Do you know that you can became Indian tax resident without spending a single day in India?
For tax reasons, if you have been physically present in a nation for a specified period, you are considered a resident of that country. In India, the same guidelines are in effect. The legislation was changed in 2020 to declare you a resident of India even if you were not physically present for a single day. Let's talk about the current rules, the justification for the change, the new rules, and their effects.
When someone moves to India physically and qualifies as an Indian resident.
Your residential stay in India for one year is determined your residential status and income which need to be taxed.
Two conditions should be fulfilled for becoming the resident of India.
For Example –
In first condition, Indian nationals can be considered residents if they have been physically present in India for at least 182 days in a given year. However, those who leave India to work on a ship or accept a job will only be considered residents once they have spent at least 182 days in India.
In second condition, People of Indian heritage who travel to India on vacation are exempt from the second criterion, and those who do not meet these requirements are considered non-residents for tax purposes. For example, if a person has lived outside India for nine out of 10 years or spent at least 729 days, they fall into a different category than an ordinary resident.
Justifications for changing the residency requirements
A few wealthy individuals used to manipulate their physical presence in many nations so that they weren't considered residents of any one of them for tax purposes and were able to avoid paying taxes on money that was earned in India or that was earned because of a relationship to an Indian source of income.
The amendment was introduced to stop such methods from depriving India of its rightful tax obligations.
A citizen of India becomes a tax resident under the modified provision without physically being present in India for tax purposes
A person's citizenship is generally irrelevant when determining their residency status. The amended law aims to make all Indian citizens tax residents of India if they meet certain requirements, even if they do not meet physical presence. Non-Resident Indians (NRI) are not covered by the amendment, as they do not have Indian citizenship.
A citizen of India will be considered a resident for tax purposes if their total income from Indian sources exceeds fifteen lakh rupees during the year. They are not subject to taxation in any other country due to their physical stay, domicile, etc. They will not become a complete resident who must pay taxes on all of their worldwide income.
Consequences of becoming a resident even if you haven't spent a single day in India
Individuals who are not full-fledged residents of India are not eligible to receive advantages under the Double Tax Avoidance Agreement (DTAA). However, if they have previously paid tax on their income earned outside India, they may be eligible to claim a credit for those payments up to the additional tax due on that income if it were taxed in India.
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