Non-Resident Indians (NRIs) will now have to disclose their assets even if they are abroad and the Income Tax Department will determine the taxability factor to each asset. This implies that NRIs who owned these assets before leaving India and officially acquiring the status of an NRI will now have to report them. This is based on the redefinition of ‘assessee’ by the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act that quotes, “residential status of the assessee, in the previous year in which the income is earned or the asset is acquired, shall be the determinative factor for charging under the said Act”. An assessee is any individual who is liable to pay taxes to the government against any kind of income earned or any losses incurred by him for a particular assessment year. Each and every person who has been taxed in the previous years for income earned by him is treated as an Assessee under the Income Tax Act, 1961

Tax authorities will now target these High Net Worth Indians (HNWI) who have acquired huge assets in India but have begun to migrate abroad. These numbers became more prominent in YR 2018 when nearly 28,000 dollar millionaires – over 2% of the HNWIs had migrated out of India. Acquiring NRI status gave them the liberty to not record these assets within India or the income from them. Taxability of income in depends on the taxpayer’s residential status in India, the source of income and the place of receipt of income. One achieves this status by staying outside of India continuously for over 182 days within the financial year. Having said that, the NRI will be taxed in India for salary income received in an NRO account, even though the services are rendered outside India. As for a resident of India, all global income as well as bank accounts, immovable property and financial interests abroad have to be submitted in the income tax returns annually.

What Does This Mean for NRI Taxes?

The new Black Money and Imposition of Tax Act is supported by many global inter-country treaties wherein there is information exchange on all forms of assets held overseas. Therefore, NRIs now have the obligation to make all arrangements to disclose all foreign earnings when filing their ITR henceforth. To be noted, this covers the direct owner of an asset as well as a beneficial owner. The implication of the new tax law is that they have to include –

• additional disclosure of custodial accounts,
• salary incomes earned and deposited in NRO accounts
• foreign depository accounts and
• foreign debt and equity interest, if any

Tax Penalties for NRIs

With an intention to curb illegal assets overseas and investigate cases involving foreign bank deposits and purchase of properties overseas by Non-resident Indians, the Indian Income Tax Department will begin to impose –

• provisions for a steep 120% tax,
• penalty on undisclosed foreign assets and income, and
• along with a jail term of up to 10 years.