Are you an NRI stranded in India due to Covid? Watch out for these tax rules

While work may not be affected in such a scenario, tax implications have changed significantly for these individuals. If you're an NRI stranded in the country, here are five things you need to note, to calculate the taxes you owe the Indian government..

The coronavirus pandemic, and the sudden imposition of travel restrictions all over the world, left many stranded away from home. As India imposed the world's biggest lockdown, non-resident Indians, who had been visiting the country, were unable to return. With work from home, and minimal flights back, many are still working from India.

While work may not be affected in such a scenario, tax implications have changed significantly for these individuals. If you're an NRI stranded in the country, here are five things you need to note, to calculate the taxes you owe the Indian government.

1. Your residential status: Income tax in India depends on your residential status and place where services are rendered. You will be treated as resident if you-

• have stayed in the country for 182 days or more in the current financial year.
• have stayed in the country for 60 days or more during the current financial year; and 365 days or more in the last 4 years.
• The 60-day rule becomes 182 days for those who have gone abroad to work or NRIs who are visiting India.
• If your income in Indian rupee is over Rs 15 lakh, the relaxation from 60 days to 182 days gets restricted to 120 days.

Considering that it is now December, most employees will have exceeded this threshold and would be liable for tax in India.

2. Your employer's status: If you are working for a foreign company working out of India, your company may be deemed to have a permanent establishment in India and can become liable for tax for the part of its profits attributed to you. This situation can give rise to substantial litigation for the company.

3. Tax deductions: Most countries have provisions similar to Tax Deducted at Source (TDS). This amount will be deducted by your foreign employer even if you are working from India and filing tax returns here. However, in some cases, you may be able to claim the TDS deducted abroad as credit while filing your ITR in India.

4. Rules of Foreign Exchange: If you have been working abroad, most likely you will have an international salary account. When you transfer funds from that to your Indian bank account, you will need to pay extra charges. Also, if you get your pay transferred to your Indian account directly, that would automatically become taxable.

5. Income from investment: All your income from different investments, like dividends, rent received and capital gains will be taxable in India. Even returns on pension funds like the 401(k) will be taxable.