Budget 2020: Will NRIs have to report foreign assets in their ITRs?

Indian residents are required to report their global assets and financial interests. This resulted in an apprehension about Indian citizens employed or have business interests or are residing outside India including in countries which presently do...

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In addition to that, changes have been proposed in the Finance Bill to reduce the maximum number of days in order to maintain the 'non-resident' status.
By Dr. Suresh Surana

A day after the Budget, the government clarified about its intention of taxing income earned by non-resident Indians (NRIs) in India. However, further clarification is needed from the government regarding reporting of NRIs' foreign assets in India.

The clarification from the Central Board of Direct Taxes (CBDT), issued on February 2, 2020, has said that "in case a person becomes Resident under this Section 6(1A), no tax will be levied on foreign income unless it is derived from an Indian business or profession". It further clarified that in the case of such persons, only their Indian income will be taxed and income earned outside India will not be taxed. The above provision is an anti-abuse provision and is not intended to cover bona fide workers in foreign countries.


Clarifications needed
It is imperative that appropriate changes are made in the Finance Bill in context of such clarifications so that it is legally binding.

Further, it needs to be clarified that in such cases, the reporting of foreign assets or financial interest shall not be required in the Indian income tax return. The reference to "bona fide workers" in other countries should only be by way of example and the amendment must cover all individuals, whether carrying on business or investors or spouses or retired persons or on employment and not be limited to "workers".

The Budget has proposed a new Section 6(1A), whereby "an Indian citizen is deemed to be resident in case he/ she is not liable to tax in any other country by reason of residence, domicile or any other criteria of similar nature". Once a person is a resident of India, his global income is subject to tax in India and the maximum marginal rate in case of income exceeding Rs 50 million (about US$ 7,00,000) can be as high as 42.7%. Further, residents are required to report their global assets and financial interests.

This resulted in an apprehension among Indian citizens who are employed or have business interests or are residing outside India including in countries which presently do not levy any tax.

In addition to that, changes have been proposed in the Finance Bill to reduce the maximum number of days in order to maintain the 'non-resident' status. According to the proposals, the maximum period of stay in India has been reduced from 181 days in a financial year to 119 days in order to maintain the non-resident status.

Given the need for continuing foreign exchange remittances and investments by NRIs, it may be worthwhile to take a re-look at the likely benefit from this provision altogether.

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(The writer is the founder, RSM India)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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