Tax and disclosure norms: NRIs asked to state number of days spent in India
Jan 9, 2024
Synopsis
Unlike residents, NRIs are not required under the law to pay tax on overseas earnings or declare foreign assets. However, if they overstay - spending more than 181 days in a year in India - tax and disclosure regulations, as related to residents, apply to them.
Several NRIs are being told by the income tax (I-T) authorities to give sworn statements on the exact number of days spent in India to figure out if they escaped tax in certain years.
Unlike residents, NRIs are not required under the law to pay tax on overseas earnings or declare foreign assets. However, if they overstay - spending more than 181 days in a year in India - tax and disclosure regulations, as related to residents, apply to them.
In the past few weeks, the tax department has served notices to dozens of NRIs asking them to submit signed affidavits, affirming the fact that they have not been residents during the periods mentioned by them in their tax returns, besides specifying the number of days spent in each of the years in question. In some notices, the assessment years under review are from 2014-15 to 2022-23.
"The I-T department can always obtain information from the immigration department which collates flight-wise, date-wise data of every person coming and leaving the country. The assessing officer need not ask NRIs who have settled abroad for a long time to submit affidavits to prove their NRI status on the basis of number of days of stay in India. NRIs who are currently abroad are finding it difficult to submit affidavits on Indian stamp paper as well as to get such affidavits notarised," said Rajesh P Shah, partner at the CA firm Jayantilal Thakkar and Company.
However, according to tax circles some of the NRIs who visited India in 2020 and 2021, stayed back, and have been filing I-T returns (ITRs) as NRIs may find themselves in the crosshairs of the tax office.
Under the circumstances, a person submitting incorrect information or false affidavit would find himself violating the penal code, besides exposing himself to the possibility of getting pulled up under the Income Tax Act and the Black Money (Undisclosed foreign Income and Assets) and imposition of Tax Act 2015.
According to Siddharth Banwat, a partner with a CA firm, the stamp on a passport may be adequate proof for computing the number of days' presence in India, but for determining the presence in other countries it may not be enough as many countries do not have a stamping requirement while leaving the country. "This makes it difficult for professionals to verify the actual number of days' presence for their clients in India and in a particular country outside India. In fact, many times, clients have been casual in sharing information with professionals about their residential status for filing their return of income. Obtaining an affidavit from persons about their residential status by the department makes it more onerous for the person making such a declaration. Giving a false statement in an affidavit is an offence," said Banwat.
Apart from the 181 days criteria, some of the NRIs have to also watch out for another change in law linked to residency. Following an amendment to the I-T Act 3 years ago, an NRI visiting India and spending more than 120 days (but less than 182 days) is treated as 'resident but not ordinary resident' (or, RNOR) if such a person's 'total income' - i.e. , gross income post deductions - arising from India is ₹15 lakh or more. Like an NRI, an RNOR neither has to pay tax on foreign income nor disclose foreign assets. However, if an RNOR is not a tax resident of any other country, then his foreign earnings are taxed in India, even though the foreign assets need not be disclosed in ITRs.
[The Economic Times]
