1. Tax Residency Rules: The reformation of tax residency rules stands as one of the most pivotal alterations affecting NRIs. The amendment in the definition of “resident” under the Finance Act is instrumental in determining the tax status of individuals. According to the new rules, an individual is deemed a resident of India if they spend 120 days or more in the country during the financial year and have been in India for 365 days or more in the preceding four years.
2. Tax Rates and Exemptions: The Indian government has undergone a paradigm shift in tax rates for individuals, which naturally extends to NRIs as well. Although the tax rates per se have not undergone drastic modifications, adjustments in tax slabs and applicable rates have been introduced. Moreover, certain exemptions and deductions available to resident Indians might not be extended to NRIs, contingent upon their tax status.
3. Taxation of Foreign Income: NRIs frequently accrue income from diverse sources outside India. Grasping the intricacies of foreign income taxation is imperative for NRIs to ensure compliance with Indian tax laws. Recent alterations have elucidated the taxation rules for foreign income encompassing earnings from salaries, investments, and business activities abroad.
4. Tax Reporting Requirements: The Indian government has ushered in stricter reporting requirements for NRIs, with the objective of augmenting transparency and curbing tax evasion. NRIs are presently mandated to disclose their global income, assets, and financial interests in India. This entails furnishing details of foreign bank accounts, investments, and properties.
5. Digital Taxation and Equalization Levy: The advent of digital transactions and online businesses has spurred the Indian government to introduce a digital services tax termed the Equalization Levy. This levy is applicable to specific digital transactions and advertising services rendered by non-residents to Indian residents. Consequently, NRIs engaged in digital business activities in India find themselves impacted by this levy.
6. Taxation of Capital Gains: Changes in capital gains tax regulations have ramifications for NRIs investing in Indian securities and properties. The revised taxation of capital gains arising from selling stocks, mutual funds, and real estate assets necessitates NRIs to meticulously assess their tax liabilities per these alterations.