legislative Assembly/Council elections. OCI holders cannot vote in any elections. NRIs can stand for public office. OCI holders cannot. NRIs can purchase agricultural land. OCI holders cannot. NRIs can conduct research work without any prior permission. OCI holders must get prior permission from the local Foreigners Regional Registration Officers (FRRO). Read More