Budget 2020Tax

Do NRIs have to pay taxes after the 2020 budget or not

Newz On Tips
Mon Feb 17 2020 / By: Rashmi

The money that is earned legally and ethically is called white money, while the money that is earned by illegitimate methods is called black money. But, what if you don't know if the ways by which you are earning money is legitimate or not? What if the laws themselves are not showing your money's true colour; black or white? 


The 2020 budget has left grey areas over a number of monetary spaces. One of them is taxation for NRIs. 


In her budget speech, the union Finance Minister, Nirmala Sitharaman, said that the government is planning to crack down on people who are trying to create a loophole in the taxation system in the name of their residence status. But, after the speech caused great furore among NRIs, the government took a U-turn. 


In an official statement, the finance ministry said, "The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries. In some section of the media the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there. This interpretation is not correct."


So, who does exactly have to pay the 'NRI tax'?


Those persons who live in India for more than 120 days will now be deemed as Indian residents. Hence, if they have businesses in India, then the money earned by those businesses will come under the scrutiny of the Indian tax system. 


One thing to be noted here is that one has to pay taxes only for the local earnings and not the earnings made in any foreign country. The finance ministry clearly said so in the statement issued on February 02, "It is clarified that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession."


Another loophole left:


It is not the case that 'NRIs' now can not exempt themselves from paying taxes to the Indian government. They can; if they care enough to read the budget thoroughly. According to the Indian 2020 budget, if an NRI lives abroad for more than 35 weeks or 145 days, one can not be taxed even for earnings made through Indian businesses. In other words, NRIs still don't have to pay taxes, it is just that the definition of an NRI has changed after the 2020 budget.

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