Finance Minister Nirmala Sitharaman introduced the New Income Tax Bill in Parliament today, redefining tax residency rules.
These changes will significantly impact Non-Resident Indians (NRIs), especially those earning Rs 15 lakh or more in India but not paying taxes.
Stricter Rules for NRI Status
Under the new law, individuals earning more than Rs 15 lakh in India will be considered tax residents and must pay taxes on their Indian income. The government introduced this rule to prevent misuse of NRI status and curb tax evasion.
A person will now be considered an Indian tax resident if they meet any of these conditions:
1) Stay in India for at least 182 days in a financial year.
2) Spend 60 days or more in India in a year and a total of 365 days or more in the last four years.
Who is Exempt from the 60-Day Rule?
Certain individuals are exempt from the 60-day rule:
1) Those leaving India as crew members of an Indian airline or ship.
2) People going abroad for a job.
3) NRIs visiting India – If they earn more than Rs 15 lakh (excluding foreign income), the 60-day rule extends to 120 days instead.
India’s Tax System Focuses on Residency
India’s tax system is based on physical presence in the country, not citizenship. Currently, NRIs only pay tax on income earned in India, while foreign earnings remain tax-free.
However, the government has noticed that some people misuse NRI status to avoid paying taxes, even while staying in India. The new rules aim to ensure fair taxation and prevent tax evasion.