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Do NRIs have to show their foreign assets in their ITRs?

Courtesy/By: AYUSHI TYAGI | 2020-04-22 04:40     Views : 229

Do NRIs have to show their foreign assets in their ITRs?

This is the most common question among the NRI society and the answer to this follows below. Residents of India are required to report their global or foreign assets and also their financial interests which led to this apprehension about Indian citizens who are employed or having business interests or are residing outside India including those countries which currently do not charge any tax.

A day following the Budget 2020, the government cleared the smoke and affirmed on its intention of taxing the income earned by non-resident Indians (NRIs) in India. However, further clarification is required from the government side pertaining to reporting of NRIs' foreign assets in India.

The clarification was issued on February 2, 2020, by the Central Board of Direct Taxes (CBDT), stating, "In case a person becomes resident under the Rule 6(1A), no tax will be levied on foreign income unless it is derived from an Indian business or profession". The statement further clarified the apprehension that in the case of such persons, only the income earned in India will be taxed and income earned outside India won’t be taxed. The above mentioned provision is an anti-abuse provision and it does not intend to cover any bona fide workers in foreign countries. The "bona fide workers" in other countries only mean by way of an example and the amendment should cover all individuals, whether the people carrying on business or; investors or; spouses or; retired persons or; on employment and it should not be narrowed down to "workers".

Clarifications Required

It is important that appropriate changes must be introduced in the Finance Bill in context of such clarifications so that it becomes legally binding. Also, clarification is required in the cases in which the reporting of foreign assets or financial interest shall not be required in the Indian ITR.

This year’s Budget put forth a new Rule 6(1A), whereby "an Indian citizen is deemed to be resident in case he/ she is not liable to tax in any other country by reason of residence, domicile or any other criteria of similar nature". Once a person becomes a resident of India, his global income is subject to taxation in India and the maximum marginal rate can be as high as 42.7% in case of the income above Rs 50 million (US$ 7,00,000 approx.). Furthermore, it is compulsory for residents to report their global assets and financial interests. In addition to this, some amends have been proposed in the Finance Bill to decrease the maximum number of days required to maintain the status of a 'non-resident'. As per the proposals, the ‘maximum period of stay’ has been tailed off from 181 days to 119 days in a financial year in order to maintain the non-resident status in India. Provided, the need to continue foreign exchange investments and remittances by NRIs, it might be worthwhile to take a look again at the probable benefits from this provision altogether.

Courtesy/By: AYUSHI TYAGI | 2020-04-22 04:40