Changing landscape for non residents after DTC Bill

By: Dr Suresh Surana, Founder of RSM Astute Consulting Group

The residential status of an individual is critical for determination of income liable to tax in India. Generally speaking, a resident is liable to tax on worldwide income whereas a non resident is not liable to tax on income which accrues and is received outside India.

At present, a person is considered to be resident in India if:

a. His stay in India is 182 days or more in India during the relevant financial year or
b. His stay in India is 60 days or more during the relevant financial year and 365 days or more during the four years immediately preceding that year. However, the period of 60 days is extended to 182 days for an Indian citizen leaving India for employment. Similarly, the period of 60 days is extended to 182 days for an Indian citizen or person of Indian origin who, being outside India comes on visit to India.  As a result, non-resident Indian citizens or PIOs are able to maintain non resident status as long as their stay in India is less than 182 days during any financial year. This is set to change with the new DTC proposals.

As per the DTC provisions, a citizen of India or person of Indian origin  being  outside India and visiting India will be treated as resident if his stay in India is 60 days or more during the relevant financial year and 365 days or more during the four years immediately preceding that year.

The DTC 2010 continues with the present system of combination of residence- based taxation and source-based taxation. It also seeks to continue to apply residence-based taxation to residents i.e. global taxation and source-based taxation to non residents. The category of 'Not Ordinarily Resident' has been abolished and only two categories of taxpayers are proposed viz. residents and non-residents. The concept of