Budget extends `Ease of Doing Business' to NRIs
08 February 2021
Union Budget 2021-22 has extended `Ease of Doing Business’ benefits to its citizens living abroad by allowing them to set up one person companies (OPCs) in their home country and easing tax burden on repatriated money by allowing tax-free status to 182 days of stay in India from the earlier 120 days.
Until now, the facility of setting up one person company was available only for those citizens living in India.
The concession is expected to benefit a large number of Indians living in the Gulf, which has the highest number of non-resident Indians (NRIs).
This will allow Indians currently residing in the Gulf countries to better plan their post-NRI days once their overseas work permits or contracts end and they have to leave for home.
Guruprasad Mohapatra, secretary of the Indian government’s Department for Promotion of Industry and Internal Trade, said in a media briefing to explain provisions of the Indian budget 2021-22 that the new budget "allows NRIs to incorporate OPCs in India."
Further, he said, "The budget incentivises the incorporation of OPCs by amending the Companies Incorporation Rules to allow OPCs to grow without any restrictions on paid-up capital and turnover, allowing their conversion into any other type of company at any time, reducing the residency limit in India for NRIs to set up an OPC from 182 days to 120 days."
The complete budget was outlined to India’s parliament on Feb. 1 by Finance Minister Nirmala Sitharaman, but their provisions such as the concessions to NRIs become effective on April 1. Before they take effect such changes have to be notified as explained by Mohapatra.
Also, an earlier restriction that OPCs set up by resident Indians cannot be converted into a public limited company or a private limited company for two years will not apply in the case of NRIs.
Similarly, a limitation that the paid-up capital of Rs50 lakh and annual turnover of Rs2 crore applicable at present to OPCs has also been done away with for NRIs.
These relaxations for non-resident Indians (NRIs), announced by finance minister Nirmala Sitharaman while presenting the Union Budget 2021, will be effective from 1 April 2021, the beginning of the coming financial year.
Presently, when NRIs return to India, they face issues related to their accrued incomes in their foreign retirement accounts, which mainly occurs due to mismatch in taxation periods. She also highlighted their difficulties in getting credit for Indian taxes in foreign jurisdictions, leading to double taxation. The government notified a major economic concession to its citizens living abroad, allowing them to set up one person companies (OPCs) in their home country. Until now, the facility was available only for those living in India. This economic concession is expected to benefit a large number of Indians living in the Gulf, which has the highest number of non-resident Indians (NRIs).
As a result the Gulf-resident Indians will now be able to better plan their future for a day when their overseas work or contracts end and they have to leave their countries of limited residence to return home. Earlier there existed the restriction that OPCs set up by resident Indians cannot be converted into a public limited company or a private limited company for two years will not apply to NRIs. Similarly, a limitation that the paid-up capital of Indian rupees five million and annual turnover of rupees 20 million, presently applicable for OPCs has also been done away with. So there are no restrictions on the growth of OPCs.
Further, to decriminalise the Limited Liability Partnership (LLP) Act, 2008, the budget proposes easing of compliance requirements of small companies by revising their definition under Companies Act, 2013.
Besides, promoting start-ups and innovators by incentivising the incorporation of one person companies (OPCs), the budget proposes to allow their growth without any restrictions on paid-up capital and turnover and allowing their conversion into any other type of company at any time,