Budget 2021 | 'Expected government reduce non-resident status period from 182 to 120 days, didn't happen'

By Suresh Surana

Tax relief in case of income from notified overseas retirement fund

At present, there is mismatch in the year of taxability of withdrawal from retirement funds outside India by residents who had opened such fund when they were non-resident in India and resident in foreign countries. Accordingly, the withdrawal from such funds may be taxed on receipt basis in such foreign countries, while on accrual basis in India.

In order to address this mismatch and remove this genuine hardship, it is proposed to insert a new section 89A to provide that the income of a specified person from specified account shall be taxed in the manner and in the year as prescribed by the Central Government.

It is also proposed to define the expression ―specified personnel, as a person resident in India who opened a specified account in a notified country while being non-resident in India and resident in that country.

UNION BUDGET SPECIAL COVERAGE ONLY ON DH

The specified account is proposed to be defined as an account maintained in a notified country which is maintained for retirement benefits and the income from such account is not taxable on accrual basis and is taxed by such country at the time of withdrawal or redemption. The Notified countries shall be notified by the Central Government.

No change in the rate structure and scope of taxable income

The tax slabs and the scope of taxable income for non-residents remain unchanged. There was a widespread apprehension that the tax rate or scope may be increased due to large fiscal deficit and need to raise additional revenue.

No announcement on exclusion of stay in India during lockdown period for determination of residential status

Due to the lockdowns imposed during the current financial year 2020-21 ( including the national lockdown from 1 April 2020 to 17 May 2020) and the resultant travel restrictions, several non-residents were stuck in India. It was expected that there would be clarification or amendment for the exclusion of such stay in India for the determination of the residential status.

Earlier CBDT had announced similar relief for FY 2019-20 and it was mentioned that for FY 2020-21, the relief would be separately announced. It appears that non-residents will have to wait for some more time.

Lower period of permissible in stay in India for non-resident Indians having taxable income in India of Rs. 15 Lakh continues

Last year, there were far-reaching changes in provisions relating to determination of tax status in case of Non-resident Indians.

One of the major changes was that in case of Indian citizens or persons of Indian origin having taxable income in India of Rs. 15 lakhs or more, the maximum permissible stay in India, in order to continue to maintain “non-resident status” for tax purposes, was reduced from 181 days to 119 days during the relevant financial year.

It was expected that the number of 120 days would be relaxed to 182 days in this Budget so as to not to disincentivise NRIs from investing in India. However, the same has not been considered in Budget 2021.

(The author is the Founder of RSM India)