New Income Tax Bill: NRIs Earning Over Rs 15 Lakh In India May Be Classified As 'Residents'

The new Income Tax Bill is expected to provide clarity on the taxability of Non-Resident Indians (NRIs) who earn Rs. 15 lakh or more in India but do not pay taxes elsewhere. Sources suggest that the bill may propose classifying such individuals as "residents" for tax purposes.

This would require them to pay taxes in India, preventing the misuse of NRI status to avoid taxes while earning substantial income in India. Importantly, only income earned within India would be subject to tax, and not global income.

The bill is also expected to introduce nuances for residency determination in complex cases, particularly in the case of multiple citizenship and is expected to provide guidance on such cases.

Similarly, the bill is also expected to define deemed income for NRIs.

The bill may also propose a detailed framework for defining taxable income, compliance requirements, and restrictions on non-profit commercial activities. Over the years, various rules have been brought in over the taxability of charitable trusts, which could be included in the bill.

Furthermore, it is expected to include provisions addressing the taxability of "virtual digital assets," including cryptocurrency, under short-term and long-term capital gains, income from other sources, and other relevant tax categories.

The bill may also propose explicit rules for the taxation of digital assets and an updated treatment for emerging asset classes like cryptocurrency. Moreover, it could highlight tax regulations for online gaming and digital platforms, which are currently not included in the existing bill, in light of recent legal changes.

A dedicated provision for start-ups could also be proposed, offering a 100% tax exemption for the first three consecutive years within the first 10 years.

To reduce litigation and disputes, the bill may expand the dispute resolution committee for small taxpayers to facilitate amicable resolutions. Additionally, it could introduce measures to minimise repetitive litigation, addressing the ongoing legal questions pending in various judicial forums, including High Courts and the Supreme Court.

On reassessing escaped income, the bill may propose stricter timelines and codified procedures for issuing notices, ensuring a more efficient process for income tax assessments.

Additionally, the bill is expected to introduce comprehensive anti-avoidance measures, targeting impermissible arrangements, transactions lacking commercial substance, and specific risks, thereby ensuring stricter checks against tax avoidance.