A few days back, I was working on a case of a Person of Indian Origin (PIO) who had been staying in India for all these years to take care of ailing parents, and plans to move out of India since they’ve passed away, however would want to come to India for some days every year to settle the estate and other routine work. The query was: what is the maximum number of days he can stay in India to qualify as a non-resident.
There is a general belief that Indian tax residency laws, unlike the US law, does not depend on citizenship that’s the general sense that prevails in casual conversations and discussions. At the same time, if we read closely there are subtle provisions in Indian tax law which depend on whether person is a citizen of India or a PIO. These are 2 different things.
Before moving forward, let me take up the relevant extract of Section 6 of the Act which determines tax residency is worded – note the emphasis I have added on the citizenship bit
Residence in India.
6. For the purposes of this Act,—
(1) An individual is said to be resident in India in any previous year, if he—
(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or
(b) [***]
(c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.
Explanation 1.—In the case of an individual,—
(a) being a citizen of India, who leaves India in any previous year as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or for the purposes of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one hundred and eighty-two days” had been substituted ;
(b) being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one hundred and eighty-two days” had been substituted and in case of such person having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year, for the words “sixty days” occurring therein, the words “one hundred and twenty days” had been substituted.
Explanation 2.—For the purposes of this clause, in the case of an individual, being a citizen of India and a member of the crew of a foreign bound ship leaving India, the period or periods of stay in India shall, in respect of such voyage, be determined in the manner and subject to such conditions as may be prescribed.26
(1A) Notwithstanding anything contained in clause (1), an individual, being a citizen of India, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year shall be deemed to be resident in India in that previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.
Explanation.—For the removal of doubts, it is hereby declared that this clause shall not apply in case of an individual who is said to be resident in India in the previous year under clause (1).
Some conclusions we can draw from above as follows:
- Citizen of India is different from PIO – why? Because if we closely study the explanations, explanation 1(a) applies only to an Indian citizen and not to a foreign citizen. Now, if you wish to take an interpretation that it includes a PIO, in my view, that can be a very aggressive interpretation because if you see situation in explanation (b), it clearly mentions BOTH citizen as well as non-citizen. Had the intention of legislature been to given benefit mentioned in Explanation (1)(a) to both citizen as well as non-citizen, it would have expressly mentioned this point in wording of Explanation (1)(a) as well.
- If a PIO moves outside India for employment or as crew member of the ship, he shall not get the benefit of 182 days rule via Explanation 1(a) as he is not a citizen of India.
- If Citizen/PIO is having Indian income > INR 15 lacs in previous year, then he gets a maximum time limit for visit to India as 120 days (not 182 days) for remaining NR. If he stays between 120-182 days, he becomes RNOR. More than 182 days, an NR. Here the position is the same for citizen & PIO. Also, the only difference in tax liability for the PIO being RNOR is if some income acrrues to him outside Inda which is derived from a business controlled in India. If that is not the case. 120 days rule has no relevance & he can stay back till 181 days with no impact on tax liability.
- If Citizen (NOT A PIO) is having Indian income > INR 15 lacs in previous year AND he is not liable to tax in any other jurisdiction, he shall be deemed as resident and fully taxed in India. This provision means that even if you are an Indian citizen & you’ve not spent even a single day in India for the previous year, still because your income in India > 15 lacs & the fact that you are not liable to tax in any other jurisdiction, you will have to pay tax in India. Note that this provision does not apply to a PIO.
So, coming to the question of my PIO client visiting India, he can he can stay for up to 181 days at the max. Only exception is if some income accrues to him outside Inda which is derived from a business controlled in India. In that case, he can ensure to wind up everything within 120 days else the income will be taxed in India.
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