Are you a Resident or a Non-Resident in India? What changed in FY 2020-2021?

Are you a Resident or a Non-Resident in India? What changed in FY 2020-2021?

Among the global pandemic, and the unfortunate effects it might have on the economy, the Finance Bill 2020 has been passed by the Parliament with some major relaxations on March 23, 2020.

Out of the many changes, few will directly impact the non-resident Indian (NRI) community.

The Residential status in India is determined by the number of days of stay in India in a FY. As such, besides monitoring the number of days of stay in India, the visiting Indian is also required to keep tab of his Indian taxable income. This is because once income taxable in India or taxable Indian income exceeds Rs. 15 lakh, then provisions related to stay exceeding 120 days will be applicable, instead of 182 days, as was before the amendment.

Also note that dividends distributed by Indian companies would be taxable in the hands of the shareholders and would form part of the taxable income. On the other hand, since interest on FCNR and NRE deposits are exempt it will not form a part of taxable income. This amendment is effective from financial year 2020-21, viz. April 1, 2020 to March 31, 2021.

Road ahead for NRI

NRIs need to carefully consider the total Indian income and plan their travel itinerary based on the amendment for their period of stay. The positive aspect is that in most cases, NRIs can continue to visit India for up to 181 days in the financial year and even in other cases where the period of stay in India is 120 days (and also for 365 days or more in preceding 4 years) or more or in case of Indian citizens who are not tax residents of any other country and are deemed to be tax residents of India, the status would be RNOR and hence foreign income shall not be taxable in India.

To make it easier, please find attached herewith a NRI Calculator, which will help you decide whether you’re a NR, ROR or and RNOR in India for FY 20-21.

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