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Clarification regarding the provision in 2020 budget on deemed tax residency in India

Posted on: February 03, 2020 | Back | Print

Consulate General of India



03 February, 2020

Government of India has issued a clarification regarding the provision in 2020 budget on deemed tax residency in India. The clarification is as below:

“The Finance Bill, 2020 has proposed that an Indian citizen shall be deemed to be resident in India, if he is not liable to be taxed in any country or jurisdiction. This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or not tax jurisdiction to avoid payment of tax in India.

The new provision is not intended to include tax net those Indian citizens who are bonafide workers in other countries. In some section of the media the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there. This interpretation is not correct.

In order to avoid any misinterpretation, it is clarified that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession. Necessary clarification, if required, shall be incorporated in the relevant provision of the law.”