According to finance bill 2020, any Indian citizen who is not liable to tax in any other country shall be deemed to be resident in India. Such residents will have to pay tax on overseas income & disclose foreign assets.
Under the proposed residency rules, any citizen of India or persons of Indian origin overstaying for 120 or more days on visit to India will be considered as resident whose global income would be taxed by Indian authorities.
As the implication of the proposed law for NRIs, Income Tax Department will question NRIs on “unrealistic” overseas income earning.
“Bona fide workers will not be taxed on what they earn abroad. This is a veiled hint to other NRIs that have to justify their bloated overseas income” The government’s press release says.
There are multiple reason to introduce this law:
It is observed that all NRIs are not bona fide workers. They earn income from business, executive positions or as promoter of foreign JVs. The word ‘bona fide’ without objective test will create difficulties and multiple litigations,”
People who became NRIs to whitewash unaccounted wealth structured their transactions to lend an air of legitimacy.
Some people generated fake trading income, and often layered the transactions through multiple companies to make the amount profit generated at each level believable.
