Previously, NRIs were citizens who reside outside of India for the majority of the year, and therefore do not pay income tax in the country. However, this is no longer the case.
Now, NRIs will still be liable to Indian income tax, even if they reside outside the country for most of the year – unless they are also a resident of another country during that period.
This could prove costly for the millions of Indians who are outside India for much of the year on business or work. Provided you are aware of and complaint with the new NRI status rules, however, it is possible to remain tax efficient.
NRI Status Rules 2023 – what’s changed?
The key changes to the NRI status rules concern the length of time that Indian citizens are required to live outside India and their residency status during their time outside India.
Previously, to comply with NRI Status Rules, Indians were only required to live outside the country for 182 days. Meet this criteria and you were not liable to pay tax on your global income – which can reach 30% depending on your income.
Under the new NRI Status Rules, Indians are now required to reside outside the country for 240 days. This may seem okay for many Indians, but that’s not all. The new rule states, unless you are a resident of another country during this period, you will still be considered a tax resident of India and therefore liable to pay Indian income tax.
How to become NRI
If you’re left wondering how to get a residence in another country and become an NRI, don’t worry, there is a fairly simple answer, which we will address further below. However, it does require an in-depth knowledge of the UAE’s visa and company formation processes.
Put simply, to qualify as an NRI, you must legally reside outside of India for a minimum of 240 days a year – and be a resident of another country during that time.
By applying for UAE residency, and residing outside of India for the required period, you will meet this criteria. And as the UAE and India have an agreed Double Tax Treaty, you will not be liable for Indian income tax for income generated outside India.
You will instead be bound to the UAE income tax rate, which is 0% on both corporate and personal income.
This comes under Section 6 of India’s 2020 Finance Bill, which states:
‘An Indian citizen who is having a permanent home in UAE and have his employment or business in UAE and most of the time stay in UAE would not be hit by this provision and would remain resident of UAE’.’
So, to be clear, in order to be compliant with this law, you must have a permanent home in the UAE, spend most of your time in the UAE and conduct business or employment within the UAE.
How to get NRI status in 2023
So, how to get NRI status in 2023? Perhaps the quickest and easiest way is to start a business in the UAE – or switch your existing business to the country.
As a UAE business owner, you are eligible for a residency visa that allows you to live and work in the country, and assures your status as a Non-Resident Indian.
NRI status aside, there are many great reasons to do business here. The aforementioned tax rate, the country’s location at the meeting point of East and West, and its quick and easy incorporation process to name just a few. With the right guidance, you could make your license application, obtain your visa and be up and running in the UAE in matter of weeks.
Forming a business in the UAE
To form a business here, you’ll first need to follow a few simple steps. These include outlining your business activities, choosing a company name and making your license application.
Your business activities must be chosen from a pre-determined list published by the Department of Economic Development. It’s important that you list every activity that applies to your business when making your application as failure to do so can lead to fines or even license revocation.
When choosing your company name, you’ll need to comply with the UAE’s clearly defined naming conventions.
In short, UAE company names must not contain any blasphemous or offensive language, any references to well-known institutions or any abbreviations of your name – though your full name is acceptable.
Once you’ve taken care of the early details, you can apply for your trade license.
You can apply for either a free zone or mainland license. Both bring their own advantages and have several distinct differences. If you choose to set up in the mainland, for example, you can trade directly with the local market without the need for a distributor or local agent.
If you set up in a free zone, you cannot do this, however you do benefit from customs tax exemptions and other financial incentives such as the ability to repatriate all capital and profits to your country of origin.
In both cases, you are usually required to submit several documents along with your application form, including:
- A copy of your passport – and that of any other shareholders
- Your business plan
- A copy of your signature
- A No Objection Certificate from your current employer (if applicable)
Now for the most important step – applying for your residency visa.
This is a detailed process comprising four stages – entry permit, medical test, Emirates ID and visa stamping.
During the process you will be required to undergo a chest x-ray, blood test and fitness test. Biometrics will also be captured for use on your ID.
While the process is involved, with the right support, it can be completed in less than a week.
As the holder of a Dubai business license, you can also sponsor others such as children, a spouse or domestic staff for their visas too, providing you meet the income eligibility criteria.
Becoming a resident of the UAE
By following the steps above, it is possible to obtain your trade license and residency visa in the UAE in a matter of weeks.
However, it is always advisable to undertake the steps with the assistance of a registered company formations agent to eliminate any potential hassles that might arise.
With more than 20 years of experience in company incorporation, Worldwide Formations can help you get your business up and running within a week or two. We’ll manage your license and visa application and correspond with all relevant authorities for you. All you need to do is wait for the green light to start trading.
Worldwide Formations helps entrepreneurs in the UAE with all their company setup needs. For more information, call us now on 800 FREE ZONE (800 3733 9663).