NRI Income Tax Rules are announced in Budget 2020. Many NRI individual are looking for new income tax rules and proposed changes in residential status. Here is complete information about NRI Income Tax Rules 2020.
In Budget 2020, two major changes are proposed for the NRI.
- Residential Status
- Taxability of Income of NRI
The new proposed amendment will be enforced from FY 2020-21.
NRI Income Tax Rules 2020 & Residential Status Rule Change
Residential Status Rule change
An individual or manager of HUF who is non-resident in India in 7 out of 10 preceding years will be regarded as “not ordinary resident” in India.
NRI who is a citizen of India if visiting India for more than 120 days in a year will lose his non-residential status (earlier this limit was of 182 days). In the simple words if Indian national wants to claim NRI status he cannot stay in India above 120 days. (4 months). This means you need to stay minimum 245 days abroad for claiming your NRI status.
For residential status only above condition is added, remaining conditions remain same.
In addition to above condition, if person is not staying in India for greater than 60 days in the financial year or 365 in preceding four financial year status can be claimed as NRI.
If these conditions do not get satisfied residential status will be ordinary Resident. The flow chart of explaining NRI status is given below.
NRI Income Tax Rules 2020
Another amendment is made in the rule that NRI who is not taxed in the foreign country, will become taxable in India. This rule is introduced to prevent tax abuse.
This means there are lot of citizens of India, who stay in the other countries for the smaller period of time and not holding residency status in any of the country and not paying taxes anywhere. Those investors will have to pay Tax in India for their global income.
The above rule is not applicable for the countries which are Zero Tax (Tax Free) such as UAE, Panama and Bahamas. This is because tax law of those countries are like that. The above rule is also not applicable to merchant navy employee.
Income of NRIs in India is taxed depending on the slab they fall under. This means any income earned by Indian passport holder would be liable to be taxed, even though it was earned somewhere else, unless there is tax-avoidance treaty in place.
The tax slab for NRI also remain same for FY 2020-21. Tax Slab is given below.
|Income Tax Slab||% Rate|
|Up to Rs. 2,50,000||NIL|
|Rs. 2,50,001 to Rs. 5,00,000||5%|
|Rs. 5,00,001 to Rs. 7,50,000||10%|
|Rs. 7,50,001 to Rs. 10,00,000||15%|
|Rs. 10,00,001 to Rs. 12,50,000||20%|
|Rs. 12,50,001 to Rs. 15,00,000||25%|
|Rs. 15,00,001 and above||30%|
The above tax slab is with reducing tax rate. NRI can also opt for old tax or new tax regime.
The old tax regime allows NRI to claim exemptions and deductions. The new income tax slab with reduced rates will not allow any deduction or exemptions such as Section 80C. Home loan exemption, insurance exemptions, the standard deduction etc.