Finance Minister Nirmala Sitharaman introduced a new Income Tax Bill in Parliament today, bringing changes to tax residency rules that will directly affect Non-Resident Indians (NRIs).
These changes focus on individuals earning Rs 15 lakh or more in India but not paying taxes, ensuring that they contribute fairly to the country’s tax system.
Stricter Rules for NRI Status
The new law now considers individuals who earn over Rs 15 lakh in India as tax residents, meaning they must pay taxes on their Indian income. This rule aims to prevent misuse of the NRI status and reduce tax evasion.
A person will be classified as a tax resident in India if they meet any of these criteria:
1) They stay in India for at least 182 days in a financial year.
2) They spend 60 days or more in India in a year and a total of 365 days or more in the last four years.
Exemptions to the 60-Day Rule
Some individuals are exempt from the 60-day rule, including:
1) Crew members of Indian airlines or ships leaving India.
2) People traveling abroad for a job.
3) NRIs visiting India: If they earn more than Rs 15 lakh (excluding foreign income), the 60-day rule extends to 120 days instead.
India’s Tax System Based on Residency
India’s tax system is based on a person’s physical presence in the country, rather than citizenship.
Currently, NRIs are only taxed on income earned in India, and foreign income is not taxed.
However, the government has observed that some individuals misuse the NRI status to avoid taxes while staying in India.
The new rules aim to address this issue and ensure fair tax contributions.
