Residential status of NRIs under I-T scanner, past assessments could be reopened

New Delhi: Individuals who claim to be Non-Resident Indians (NRIs) for tax filing purpose have come under the scanner of the investigation wing of the income tax (I-T) department.

Worth mentioning here is that an individual will be considered as an NRI by the I-T department if he stays overseas for more than 182 days in a particular financial year. But laws also state that a person will be considered as a 'resident' if he has been in India for more than 60 days in the year in question and 365 days during the four years prior to that year.

Many Indians divide their time between India and abroad in order to avoid paying tax on income from outside India. It may be noted that according to income tax laws, NRIs are not required to pay tax on their income from outside India but a resident Indian is required to pay tax on their income from abroad.

It is learnt that several NRIs have received notices from the I-T department for reopening tax assessments of the past five to six years, they were also told to share photocopies of their passports.

The tax department is scrutinizing individuals who claimed NRI status without fulfilling the norms on the period of stay for alleged tax evasion. These people may face long litigation, the business daily said.

“Even if a person is forced to extend his stay in India beyond 182 days on genuine grounds like hospitalisation or marriage, there is no respite. The department has turned aggressive to ensure that foreign income of residents does not escape taxation,” senior chartered accountant Dilip Lakhani said.

Many notices were served to NRIs a month before the budget which proposed an amendment (with retrospective effect) in the black money Act to include NRIs in the definition of ‘assessee’ – a move that would make the laws more stringent.

Worth mentioning here is that in the revised income tax return forms for the last financial year, NRIs have to give details of stay in India for the past four years to enable assessing officers to determine their true residential status.

It is advisable for NRIs who have got NRI status 6-7 years ago to preserve relevant documents and clear evidence of source and application of funds as well as immigration details, Mitil Chokshi, senior partner at Chokshi & Chokshi said.