The Finance Acts of 2020 and 2021 made significant adjustments to the determination of NRIs’ residence status for fiscal years ending March 31, 2021, and March 31, 2022. This move will have a direct impact on the NRI community. Here are guidelines explained by a reputed NRI Tax Advisory in India, MPVD & Associates.
The Indian Tax System for NRIs
Non-resident Indians (NRIs) have to pay taxes to the Indian Government when they earn any taxable income through assets such as rental earned from their property in India, earnings from shares and stocks, returns from term deposits and mutual funds etc. Now, what is taxable income? It is any amount greater than the “exemption limit” and when it falls under any of the domains of income tax, property tax or wealth tax.
Tax Liabilities for NRIs as in February 2022
According to the new rules assented by the president for The Finance Act, 2020 and 2021, the period of 182 days has been reduced to 120days for individuals gaining NRI Status. Under the rule, it is only considered taxable income if the amount exceeds Rs. 15 lakh throughout the financial year. This change will be effective from April 1, 2022.
The NRI Status in India
An Indian Citizen who studies or works abroad, or is mostly outside of India and spends any less than a certain period in the home country in a preceding financial year, is considered an NRI. Sometimes when individuals live abroad for an uncertain period for any special purpose, such as crew members of the ship, transfer jobs, etc. can be considered NRIs too, after a certain period.
Foreign Nationals Other Than NRI
Other than the Non-Resident Indian status, there are other recognitions for foreign nationals that include Person of Indian Origin (PIO), Overseas Citizen of India) and Resident but Not Ordinarily Resident (RNOR) status. Details of which are given below:
- PIO are foreign nationals who have ever held an Indian passport, whose parents are Indian citizens, or who are married to an Indian citizen.
- OCI is a person who has their parents living in India or any other familial connection to India. The rights and liabilities for OCI status holders are much different from that of NRIs or PIOs
- RNOR status holders are referred to Indian Residents who have an NRI status for at least 9years or have lived in India for 729 days in 7years, and hold either or both PIO and OCI status.
Moving Abroad? Consult An NRI Tax Advisory To Stay Updated with
The tax system changes based on the status of an Indian national living abroad or a foreign national. If you are newly moving abroad for work, then it is a good time to consult an NRI tax advisory to stay up to date with the amendments and adjustments in the tax regime and know your tax liabilities.