Changes to India’s DTC May Mean More Taxes for NRIs

India’s Direct Tax Code (DTC), which looks to become fully operational April 1, 2012, may have serious repercussions for non-resident Indians (NRIs) spending significant amounts of time living or doing business in the country.

Under the DTC, NRIs staying in India more than 60 days a year and 365 days over four tax years will be considered and taxed as residents of India. Under the current legislation, NRIs are classified as residents only after their stay exceeds 182 days.

When an NRI becomes a resident of India, they may be taxed in the country on their global income if their stay in India for seven tax years exceeds 729 days and if they are residents during two out of 10 tax years.

There have been many alterations to India’s DTC since it was proposed in August 2009, and this may change yet again before the final bill comes into effect, but those who spend a significant amount of time in India will need to keep this in mind.