Some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India. The Budget 2020 has made changes in the income tax act section 6 which determines residential status of the Individual and based on that they are taxed in India, there are few conditions attach to it
The Finance Act, 2020 has insert a new clause (1A) to section 6 of the Income-tax Act to provide that an Individual, being a citizen of India , having total income of Rs 15 Lakhs during previous year (other than foreign income) shall be deemed to be resident in India in that previous year, if 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
For this provision, income from foreign sources means income which accrues or arises outside India (except income derived from a business
controlled in or a profession set up in India)
From Financial Year 2020 -21, Assessment Year 2021-22 an Indian Citizen earning total income in excess of Rs. 15 lakhs (other than from foreign sources) shall be deemed to be resident in India if he is not liable to pay tax in any country. The residential status of such person shall of a ‘Not Ordinarily Resident’ due to new sub-clause (d) added to Section 6(6).
The assessee whos existing income is not more than 15 Lakhs in previous year in India won’t be covered by the above provision
|Individual / Conditions||Indian Citizen gone outside India as Crew or Employment||Indian Citizen gone outside India as Crew or Employment||Indian Citizen gone outside India as Crew or Employment||Indian Citizen Visiting India||Indian Citizen Visiting India||Indian Citizen Visiting India|
|Total Income (in India – Exclude Foreign Income)||Exceeds Rs 15 Lakhs||Exceeds Rs 15 Lakhs||Not Exceeds 15 Lakhs||Exceeds Rs 15 Lakhs||Exceeds Rs 15 Lakhs||Not Exceeds 15 Lakhs|
|Liable to Pay Tax in Other Country||No||Yes||Yes or No||No||Yes||Yes or No|
|Period of Stay in India||More than 120 Days and Less than 182 Days||More than 120 Days and Less than 182 Days||Less than 182 Days||More than 120 Days and Less than 182 Days||More than 120 Days and Less than 182 Days||Less than 182 Days|
|Resident Status if Stay is less than above mention days||Non Ordinarily Resident||Non Resident||Non Resident||Non Ordinarily Resident||Non Resident||Non Resident|
The residential status of such person shall be ‘Not Ordinarily Resident’ and his global income won’t be taxable in India, only all income earned outside India in which income derived from a business controlled in or a profession set up in India will be taxable in India. This is a big relief for Citizen of India who travel abroad frequently as global income wont be taxable except otherwise as mention above.
Deemed Residential Status is concept linked with citizen of India, its applicable only for citizen of India and not to others.