Indian I-T department tightens grip on NRI’s for tax returns according to new amendments

indica News Bureau-

Tightening the grip on non-resident Indians (NRI) , the investigation wing of the income-tax department is carefully going through the ‘residential’ status of the NRIs, sending them notices to reopen their tax assessments for the past 5-6 years and share the photocopies of their documents, including passports.

Citing the definition of a ‘resident’ and an NRI, TOI wrote- resident can attain NRI status by staying overseas for more than 182 days. The law also states that a person is a ‘resident’ if he has been in India for more than 60 days in the year in question and 365 days during the four years prior to that year.

To get exemptions and relaxations on income tax, many Indians carefully divide their time between India and abroad, to avail the best of both the ‘resident’ and NRI status. While an NRI is spared tax on income from outside India, a resident is required to pay tax on global earnings. Under the circumstances, persons who claimed NRI status (without fulfilling the norms on the period of stay) are being pulled up for alleged tax evasion and may be in for long litigation. Due to severe tax implications, many Indians carefully divide their time between India and abroad, reported Economic Times.

Throwing light on the situation, senior chartered accountant Dilip Lakhani, said, “Even if a person is forced to extend his stay in India beyond 182 days on genuine grounds like hospitalization or marriage, there is no respite. The department has turned aggressive to ensure that foreign income of residents does not escape taxation.”

Several NRI were served notices a month before the Union Budget 2020, which made a major amendment in the ‘Black money act’, to include NRI’s in the definition of ‘assessee’, making tax laws more strict. The NRIs will now have to give the details of their stay in India for the past 4 years while filing the tax return for the financial year 2018-19, to enable the assessing officer to determine their true residential status.

Speaking to ET, Mitil Chokshi, senior partner at Chokshi & Chokshi, said that it is advisable for NRIs, particularly those who have got that status in the past 6-7 years, to preserve relevant documents and clear evidence of source and application of funds as well as immigration details.

Sometimes, there is a dispute over how one calculates 182 days — whether departure and arrival dates are included or only the arrival date is considered in the period of stay. Under the 365-day rule, the law allows the tax office to let a person (who gives necessary explanation) claim NRI status even if he has overstayed beyond 60 days in the fifth year or the year under question, he explained.

However, there are cases where the tax department has refused to extend the benefit of 182 days to persons who have stayed in India for more than 60 days in the relevant year. It is equally important, says Chokshi, to explain the rationale for becoming an NRI — whether it is for employment, business, academic purposes or family matters. The I-T enquiries are driven by the suspicion that a person becomes an NRI to legalize undisclosed offshore assets and earnings emanating from them