Direct Tax Affects NRIs and Person of Indian Origins

A resident’s global income is taxable in India.  A non resident can easily become residentas per Direct Tax Code if does not give attention to number of days he stayed in India. Read this posting to know new scheme of recdiency under DTC 2010.

So, if a non resident  becomes resident in India , whether his income aborad is also taxable in India .  Fortunately , for one year , there is grace period given to him. This is provised in

29. Any income accruing to an individual outside India, in a financial year from a source other than a business controlled in or a profession set up in India, if the individual—
(a) has been a non-resident in India in nine out of ten financial years preceding that financial year;

or

(b) has during the seven financial years preceding that financial year been in India for less than seven hundred and thirty days.

In other words, let us say , a non resident stayed in India for 184 days in India in FY 2011-12. So for that year he is Resident as per Clause 4 of DTC 2010 and his income earned outside India also becomes taxable in India by virtue of Clause 3 of DTC.

However, the Direct Tax Code has exempted income earned abroad by an individual if certain conditions are fulfilled. The provsison is in Clause29 of Sixth Schedule which is for “income not include in total income” ( read exempt income)

29. Any income accruing to an individual outside India, in a financial year from a source other than a business controlled in or a profession set up in India, if the individual—
(a) has been a non-resident in India in nine out of ten financial years preceding that financial year; or
(b) has during the seven financial years preceding that financial year been in India for less than seven hundred and thirty days

So,  an Individual can easily stay in India for 104 days for 7 consecutive years , even then his income earned abroad shall not be taxable .