On February 1, 2020, Hon'ble Finance Minister Nirmala Sitharaman proposed the 2020 Financial Law, which proposed domestic tax law from the perspective of individual tax cases. Among other tax suggestions, some important suggestions that affect individual taxpayers (especially global mobile individuals) include changes in tax residency, introduction of a new optional tax system, and TCS cancellation of foreign remittances under the Free Remittance Scheme (LRS). dividend. Shareholder tax (DDT) and dividend tax to determine specific tax thresholds, expand TDS on ESDS to qualified startups, etc.
On March 27, 2020, the President approved the "Finance Act 2020", which has now become the regulations applicable to the fiscal year 2020-21 of 2020-21 April 1, 2020 (the following clauses contain some clauses respectively) . legal). From the perspective of personal taxation, most of the recommendations of the 2020 Financial Law have been revised / unmodified. In light of this, it is important to discuss how the revised laws that have become certain amendments affect individual taxpayers to manage their Indian tax affairs.
Amendments to the tax proposal of the Financial Law in 2020:
1) Change the tax residence rules
(a) Strengthen the living conditions of Indian citizens / Indians
Existing tax laws stipulate that Indian citizens or POIs who visit India in this fiscal year are eligible to become tax residents of India if they have lived in India for more than 182 days in that fiscal year.
The purpose is to increase the basis of tax declarations to avoid misuse of loose regulations by Indian citizens / POIs who are engaged in major economic activities in India and control their stay in India within the prescribed 182 days, thereby evading the payment of income tax in India The 2020 Financial Law proposes to reduce the living standards of these people from the current 182 days to 120 days.
The "Finance Law" has been incorporated into the budget proposal. However, it also stipulates that the standard of residence reduction only applies to individuals whose income (excluding foreign source income) exceeds Rs 1.5 million for the fiscal year.
The definition of "other than income from abroad" refers to income generated or generated outside of India (except for income from Indian-controlled enterprises or occupations established in India).
(B) Apply the same residence rules to Indian citizens
The 2020 Financial Law recommends that
Indian citizens who do not need to pay taxes in any other jurisdiction due to domicile / residence / any other standard of similar nature should be considered as residents of India and should pay taxes in India. India earns income.
The 2020 Financial Law adds an additional condition that the amendment will only apply when the individual ’s current fiscal year ’s total income (excluding income from abroad) exceeds Rs 1.5 million.
The definition of "except for income from abroad" is similar to the above.
(C) Relaxation conditions related to non-ordinary residents
The 2020 Financial Law proposes to delete the existing dual condition that treats individuals as "NOR", and proposes to add a new condition that there are seven non-residents (NR) in the ten fiscal years before the fiscal year. nor.
However, the 2020 Financial Law deleted the proposal and restored the existing dual conditions for determining NOR. In addition, the following personnel will be added to qualify for NOR:
#Indian citizens or POIs, whose total income (excluding income from foreign countries) exceeded Rs 1.5 million in the current fiscal year, and lived in India for more than 120 days but less than 182 days in the current financial year;
#The total income of Indian nationals in the current fiscal year (excluding income from abroad) exceeds 1.5 million rupees. Because of their place of residence or other standards of a similar nature, there is no need to levy taxes in any other country or region (regarded as residents (as described above)).
The Source Tax (TCS ) for overseas remittances and travel package sales The Ministry of Finance's 2020 Act recommends that when remittances exceed 700,000 rupees, TCS for overseas remittances should be introduced based on LRS. In addition, TCS was introduced to sell overseas travel packages.
News reference: https://www.financialexpress.com/money/income-tax/how-modificationifications-in-the-finance-bill-2020-will-impact-nris-pois/1923542/