The Finance minister Nirmala Sitharaman made an announcement confirming a rollback on the previously proposed global tax on global incomes in the budget proposal to tax non-resident Indians. In addition, taxes will be levied only incomes generated in India and will have a threshold of Rs 15 lakh.
The changes were part of the amendments in the Finance Bill, 2020 proposed by the Finance Minister Nirmala Sitharaman in Parliament. The Lok Sabha passed the Finance Bill on Monday by voice vote without discussion.
Budget 2020 first announced that NRIs in India, who are not paying tax anywhere in the world will have to pay tax. According to the proposal, if an Indian citizen is not paying taxes where they are living, then they may be required to pay tax in India. The proposal was part of the government’s drive to implement anti-abuse provision since many Indian citizens move to countries with low or no tax jurisdiction to avoid payment of tax in India.
The government has since clarified via a press release that stated that income earned outside India shall not be taxed if it is not derived from an Indian business or profession.
NRI Remittances and Taxes
The Budget 2020-21 has mandated a 5 percent tax collection at source (TCS) for outward foreign remittances of over Rs 7 lakh. If the remitter does not have PAN/Aadhaar cards the rate is 10 percent.
Technically, it is aimed to tax the money flowing out of India including travel and education. So, all authorized foreign exchange dealers receiving an amount of the stated Rs 7 lakh or more in a financial year for outward remittances under the Liberalised Remittance Scheme(LRS) of the RBI shall collect TCS.
There is no impact on the inward remittance. However, you may want to check out the Gift Tax laws in India.
Who is an NRI?
The Union Budget of 2020 proposed to change the definition of NRI to any Indian who stays abroad for 240 days than the previous 182 days. And an additional clause for Indian nationals to not outstay the stipulated 120 days or more in India in a year to qualify for the NRI status.
What is an Ordinary Resident Status?
The other factor is the proposed status change in the 'ordinary resident' condition for an individual in this Budget.
The amendment has proposed to hike the number of years required to qualify as 'ordinarily resident' from at least two years currently to at least four years out of the previous 10 years.
Good News for NRI Investors
NRIs are seen as one of the biggest investors in the development and the economy of the country. The amendments are reassuring as the earlier proposed budget had steered the sentiments of the community. Here are some more good news:
This is a developing news story. As countries around the world are fighting against the Coronavirus and finding quicker ways to cope with this pandemic, we will keep you up-to-date with the latest. Stay Tuned!
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