Centre clarifies on new definition of NRI under Finance Bill 2020

In an apparent effort to end the growing confusion over the new definition of Non-resident Indian (NRI), the Ministry of Finance on Sunday (February 2) issued a clarification saying that any Indian citizen, who becomes deemed resident of India under the Finance Bill 2020 will not be taxed in the country unless it is derived from an Indian business or profession.

"In case of an Indian citizen, who becomes deemed resident of India under this proposed provision (Finance Bill 2020) shall not be taxed in the country unless it is derived from an Indian business or profession," the Ministry of Finance said in a statement.

The government added that it will incorporate necessary clarification in the relevant provision of the law if deemed necessary. "Necessary clarification if required shall be incorporated in the relevant provision of the law. The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries," said the government.

The government further said: "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 the 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."

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It is to be noted that Finance Bill, 2020 has proposed that an Indian citizen shall be deemed to be resident in India if he is not liable to be taxed in any country or jurisdiction. "This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India," the government said. 

"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," noted the Ministry of Finance statement.