Liable to tax,” as defined in Section 2(29A), refers to an individual’s legal obligation to pay income tax under the laws currently in force in a specific country. In the context of NRI taxation in the UAE, this definition is crucial in determining a person’s tax liability, taking into account both their income and residency status.
Determination Of Residential Status Of An Individual
An individual is considered to be resident in India during a year if:
- He has been in India for an aggregate period of 182 days or more during the year; or
- He has been in India for an aggregate period of 60 days or more during the year and he has been in India for an aggregate period of 365 days or more during the preceding 4 years. Or
- Deemed Resident: He is a citizen of India having Income from Indian Sources exceeding Rs.15 lakhs and he is not liable to tax in any other country by reason of his domicile or residence of any other of criteria of similar nature
In case of an individual being citizen of India or a person of Indian Origin (‘PIO’) who leaves India during the year for the purpose of employment outside India, the condition 60 days substituted with 182 days
In case of an individual being citizen of India or a PIO who being outside India comes to visit India dung the year, the condition of 60 days is substituted with
- 120 days if income from Indian Sources exceeds Rs. 15 lakhs.
- 182 days 1f income from Indian Sources does not exceed Rs.15 lakhs
An individual is considered to “not ordinarily resident “in India in any previous year if such persons
- Has been a non-resident in India in 9 out of the 10 previous years preceding that year; or
- has been dung the 7 previous years preceding that year been in India for a period of 729 days or less or
- A citizen of India or a PIO who being outside India comes to visit India 1f such person has total Income from Indian sources exceeding NR 15 lakh rupees during the previous year and has been In India for a period or 120 days or more but less than 182 days or
- A citizen of India who 1s deemed to be resident In India under Section 6(1A)
Understanding Deemed Residents in the Context of NRI Taxation in UAE
An individual, being a citizen of India, having total income from Indian sources exceeding Rs 15 Lakh during the previous year, shall be deemed to be a resident of India in that previous year.
If they are not liable to tax in any other country, such deemed residents are considered as “resident but not ordinarily resident” (RNOR).
Under the guidelines of NRI Taxation in UAE, citizens of India residing in countries with no tax laws (such as the UAE) are likely to be treated as deemed residents (RNOR) in India by the Income Tax Authorities, regardless of the number of days spent in India, if their Indian income exceeds Rs 15 Lakhs. For professional assistance and compliance support, explore our NRI Taxation Services in Dubai.
Impact Of Amendments – Increase In Scope Of Total Income
- Income that accrues or arises outside India but is derived from business controlled in or professional set up in India to become chargeable to tax in India in the hands of such individuals
- Any other foreign sourced income still not to be taxable in India even after individual qualifies as RNOR (e.g. Salary, rent, interest, business profit, etc. earned outside India)
- Exemptions available to Non Resident will not be available
- Treaty benefits lost :-The importance of the breaker rule will increase to determine status of residence of the under the DTAA, If individual qualifies as resident of India after applying the breaker test various concessions given under the DTAA with regard to capital gain, dividend, etc. will be lost.
- Income that accrues or arises outside India but is derived from business controlled in or professional set up in India to become chargeable to tax in India in the hands of such individuals
