Resident or Not? Overstaying NRIs In a Fix over Status in Tax Returns

Over the next month, thousands of visiting non-resident Indians (NRIs) who were forced to overstay due to the pandemic, will have to figure out how to go about filing their income tax return (ITR) for the financial year 2020-21. As the September 30 deadline for tax filing approaches, many are in a dilemma over whether to call themselves ‘resident’ or ‘NRI’.

Once a resident, their earnings abroad would come under the tax net in India, something members of the Indian diaspora – particularly those based in countries such as the UAE and Bahrain which have no income tax – are desperate to avoid.

But more than coughing up tax, what they find uncomfortable is sharing details of their ownership in stocks and properties overseas with the Indian Income Tax (I-T) Department.

They fear such information, which the tax office regularly shares with the Enforcement Directorate, could trigger a flurry of questions on the ‘source of the money’ and enquiries about ‘round-tripping of funds.’

“The income tax return form has a schedule called FA (foreign assets), whereby every resident is required to declare all their foreign assets. As ‘resident,’ this would be a big challenge,” said Ved Jain, former president of the Institute of Chartered Accountants of India.

Alternatively, those filing their tax return as ‘NRI’ are mentally prepared to take on the tax department at some point when the latter challenges the decision before a judicial authority. S-ET

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