Q609. Spend time in Nepal to keep NRI status in India . . .
Question: Dear Sirs, A foreigner ,having OCI card, stays for 180 days in India .During the rest of the financial year he stays in Nepal. Will he be treated as NON resident for Indian Taxation purposes? Thanks to clarify! Best regards Answer: It is not easy to answer your question with a simple yes or no! Each case is different. Generally, the purpose or shall I say the intent, the actual reason why a Indian resident leaves India, is what the tax authorities might look at rather than simply going by the number of days. Furthermore, OCI holders who generate income in India are liable to pay tax on that income regardless of the number of days they have stayed in India. A resident of India who travels abroad for purposes that do not clearly indicate an intention to stay out of India for an indefinite period would not be considered a NRI for Indian tax purposes. However, as I said earlier, each case would depend on the circumstances and the perception of the tax officer. In a situation such as described in your email, where a foreigner with OCI stays 180 days in India and spends the rest of the financial year in Nepal. The main place of residency such as where the persons permanent home is located, where income is generated etc. are considered. India and Nepal do have a tax agreement and to give you an idea, shown below is an excerpt from Article 4 of the agreement:
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Q609. Spend time in Nepal to
keep NRI status in India . . .
Question: Dear Sirs, A foreigner ,having OCI card, stays for 180 days in India .During the rest of the financial year he stays in Nepal. Will he be treated as NON resident for Indian Taxation purposes? Thanks to clarify! Best regards Answer: It is not easy to answer your question with a simple yes or no! Each case is different. Generally, the purpose or shall I say the intent, the actual reason why a Indian resident leaves India, is what the tax authorities might look at rather than simply going by the number of days. Furthermore, OCI holders who generate income in India are liable to pay tax on that income regardless of the number of days they have stayed in India. A resident of India who travels abroad for purposes that do not clearly indicate an intention to stay out of India for an indefinite period would not be considered a NRI for Indian tax purposes. However, as I said earlier, each case would depend on the circumstances and the perception of the tax officer. In a situation such as described in your email, where a foreigner with OCI stays 180 days in India and spends the rest of the financial year in Nepal. The main place of residency such as where the persons permanent home is located, where income is generated etc. are considered. India and Nepal do have a tax agreement and to give you an idea, shown below is an excerpt from Article 4 of the agreement:
RESIDENT
1. For the purposes of this Agreement, the term
"resident of a contracting State" means
any person who under the laws of that State, is
liable to tax therein by reason of his
domicile,residence place of management or any
other criterion of a similar nature.
2. Where by reason of the provisions of
paragraph 1, an individual is a resident of both
contracting States, then his status shall be
determined as follows:
(a) he shall be deemed to be a resident of the
state in which he has a permanent home
available to him; if he has a permanent home
available to him in both States,he shall be
deemed to be a resident of the State in which
his economic activities are concentrated;
(b) if he has not a permanent home available to
him in either State, he shall be deemed to be
resident of the State in which he has an
habitual abode;
(c) if he has an habitual abode in both States or
in neither of them, he shall be deemed to be a
resident of the state in which his economic
activities are concentrated;
(d) in cases of dispute, the competent
authorities of the contracting States shall settle
the question by mutual agreement.
3. Where by reason of the provisions of
paragraph 1, a person other than an individual
is a resident of both contracting States, then it
shall be deemed to be a resident of the state in
which its place of effective management is
situated.
To read more visit:
http://www.nicci.org/resources/agreement-
between-nepal.php
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