Income Tax and Adhaar updates for Non Resident Indians (NRIs)

It is tax filing season around the world. In the US 18th April is the deadline for most individuals to file their tax returns. Likewise, the window of tax filing for the past Fiscal year in India has begun too. A few interesting updates for Non Resident Indians (NRIs):

India exempts NRIs from quoting Aadhaar in tax returns – Although NRIs are exempted from income tax on their income abroad, they have to file tax returns for their income earned in India. The Indian government has exempted Non-Resident Indians (NRIs) from the requirement of quoting Aadhaar (Indian biometric ID card) number while filing income tax returns back home. Although NRIs are exempted from income tax on their income abroad, they have to file tax returns for their income earned in India. Many Indians in the UAE, who regularly file income tax returns in India but do not have Aadhaar, were worried after the government move to link Aadhaar with PAN (Permanent Account Number) issued by income tax authorities for tax and financial transactions by June 30, 2017. On March 30, a top Indian official clarified to Gulf News that NRIs were not eligible for Aadhaar and government departments had to give exemptions to NRIs in this regard. They were waiting for announcements on exemptions.

Expats stressed as Aadhaar becomes mandatory for tax returns -Expatriates living in India would often complain about heat, food and dirt. Applying, registering and getting an Aadhaar card might just extend the list of woes with another mandatory tryst with India?s famed red tape. Many expatriates would be required to obtain an Aadhaar number. The Finance Act, 2017 has made it mandatory to enroll for Aadhaar to file tax returns in India or apply for a PAN or keep the existing PAN active effective July 1. This applies to those who are eligible for Aadhaar and under the Aadhaar Act, anyone who is in India for more than 182 days in aggregate in the past 12 months becomes eligible to obtain Aadhaar, experts said.

As an NRI, your India-sourced income will be taxed in India: From update on Livemint “I am an NRI and was living in Kenya for the last 11 years. Since November 2016 I have been living in India. In December 2016 I also got a job here, in the diamond polishing business, which pays me a fixed salary of about Rs1 lakh per month. Depending on external factors, I may or may not go back to Kenya. Please tell me how I should file my taxes for 2016-17? Do I still qualify as an NRI?”

Residential status in India is determined based on your physical presence in India in the current financial year (FY) (1 April to 31 March) and the preceding 10 financial years . If the individual satisfies any of the basic conditions mentioned below, he would qualify as a resident, otherwise he would qualify as a non-resident (NR):
a) Stay in India during the FY is 182 days or more; or
b) Stay in India during the relevant FY is 60 days or more and in the 4 immediately preceding FYs is 365 days or more.

Additional tips from Abhinav Gulechha on his blog.?Impact of this provision on various categories of NRIs:

1. NRI residing out of India ? comes to India every year for brief visits only: Requirement is not applicable to you, relax. If your income is below qualifying exemption limit, anyways no need to file return in India. However, if you are considering filing a return, you can do in a normal way. Leave ?Aadhaar? field in return form blank.
2. NRI spending substantial time in India: This mostly applies to my seafarer friends who plan their work in such a way that they are < 182 days in India for a previous year, and hence are categorized as ?non-resident?. For such seafarers, please note that residency requirements under ITA and Aadhaar Act are different. The implications thus, are as follows:
3. NRI returned to India/Resident of India (includes PIO/Expats) etc: Filing a tax return in India on or after 01/07/2017: Make sure that on the date of filing tax return (say X) you have NOT been residing in India for 182 days for period (X- 365), if yes, you cannot file a return without quoting your Aadhaar and if you do so, it can be deemed as ?defective?
   It may be noted that Government has not given any leeway yet (as I write the post on 10/04/2017) to PIO and expats. So, even if you are a US citizen residing in India, if you?re eligible for Aadhaar, you need to apply for it, and quote it in your tax return.

What does all this mean?

• If you are an NRI (or OCI) living in India for more than 182 days, you should plan to get an Adhaar Card. (the process is rather simple for those residing in India)
• If you have income earned in India, you should file tax returns in India.