Residential status Amendment Impact

As per the current provisions of the Act, an individual’s residential status in India is characterised as Ordinary Resident (OR) or NOR, based on his number of days stay in India. Hence, some Indian citizens used to shift their stay in low / no tax jurisdiction to enjoy the status of NR in India. To prevent such abuse, FA has introduced the provision of ‘Deemed Residency’.

As per this provision, Indian citizen shall be deemed to be Resident of India (ROI), if –

(i) His total income, other than income from foreign sources, exceeds Rs 15 lakhs during the FY; and

(ii) He is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.

The residential status of an Indian citizen who is deemed Resident of India shall be ‘Not Ordinarily Resident (NOR)’. It is important to note here that while an Ordinary Resident is taxable in India on his global income as against NOR whose income from outside India is taxable in India only if it is derived from a business controlled in or a profession set up in India. This in fact requires for every individual who was erstwhile taking the benefit of these provisions of the Act are now in a way coming within the purview of the Indian tax net.

Pursuant to the above changes introduced in the residency provisions, it is important for Indian citizens and PIOs to carefully evaluate their residential status and assess their tax liability in India accordingly.

I think this is an inteligent method to curb tax evasion