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Budget 2022 wishlist for NRIs: New Income Tax Return Form, Rules for Over Rs 15 lakh Income and more

Budget 2022 for NRIs (Expectations): End of the stringent rules for NRIs having taxable income of over Rs 15 lakh in India and new Income Tax Return (ITR) Form for them…

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Budget 2022 for NRIs (Expectations): End of the stringent rules for NRIs having taxable income of over Rs 15 lakh in India and new Income Tax Return (ITR) Form for them are some of the expectations for Non-Resident Indians from the upcoming Budget 2022.

Budget 2020 had proposed to exempt Non-resident Indians (NRIs) from filing income tax return in certain conditions. It had also proposed to modify residency provisions to prevent tax abuse. Prior to that, NRIs were liable to pay tax in India if they spent over 165 days in India in a year. This was reduced to 120 days. This decision was taken after the Government noted instances where period of 182 days specified in respect of an Indian citizen or person of Indian origin visiting India during the year, was being misused.

For Budget 2022, experts have called for the abolition of stringent regulations for NRIs having taxable income exceeding Rs 1.5 million (Rs 15 lakh) in India.

“At present, NRIs having taxable income in India exceeding Rs 1.5 million are treated as Resident but not Ordinarily Resident (RNOR) in case they spend 120 days or more in India but less than 182 days in any financial year. On the other hand, NRIs who do not have taxable income exceeding Rs 1.5 million are treated as Non-Resident as long as they spend less than 182 days in India in the financial year,” Dr Suresh Surana, Founder, RSM India, told FE Online.

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“Several NRIs make investments in India in shares of listed companies which result in taxable dividend income or in properties which result in rental income. This provision discourages investment in India and is detrimental to India’s economic interests and should be abolished,” he added.

New ITR Form for NRIs

At present, there is no separate Income Tax Return form prescribed for NRIs. ITR2 or ITR3 or ITR 4 is applicable for them based on specific facts of the case. Dr Surana said that as there are several disclosure requirements which may not be relevant for NRIs, it would be helpful if a separate ITR form is prescribed for the Non-Residents with limited disclosure requirements so as to uncomplicate the tax compliance requirements and to make the process hassle free for the NRIS and also efficient from the tax administration perspective.

Elimination of the taxation of Notional Income on House Property

Many NRIs have investment in multiple properties in India. The existing provisions of the IT Act provide the taxpayer to declare up to two of their residential properties as ‘self-occupied’ properties for which the annual valued would be taken to be Nil. Any other property, whether let out or not, would be subject to taxation under the head ‘House Property’. Thus, even if the property is not let out, the same would be subjected to tax based on fair rent.

Dr Surana said that considering the need to revive the demand for unsold inventory in the real estate sector, it would be prudent to tap the NRI funding. “As such, it is expected that the concept of taxation on notional income (on deeming basis) is omitted to encourage more investments by NRIs into the real estate sector.”

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Increase in the threshold limit in case of Payment of Advance Tax

The threshold limit of Rs. 10,000 for payment of advance tax was last amended by Finance Act, 2009.

Considering the inflation in the economy over the last 12 years, there is a need to increase the threshold limit from the present Rs. 10,000 to Rs. 30,000. The hardship is further compounded by the levy of interest u/s 234C for the shortfall in the instalment of advance tax paid, Dr Surana further said.

Dedicated helpline number for NRIs

At present, the income tax helpline numbers are operational only during business hours from the Indian Standard time perspective. Due to the timing difference between India and Europe / US and other countries, it would be advisable that a separate helpline number which is available 24×7 is created to address the issues and concerns of the Non-Residents either in their processing of the tax return, refunds, tax assessments and other queries, Dr Surana suggested.

Tax-free long Term Infrastructure/Development bonds

The ongoing covid 19 with the new variant omicron has slowed down the pace of economic development and there is a need to bring to create more demand by increasing the liquidity in the markets, more investments, employment opportunities and thereby the disposable income.

Further, the government has laid down an ambitious target of investing over Rs.100 lakh crores in infrastructure up to 2024. India is one of the world’s largest recipients of foreign remittances with about US$ 87 billion received in 2021. The remittances are mostly made by NRIs working outside India or those individuals settled abroad having an economic interest in India.

“It would be prudent to tap this source of funding for significant spendings towards infrastructure, healthcare and other critical development programs of the government. Accordingly, it is expected that tax-free Infrastructure / Development bonds be issued by the government to the NRI category, with instruments having a longer maturity period say 10 years. This bond scheme could raise significant funding, which can play a critical role in the overall development plan and assist in the revival of the economy,” said Dr Surana.

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