TAX NEWS - June 2010

Are there any discounts for NRIs in the Indian tax system?

Are there any discounts for NRIs in the Indian tax system? Also, what kind of proof is required for NRI status? If I was out for 18 months and if I come and stay in India and work for an Indian company, can I claim tax benefits?


The tax rates for NRI and residents are the same. The concession for NRIs is that their forex income is not taxable in India. However, if you happen to be a resident, your global income is taxable in India. Surely, you will get the benefit of double taxation avoidance agreement between India and your host country, if such an agreement exists.

Your residential status is determined on the basis of the following provision of the ITA:

A Resident is one who during a financial year (FY) which is from April to March, satisfies any one of the following 2 basic conditions:

He is in India for at least:

a. 182 days in the FY OR
b. 365 days out of the preceding 4 FYs AND 60 days in the FY.

The stay in India need not be continuous.

Most persons going abroad for an employment for the first time will have the status of Resident since they will be covered by the 'b' clause above. Therefore, if an Indian citizen leaves India in any year for the purpose of employment, the 60 days in the clause 'b' above is to be replaced by 182 days.

I am aware of the 182 days rule to maintain my NRI status. For this year, I will be cutting it quite fine. So I want to know the treatment for the days of travel. How does one account for the day that I left India (for the better part of the day I was in the flight and technically, had left India) as well as the day of return? — Mitesh Shah

Regardless of how much of the day you have spent in India, both the days of travel (of leaving India and coming into India) have to be counted as days spent in India. In other words, these will be counted for arriving at the 182 days rule for determining NRI status.