{"id":28923,"date":"2025-03-14T00:17:57","date_gmt":"2025-03-13T18:47:57","guid":{"rendered":"https:\/\/carajput.com\/blog\/?p=28923"},"modified":"2025-03-27T16:17:46","modified_gmt":"2025-03-27T10:47:46","slug":"income-tax-bill-2025-indian-citizen-deemed-residency","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/income-tax-bill-2025-indian-citizen-deemed-residency\/","title":{"rendered":"Income Tax Bill 2025: Indian citizen-deemed residency"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d6dd012af73\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d6dd012af73\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/income-tax-bill-2025-indian-citizen-deemed-residency\/#Income_Tax_Bill_2025_Concept_of_Indian_citizen-deemed_residency\" title=\"Income Tax Bill 2025: Concept of Indian citizen-deemed residency\">Income Tax Bill 2025: Concept of Indian citizen-deemed residency<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/income-tax-bill-2025-indian-citizen-deemed-residency\/#Meaning_of_deemed_residency\" title=\"Meaning of deemed residency: \">Meaning of deemed residency: <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/income-tax-bill-2025-indian-citizen-deemed-residency\/#Improves_clarity_without_altering_substantive_tax_implications\" title=\"Improves clarity without altering substantive tax implications.\">Improves clarity without altering substantive tax implications.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/income-tax-bill-2025-indian-citizen-deemed-residency\/#Concept_of_%E2%80%98Liable_to_Tax_in_Deemed_Residency\" title=\"Concept of \u2018Liable to Tax\u2019 in Deemed Residency: \">Concept of \u2018Liable to Tax\u2019 in Deemed Residency: <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/carajput.com\/blog\/income-tax-bill-2025-indian-citizen-deemed-residency\/#Whether_applicable_to_UAE_residents\" title=\"Whether applicable to UAE residents: \">Whether applicable to UAE residents: <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/carajput.com\/blog\/income-tax-bill-2025-indian-citizen-deemed-residency\/#Potential_Impact_on_NRIs\" title=\"Potential Impact on NRIs:\">Potential Impact on NRIs:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/carajput.com\/blog\/income-tax-bill-2025-indian-citizen-deemed-residency\/#Strategic_Tax_Planning_for_PIOs_Indian_Citizens\" title=\"Strategic Tax Planning for PIOs &amp; Indian Citizens: \">Strategic Tax Planning for PIOs &amp; Indian Citizens: <\/a><\/li><\/ul><\/nav><\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-12732\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2016\/04\/FAQs-ON-NRI-INCOME-TAX-COMPLIANCE...png\" alt=\"Non-Resident Indian (NRI)\" width=\"933\" height=\"491\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2016\/04\/FAQs-ON-NRI-INCOME-TAX-COMPLIANCE...png 589w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2016\/04\/FAQs-ON-NRI-INCOME-TAX-COMPLIANCE..-300x158.png 300w\" sizes=\"(max-width: 933px) 100vw, 933px\" \/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Income_Tax_Bill_2025_Concept_of_Indian_citizen-deemed_residency\"><\/span><span style=\"color: #000080;\"><strong>Income Tax Bill 2025: Concept of Indian citizen-deemed residency<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h2><span class=\"ez-toc-section\" id=\"Meaning_of_deemed_residency\"><\/span><span style=\"color: #000080;\">Meaning of deemed residency: <\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The introduction of a new Resident but Not Ordinary Resident category aims to strike a balance between preventing tax avoidance and ensuring preferential tax treatments are still available in certain cases.\u00a0The Income Tax Bill 2025 retaining the deemed residency clause from the Finance Act 2020 indicates that the government continues to focus on taxing global Indian citizens who are not tax residents in any country.\u00a0 As per Section 6(1A) of the Income Tax Act, an individual will be deemed to be a resident in India if:<\/p>\n<ul>\n<li>Their total income (excluding foreign-sourced income) exceeds INR 15 lakh in a financial year, and<\/li>\n<li>They are not liable to tax in any other country or territory due to reasons like their domicile, residence, or similar criteria.<\/li>\n<li>deemed residency Applies to Indian citizens earning INR 15 lakh+ from Indian sources who are not liable to tax in any other country. This provision does not apply to individuals who already qualify as residents under other provisions of Section 6.<\/li>\n<li>This provision mainly targets stateless persons\u2014typically Indian citizens who do not qualify as residents in any country but earn significant income from Indian sources.\u00a0 Section 6(6): Such deemed residents are taxed in India as Residents but Not Ordinarily Residents u\/s 6(6). This means:\n<ul>\n<li>They are taxed on Indian-sourced income and income from a business\/profession controlled from India<\/li>\n<li>Their foreign income remains tax-free in India, unless it arises from an Indian-controlled business.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Improves_clarity_without_altering_substantive_tax_implications\"><\/span><span style=\"color: #000080;\"><strong>Improves clarity without altering substantive tax implications.<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>The Income Tax Bill 2025 retaining the deemed residency clause without any modifications indicates continuity in tax treatment for NRIs.\n<ul>\n<li>No change in residency definition: Section 6 remains largely the same.<\/li>\n<li>Deemed Residency Clause retained: Indian citizens earning INR 15,00,000\/- from Indian sources and not taxable elsewhere continue to be deemed residents.<\/li>\n<li>Minor language simplification: \u201cFor the purpose of employment outside India\u201d replaced with \u201cfor employment outside India.\u201d<\/li>\n<li>No relief for NRIs on TDS for property sales. The high 20%+ tax withholding on gross sale proceeds remains, leading to cash flow issues and refund delays<\/li>\n<li>The INR 15,00,000\/- threshold for determining deemed residency in India includes:<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Income accruing or arising in India or income deemed to accrue\/arise in India (e.g., salary, capital gains, rental income from Indian properties, interest on Indian bank accounts).<\/li>\n<li>Income received in India or income deemed to be received in India.<\/li>\n<li>Foreign income derived from a business controlled in India or a profession set up in India (e.g., consultancy or freelancing work for an Indian entity while living abroad).<\/li>\n<li>Exempt income should not be included in the INR 15,00,000\/- threshold (e.g., agricultural income, PPF interest, or specific tax-free allowances).<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Concept_of_%E2%80%98Liable_to_Tax_in_Deemed_Residency\"><\/span><span style=\"color: #000080;\"><strong>Concept of \u2018Liable to Tax\u2019 in Deemed Residency: <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The term \u2018liable to tax\u2019 means that a country has the right to impose tax on an individual, irrespective of whether it actually exercises that right. It is different from terms like \u2018subject to tax\u2019, \u2018exempt from tax\u2019, or \u2018not paying tax\u2019 due to legal provisions.\u00a0 Meaning of liable to tax: Section 2(29A) &#8220;liable to tax&#8221;, in relation to a person and with reference to a country, means that there is an income-tax liability on such person under the law of that country for the time being in force and shall include a person who has subsequently been exempted from such liability under the law of that country;<\/p>\n<p style=\"padding-left: 40px;\">&#8211; Condition of actual liability<\/p>\n<p style=\"padding-left: 40px;\">&#8211; However, actual payment of tax is not necessary if there is an exemption provided.<\/p>\n<p><span style=\"color: #000080;\"><strong>Key Implications:<\/strong><\/span><\/p>\n<p style=\"padding-left: 40px;\"><strong><span style=\"color: #000080;\">Taxable but Exempt Income:<\/span> <\/strong>If an individual\u2019s income is taxable in a foreign country but is exempt due to specific conditions, they are still considered \u2018liable to tax\u2019. A person in Country X has tax-free income due to certain conditions, but if the country\u2019s tax law allows taxation, they remain \u2018liable to tax\u2019 and will not be deemed a resident of India.<\/p>\n<p style=\"padding-left: 40px;\"><span style=\"color: #000080;\"><strong>Zero-Tax Jurisdictions (UAE, Middle East, etc<\/strong>.)<\/span>: Countries with no personal income tax do not impose taxation on individuals, meaning there is no concept of being \u2018liable to tax\u2019. India may treat such individuals as deemed residents if their India-sourced income exceeds INR 15,00,000\/-. Some high-net-worth individuals (HNIs) moved to zero-tax jurisdictions but retained \u00a0significant economic ties with India while avoiding taxation in any country. The deemed residency provision ensures that such individuals cannot escape Indian taxation altogether, at least on Indian-sourced income.<\/p>\n<p style=\"padding-left: 40px;\"><span style=\"color: #000080;\"><strong>Mitigation through DTAA:<\/strong><\/span> If India considers them deemed residents, they can claim tax residency in the foreign country under the Double Tax Avoidance Agreement. If they qualify as tax residents of the foreign country under the treaty, they can avoid being treated as Indian tax residents.<\/p>\n<p style=\"padding-left: 40px;\"><span style=\"color: #000080;\"><strong>Pending Clarity from Indian Authorities : <\/strong><\/span>Since official guidance is awaited, taxpayers in zero-tax jurisdictions should assess their DTAA eligibility and explore structuring their residency status to avoid unintended Indian taxation under the deemed residency rules.<\/p>\n<p style=\"padding-left: 40px;\"><span style=\"color: #000080;\"><strong>Retaining Benefits of NR Tax Treatment in Certain Situations: <\/strong><\/span>Even though Resident but Not Ordinary Resident are not taxed on foreign income, they are still considered residents for other tax provisions, including:<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li><span style=\"color: #000080;\"><strong>Capital Gains Treatment on Unlisted Shares<\/strong><\/span>: NRs currently enjoy a more favorable tax rate on capital gains from unlisted shares than RORs or Resident but Not Ordinary Resident. By classifying more individuals as RNOR, they lose preferential NR tax treatment and may pay higher taxes.<\/li>\n<li><strong><span style=\"color: #000080;\">Tax Treaty Benefits on Dividend Income:<\/span> <\/strong>Under domestic tax laws, residents pay tax on dividends at slab rates (up to 30% + surcharge + cess). NRs, however, enjoy concessional tax rates under treaties (e.g., India-UAE \u2013 10%, India-Hong Kong \u2013 5%). An Resident but Not Ordinary Resident qualifying as a resident under Indian law but a non-resident under a treaty\u2019s tie-breaker rule can still avail treaty benefits.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Whether_applicable_to_UAE_residents\"><\/span><span style=\"color: #000080;\">Whether applicable to UAE residents: <\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>For Indian citizens working in UAE, issue arises as to whether they are liable to tax as per the definition given above. Answer is no because currently there is no individual taxation in the UAE, except where there is business. Potentially there could be liability in the future, but that is not relevant for 2(29A). Therefore, they will be covered under the deemed residency provisions.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Potential_Impact_on_NRIs\"><\/span><span style=\"color: #000080;\"><strong>Potential Impact on NRIs:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>Tax burden remains unchanged \u2013 NRIs continue to be taxed on their Indian income.<\/li>\n<li>Higher TDS on property sales \u2013 No relaxation despite calls for TDS based on capital gains rather than gross sale price.<\/li>\n<li>Possible litigation &amp; appeals \u2013 Some NRIs may explore DTAA relief or advance ruling mechanisms to reduce tax burden.<\/li>\n<li>Deemed residents will be taxed on their global income unless they can prove tax residency elsewhere. Those covered by DTAA may still seek relief. Individuals falling under the deemed resident category need to ensure proper tax planning to avoid unnecessary taxation on foreign income.<\/li>\n<li>Given these challenges, the lack of TDS relief for NRIs is a missed opportunity in the new Bill. Do you want a detailed analysis of possible ways NRIs can optimize tax liability under the existing framework?<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Strategic_Tax_Planning_for_PIOs_Indian_Citizens\"><\/span><strong><span style=\"color: #000080;\">Strategic Tax Planning for PIOs &amp; Indian Citizens:<\/span> <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Given the amendments, individuals must carefully manage their stay and income to maintain tax efficiency. New RNOR category does not impose taxation on foreign income, but it subtly removes favorable NR tax treatments, making it crucial for individuals to plan their residency and income sources carefully. After this income tax amendments, PIOs and Indian Citizens individuals must carefully manage their stay and income to maintain tax efficiency. To retain full NR status:<\/p>\n<ul>\n<li>Limit stay in India to below 120 days<\/li>\n<li>Ensure India-sourced income remains below INR 15,00,000\/-.<\/li>\n<li>For Indian citizens in zero-tax jurisdictions (UAE, Monaco, etc.): Maintain residency in the foreign country to avoid being taxed as a deemed resident under Indian law.<\/li>\n<li>The new RNOR category does not impose taxation on foreign income, but it subtly removes favorable NR tax treatments, making it crucial for individuals to plan their residency and income sources carefully.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Income Tax Bill 2025: Concept of Indian citizen-deemed residency Meaning of deemed residency: The introduction of a new Resident but Not Ordinary Resident category aims to strike a balance between preventing tax avoidance and ensuring preferential tax treatments are still available in certain cases.\u00a0The Income Tax Bill 2025 retaining the deemed residency clause from the &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9909],"tags":[10230],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/28923"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=28923"}],"version-history":[{"count":5,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/28923\/revisions"}],"predecessor-version":[{"id":28925,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/28923\/revisions\/28925"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=28923"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=28923"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=28923"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}