493. NRIs staying in India 60 days

or more taxation of global income

Question: DTC (Direct Tax Code) Clause For NRIs (Non Resident Indians) NRI fretting over the New Taxation Clauses, due to be introduced as part of DTC (Direct Tax Code), adversely affecting their tax-liabilities NRIs who frequently travel to India, will have to pay Taxes on their Global Income. NRI is liable to pay taxes on his or her global income, if he or she stays in India for a period of more than 182 days in a financial year. But DTC (Direct Tax Code) proposes to shorten this duration to just 60 days. Where this new rule stands can you clarify thank you SUNDER ZAVERI Answer: Direct Tax Code (DTC) effects on NRIs has been discussed in my book THE NRI GUIDE on page 111. DTC was introduced to parliament in 2010 and has been cause for concern amongst NRIs due to some misunderstanding of the forthcoming changes that will take place regards to NRIs period of stay in India. The current status of the new tax code is that while it was meant to be in effect first by 2012 and then delayed to 2013 and to date there is no final time-line as to when the Direct Tax Code is to be implemented. A few months ago, India’s Finance Minister Mr. Chidambaram indicated that he was not sure whether the DTC would be implemented by April 2013 as it needed a fresh look! (http://profit.ndtv.com/news/corporates/article-direct-taxes-code-may- miss-april-2013-deadline-310020) I won’t be surprised if the implementation of the DTC is further delayed till the next elections in India which are scheduled for 2014 but may even happen in 2013. Clarification on the proposed changes in the Direct Tax Code regarding shortening of the stay period in India by NRIs from 180 days to 60 days. • To be considered a resident, an individual in addition to the 60 days stay in a financial year, must also have been resident in India for 365 days or more in the preceding four financial years. • Only when the two criteria are met (60 days stay in India in a financial year plus resident in India for 365 days or more in the preceding four financial years) an individual would be considered a resident for taxation purposes. • If a person becomes a resident, it would not mean that global income also becomes taxable. A persons global income would be taxable only if they also stayed in India for 9 out of 10 precedent years or 730 days in the preceding seven years Since nothing has been finalized yet, things may change when the DTC is implemented.