Some smart taxpayers, along with some smart tax consultants, had developed a system that they would not pay tax in any country of the world. In the finance act 2020,  for such taxpayers, the Government of India has tried to bring such taxpayers into the tax net by introducing a new concept "Deemed Resident", and tightening the rules a bit. Which we can call master stroke.

Whenever it comes to income tax in India, the important thing is that the taxpayer is a resident or non-resident. Because the government wants more and more taxpayers to be residents so that their global income can be taxed in India. And the taxpayer keeps trying to make his states non-resident because the non-resident has a lot of benefits in income tax like: -

(i) Foreign income of non-resident does not have to be taxed in India, 
(ii) some non-residents are exempt from filing income tax returns, 
(iii) many income like interest, dividend, royalty, professional fees of non-residents are taxed at the concessional rate in Section 115A
(iv)  In addition to above, the non-resident gets a benefit of treaty,  in treaty rates of tax are much lower than the rate of normal tax.

Citizenship versus tax residency:-

 we must know that a citizen of India can also be a non-resident and a foreigner can also be a resident, ie the resident has no relation to citizenship for income tax. is. 
In the second FEMA (Foreign Exchange Management Act), the definition of non-resident is different from the definition of non resident in income tax act.

Who are the residents: -

 Section 6 of the Income Tax Act states that a person residing in India for more than 182 days in a financial year will be resident, irrespective of the citizen of india or not. means,  his global income will be taxed in India.

Second Criteria, in some cases, resident in India for only 60 days in a financial year shall be treated to be resident provided that in the preceding 4 financial years it has been 365 days in India but this 60-day provision will not apply to the following: -

1.Those Indian citizens who have gone out of India to work in the Merchant Navy or for employment or self-employment, ie those Indian citizens who will be in India for 182 days or more in a financial year, only then they will be treated as resident and then only,  their global income will tax in india. . The days of the Merchant Navy employee's stay outside India will be calculated on the basis of "Continuous Discharge Certificate" as per Rule 126 of Income Tax.

2. A person called,  PIO (Person of Indian Origin)  who is a foreign national but has his own birth or birth of one of his parents or the birth of one of his grand parents, Un-divided India. It happened to be Such a PIO or a citizen of India, who lives abroad and has visited India, will be treated as a resident and tax his global income only if he has been in India for 182 days or more.
 provided his income in India [ + Foreign income of business controlled  from India + Foreign income of  profession set up in India] be less than Rs. 15 lakhs, otherwise he will be resident only in 120 days in india. althogh NOR ( Not Ordinary Resident). this NOR categery is only in india, across the globe.

But If his , [income in India + foreign income of business controlled  from India + income of profession set-up in India] will be more than 15 lakh rupees, then he is considered NOR (Not Ordinary Resident) only in 120 days in India, instead of 182 days.
 Although his global income will not be taxed, but his [Income in India + Foreign Income of Business controlled from India + Foreign Income of Profession set up in India] will be taxed.

Let us now know about those smart taxpayers of India, who will be treated as deemed resident.

Citizens of India who do not pay tax anywhere in the world due to their residency or domicile or any similar criteria, will be considered as deemed resident in India. Even if they did not come to India for a single day. Provided that his [Income in India + Foreign Income of Business controlled from India + Foreign Income from Profession set up in India] is more than Rs. 15 lakhs.
However such citizens will be considered NOR (not Ordinary Resident) i.e. their income [foreign income from  business controlled in India + foreign income from s profession set up in India] will be taxable. That is, their foreign income will not be taxable.

Residents of the following two categories will also be treated as NOR ((Not Ordinary Resident). Only [Income in India + Foreign Income of Business control from India + Foreign Income from Profession set up in India]] will be taxable, their foreign income will not be taxable. 
(i) who has been non-resident for 9 years out of the last 10 years, before that financial year. But due to some reason, he has been resident in the last year.
(ii) who has in india 729 days or less during 7 financial before that financial year.


Written by - CA RS Poonia
Translated by - Simran Bharti 
 4th year law intern 
Jecrc University, Jaipur