Non-resident Indians, businessmen and multinational employees stuck in India because of the Covid second wave are looking to make a short visit to countries such as Vietnam, Cambodia, Sri Lanka or even Laos to stay away from residency issues that may trigger tax complications.
As per the existing policy, a person staying in India for more than 182 days is liable to pay domestic taxes.
Many multinational employees are stuck in India as several countries are not allowing Indians to fly back. In other cases, some NRIs want to stay with their families in India at a time when the Covid situation is getting worse.
“As per the current regulations, anyone staying in India for more than 182 days will be liable to pay domestic taxes,” said Paras Savla, partner at KPB & Associates, a tax advisory. “In certain scenarios, a period of 182 days is replaced by 120 days. While the government had come out with a relaxation that if any taxpayers are stranded due to Covid, they can apply for relaxation with tax authorities. However many taxpayers have also explored going out of India for a short while for managing the number of days.’’
Tax experts are advising that rather than dealing with the tax department, it is better to visit countries that are allowing Indians.
The NRIs are looking to visit these countries for 15-20 days to manoeuvre the 182 days rule.
Vietnam, Indonesia, Cambodia, Sri Lanka, Laos, the Philippines or any other country that allows Indian visitors are on the radar of the non-residents.
Take the case of a software engineer working with a multinational in the US. He has been stuck in India since February when he returned to attend a family function. He continues to work in the American company and his money is being deposited in his US bank account—but the fear is that he may have to pay domestic taxes as well.
For some of the businessmen—mainly who handle investment companies or are into international trade—not staying in India is part of their tax planning. They avoid staying in India merely to avoid coming under the tax net.
From the point of personal income tax, an individual staying in India for more than the stipulated period changes the fact pattern of which country has first right to tax the individual.
