NRI’s Tax Liability after Direct Tax Code

NRI’s Tax Liability after Direct Tax Code (DTC):

The Following will be the tax liability of NRI’s after implementation of DTC in India (March 2012) according to The Economic Times.

Non-resident Indians (NRIs) visiting India, will need to be more vigilant, post the DTC regime. Under DTC, if their stay in India exceeds 60 days during a year and 365 days for the past four tax years, then they may be considered as residents of India.
Currently, they become residents only when their stay exceeds 182 days.
Once they become a resident, they may have to pay tax on their global income , if their stay in India for the past seven tax years exceeds 729 days and if they are residents in two out of the past 10 tax years. In a nutshell, NRIs run the risk of triggering worldwide taxation soon if they spend a significant time in India.
The DTC proposals relating to individual taxation have undergone significant change since the DTC was proposed in August 2009. One will really need to wait for the final bill, which will become operational from April 1, 2012.

Right now under section 80C, you can save up to 1 lakh of tax and if NRIs live more than 182 days in India than and only they are considered as residents of India.

But after DTC, only 2 months of stay will be eligible for considering as residents of India. This is really cool change.

However, we will need to wait until 1st April 2012 until the final bill is announced. The taxation laws under DTC will be more strict after for NRIs as well as Indian citizens after its implementations.

Another big limitation of DTC is that, it doesn’t include ELSS as a tax saving investment. ELSS are the tax heavens for many people in India and in past 5 years they are flourished like anything. But now, the ELSS will be history.