NRIs Will Only Be Taxed On Their Indian Income: Government

The government has clarified that income earned by Indian citizens outside the country will not be taxed in India, except in cases wherein the income may be derived from an Indian business or profession.

"In case an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession," the Ministry of Finance has clarified in a press release.

The clarification came after the Finance Bill, 2020 proposed that an Indian citizen will be considered as a resident in India if he is not liable to be taxed in any other country or jurisdiction. This provision is meant to deter Indian citizens from shifting to low or no-tax jurisdiction to avoid paying tax in India.

"The new provision is not intended to tax Indian citizens who are bonafide workers in other countries. In some section of the media, the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there. This interpretation is not correct," the press release further noted.

Meanwhile, the government proposed a reduction in the period of stay in India, for persons of Indian origin (PIOs) to be categorised as non-resident Indians (NRIs). "It is proposed to reduce the time of stay in India from 182 days to 120 days for an Indian citizen or person of Indian origin to become resident in India," the Finance Minister had said in her Budget Speech on Saturday.