Effect of New Definition on NRIs

Rohit Batra, of Ernst & Young, says that the revised definition of NRIs will compel them to rethink and plan their stay in India. This is especially painful for NRIs who frequently visit the nation. NRIs will have to stay on their toes and keep a watchful eye on how much time they have spent in India. The only benefit for NRIs in such a situation is that they will be exempted from paying taxes on any income they have earned from outside of India. The source of income includes any business or concern unrelated to India. To be eligible for this exemption, the person has to again fulfill either of the 2 criteria –

The person should have been an NRI for 9/10 years for a period preceding the given financial year.

OR

The person has been residing in India for less than 730 days for a period of 7 years proceeding the given financial year.

An additional area of concern is that of Wealth Tax. If an NRI becomes a resident of India because (s)he has faltered with the time spent in India, that person will be eligible for paying wealth tax on his/her global assets. Wealth Tax Act of India had a special provision for NRIs to save them from paying wealth tax in India. This relaxation is only given for a period of 7 consecutive years, beginning from the next financial year the person returned to India, that is, April 1 to March 31 of the following financial year. The major disadvantage here is that DTC does not have this provision, according to Sourabh Goradia of E&Y.