This post was originally published on 7 April 2017 and the content may be outdated.
The Indian government has exempted Non-Resident Indians (NRIs) from the requirement of quoting Aadhaar (Indian biometric ID card) number while filing income tax returns back home.
Recently the Finance Act, 2017 had made it mandatory to enrol for Aadhaar to file tax returns in India or apply for a PAN (Permanent Account Number) or keep the existing PAN active effective July 1.
However, the requirement to quote Aadhaar for filing income tax returns and for making an application for allotment of PAN shall not apply to non-residents [NRIs], according to the latest CBDT press release.
Should NRIs pay income tax?
Non-Resident Indians are exempt from taxation for all income they receive from outside India as well as interest from NRE bank accounts. However, they have to file tax returns for their income earned in India.
Many NRIs who regularly file income tax returns in India but do not have Aadhaar, were worried after the government move to link Aadhaar with PAN.
NRIs not eligible for Aadhaar card
Under the Aadhaar Act, anyone who is in India for more than 182 days in aggregate in the past 12 months becomes eligible to obtain Aadhaar, which means NRIs are not eligible.
While applying for Aadhaar card Indians have to make a declaration in the application stating that he/she is a resident (not an NRI).
The declaration reads: “I confirm that I have been residing in India for at least 182 days in the preceding 12 months.”
Thousands of NRIs haven’t paid attention to this and have already obtained Aadhaar cards. It is not clear if the Aadhaar cards already obtained by NRIs would be considered a violation of the law.
Tax Board issues statement
On Wednesday, India’s Central Board of Direct Taxes (CBDT) made the first such announcement on the exemption. Here is the full script of the press release:
- Section 139AA of the Income-tax Act, 1961 as introduced by the Finance Act, 2017 provides for mandatory quoting of Aadhaar / Enrolment ID of Aadhaar application form, for filing of return of income and for making an application for allotment of Permanent Account Number with effect from 1st July 2017.
- It is clarified that such mandatory quoting of Aadhaar or Enrolment ID shall apply only to a person who is eligible to obtain Aadhaar number.
- As per the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, only a resident individual is entitled to obtain Aadhaar.
- Resident as per the said Act means an individual who has resided in India for a period or periods amounting in all to one hundred and eighty-two days or more in the twelve months immediately preceding the date of application for enrolment.
- Accordingly, the requirement to quote Aadhaar as per section 139AA of the Income-tax Act shall not apply to an individual who is not a resident as per the Aadhaar Act, 2016.
The statement clarifies that an Indian is considered a resident if he/ she has resided in India for a period or periods amounting in all to 182 days or more in the 12 months immediately preceding the date of application.
“It is the responsibility of the relevant departments to give exemption to NRIs [on Aadhaar requirement],” Dr Ajay Bhushan Pandey, CEO, Unique Identification Authority of India (UIDAI), had recently told Gulf News in a telephone interview from New Delhi.
Pandey was referring to Section 3.1 of the Aadhaar Act 2016, which says that only a resident shall be entitled to obtain an Aadhaar number.
The departments can get a declaration from the NRI that, being an NRI, he or she is not eligible for Aadhar card, he had said.
Some time back, Sushma Swaraj had said that government is considering Aadhaar Card for NRIs. But no clear rules have been framed on this yet and it would remain a dilemma for NRIs.