In India, there are three types of residential status recognized by the income tax law: non-resident (NR), resident but not ordinarily resident (RNOR), and resident and ordinarily resident (ROR) . The rules for determining a person’s resident status for an Indian citizen or a person of Indian descent have been modified from FY21 onwards. 

The Following Factors Are Taken Into Consideration by NRI Tax Consultant Pune While Determining a Person’s Resident Status: 

It includes a person’s physical presence on the Indian soil during a financial year (FY), including workdays as well as off-days, and for the prior ten fiscal years (FYs) and beyond.

• Income derived from sources in India

The status of a resident changes with time, necessitating a new evaluation for each year. An individual who qualifies as a resident of  India is subject to Indian taxation on their worldwide / global  income and is required to report any foreign assets in the country’s income tax return (ITR) (ITR). 

Earnings derived from India are subject to taxation for individuals who qualify as NR or NOR. These earnings are classified as “India derived incomes” and include the income accruing or arising in India, income considered to accrue or arise in India, and income received or deemed to be received in India. In addition, income accruing or originating outside India that is derived from businesses operating in or professions formed in India is also subject to taxation under the Non-Resident Ordinance (NOR).

Because of this, the income tax department has issued a circular stating that physical presence in India during the specified time period would not be taken into consideration for assessing tax residency status for the fiscal year 2020.

• 22 March 2020 to 31 March 2020 if they are unable to leave India on or before the 31 March 2020 deadline

• Detained in India on or after 1 March 2020 and evacuated from India on or before 31 March 2020, using a medical evacuation aircraft.

• From the start of the quarantine period until the date of departure

• Confined in India on or after 1 March 2020, and unable to leave the country on or before 31 March 2020 (both dates inclusive).

• The beginning of the quarantine period, which will last until 31 March 2020.

• Planned to travel out of India on an evacuation plane on or before 31 March 2020 from 22 March 2020 till the day of departure

Before investigating alternatives for avoiding double taxation, a person who finds themselves stranded in India due to the flight limitation should first determine their consult with NRI tax advisor in Pune and their resident status in India and their residency status under the applicable double taxation treaty.

The recent modifications to India’s tax residency regulations were meant to address instances of abuse or exploitation of the benefits afforded to non-resident Indians and permanent residents of India (NRIs/PIOs).

Whatever the case, the unexpected stay of some NRIs and PIOs in India due to the pandemic may have resulted in their altering their residence status for the fiscal year 2020-21, so subjecting them to possibly higher taxes in their home country. Furthermore, the new “deemed resident” status may put a spoke in the wheel of specific Indian high-net-worth individuals (HNIs) who have managed to spread their tax responsibility across many states.

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