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Finance Minister Nirmala Sitharaman tabled the Union Budget for 2021-22 on February 01 emphasizing six pillars on which the budget rests - health and well-being, physical, financial capital, and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation, and research and development, minimum government, and maximum governance.
The FM had earlier promised a "never before" budget not seen in a hundred years to ward off the economic devastation caused by the Coronavirus pandemic, which rendered millions out of jobs, shuttered small businesses, and dried up the spending power, bringing the economy to its knees.
The Finance Minister also announced that the NRIs will be spared from double taxation. "New rules to be notified", she said. Sitharaman also announced that Tax audit limit has been increased from Rs 5 crore to Rs 10 crore.
"When Non-Resident Indians return to India, they have issues with respect to their accrued incomes in their foreign retirement accounts. This is usually due to a mismatch in taxation periods. They also face difficulties in getting credit for Indian taxes in foreign jurisdictions. I propose to notify rules for removing their hardship of double taxation," Finance Minister Nirmala Sitharaman announced in the Parliament today.
In order to address the mismatch in the taxation of income from the notified overseas retirement fund, the government has proposed a new section 89A to the Income-tax Act, 1961. After the amendment, the income of such a 'specified person' from the 'specified account' will be taxed in the manner and in the year as prescribed by the Central Government.
The expression 'specified person' will be defined as the person who is residing in India but opened the 'specified account' while resident in that foreign country. Guide to NRI accounts.
The finance ministry has proposed to define a 'specified account' as an account maintained by NRIs in a foreign country for retirement benefits. The income from such an account is not taxable on an accrual basis and is taxed by the foreign country at the time of withdrawal or redemption. The amendment will take effect from April 1, 2022, and will accordingly apply to the assessment year 2022-23 and subsequent assessment years.
While presenting the Union Budget 2021, finance minister Nirmala Sitharaman proposed to incentivize incorporation of one-person companies (OPCs) including the clause to allow non-resident Indians (NRIs) to incorporate OPCs in India.
India already ranks reasonably high on the World Bank's Ease of Doing Business index(EoDB). And as we see more NRIs return to the motherland to engage in a booming economy, this move will attract more entrepreneurs and innovators to test the Indian startup waters before committing too much.
One person company (OPC), as the name suggests, means a company formed with only one person as a member. While announcing the OPC scheme, the finance minister said mentioned the following points:
OPC scheme was first recommended by the Dr. J.J Irani Committee report dated May 31, 2005, with the vision that a simpler regime through exemptions should give rise to single entrepreneurs operate in the economic domain and contribute effectively by reducing his/her time, energy, and resources on procedural matters
The key feature of an OPC until now was that the member and nominee have to be a resident of India, which means that they should have stayed in India for more than 182 days during the immediately preceding one calendar year. This has now been reduced to 120 days, thus easing the entry of the NRIs.
According to the Companies Act, 2013, if the paid-up share capital limit of the OPC exceeds the prescribed limit which is currently at Rs.50,00,000 ($68,380) or turnover exceeds Rs.200,00,000 ($2,73,519) in three years preceding consecutive years, then the company shall lose its status as an OPC and shall be required to compulsorily convert to either to a private company or public company.
The budget has changed this requirement also as OPCs will be allowed to grow without any restriction on paid-up capital and turnover, allowing conversion into any other type of company at any time.
To find out which type of entity suits your entrepreneurial drive, read our complete guide for NRIs to start a business in India.
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