Clarification on income tax payable by Indians employed in other countries

• New tax regime for NRI on income earned in India.
  
  
• NRI classification changed for Indians living out of the nation for more than 245 days

Finance minister Nirmala Sitharaman in her Budget for 2020-21 had proposed to tax Non-resident Indians (NRIs) who do not pay taxes in any foreign country.

This provision raised anxiety in minds of those working in the Gulf region where countries don't tax income earned by foreign individuals. The new provision will only be applicable on the income earned in India through businesses and profession, and shall not be taxed if its earned in a foreign nation.

Government said this is an anti-abuse provision since some Indian taking the privilege of their non-resident status shift their stay in low or no tax jurisdiction, to avoid paying taxes in India.

The Union Budget for 2020-21 has tightened the laws on those seeking to escape tax by exploiting their non-resident status. Finance minister Sitharaman said Indian earnings of NRIs such as rental income from property in the country is what was intended to be taxed by way of the new provision.

Earlier it was possible to be classified as a non-resident by staying out of the country for 183 days or about six months in a year and escape from paying taxes on any income earned, this has now been enhanced to 245 days.

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