Employed Abroad? Here’s How India’s New 2025 Tax Bill May Affect Your Income Tax [Read Bill]

The Income Tax Bill 2025 introduced major changes in how the Indian government determines tax residency. One of the most talked-about amendments is the narrowing of the tax residency rules for Indians moving abroad for employment, freelancing, self-employment, or business.

Previously, the law allowed a wider interpretation of who could qualify as a non-resident for tax purposes but with this new change, job-seekers, self-employed professionals, freelancers, and business owners may now find it harder to avoid Indian tax liabilities. Experts believe this amendment could increase the tax burden on many Indians working abroad, especially those who move overseas without a pre-secured job. Experts are requesting clarification from the tax department regarding its interpretation.

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What’s Changing in the 2025 Tax Bill?

The biggest change lies in Section 6 of the Income Tax Act, 1961, which defines tax residency.

Old Law (Income Tax Act, 1961 - Section 6)

• An Indian citizen leaving India “for the purpose of employment outside India” was not subject to the 60-day rule for tax residency.
• This meant that if such individuals stayed in India for less than 182 days in a financial year, they were classified as non-residents and thus not taxed on their global income.
• The phrase "for the purpose of employment" was broadly interpreted, covering:
• Salaried employees moving abroad for work
• Self-employed professionals and business owners setting up businesses abroad
• Freelancers and consultants working internationally
• Job-seekers looking for work overseas

New Law (Income Tax Bill 2025 - Section 6 Amendment)

• The government has replaced the phrase "for the purpose of employment outside India" with "for employment outside India".
• This seemingly minor change could have a major impact, as it may now exclude job-seekers, freelancers, and self-employed professionals from claiming non-resident tax status.
• Now, only those with a secured foreign job offer may qualify for non-resident status.

What’s the Key Difference?

• Earlier: If you moved abroad to search for a job, set up a business, or start freelancing, you could still qualify as a non-resident.
• Now: You may need to show proof of employment before leaving India, such as an offer letter or an employment contract, to avoid being taxed as an Indian resident.

Why Is This Change Important?

The narrower definition of employment could significantly impact Indians moving abroad for work.

Who Will Still Qualify for the 182-Day Rule?

• Individuals already have a job abroad before leaving India.
• Employees sent abroad on deputation or working with a foreign employer.
• Professionals who can provide official documentation proving their employment abroad.

Who May Lose Non-Resident Status?

• Job-seekers moving abroad without a confirmed job.
• Self-employed professionals shifting their businesses overseas.
• Freelancers and consultants working for international clients.
• Entrepreneurs setting up startups abroad.

Without proof of employment, these individuals could be classified as Indian residents if they stay in India for more than 60 days in a financial year.

Experts Share Views on How the 2025 Income Tax Bill May Affect Indians Working Abroad

According to ET reports, tax experts are concerned about a key change in Section 6 of the Income Tax Act, 1961. Earlier, Indians moving abroad "for the purpose of employment" could qualify as non-residents if they stayed in India for less than 182 days. The Income Tax Bill 2025 changes this to "for employment outside India," which may now only apply to those with a confirmed job before leaving India.

Experts say this change may exclude job-seekers, freelancers, and business owners from claiming non-resident tax status unless they can prove foreign employment with an offer letter or contract. Some believe this rule will be strictly enforced and others argue that self-employment might still be considered valid employment under past court rulings.

Tax professionals are seeking clarification from authorities on how this rule will be applied, especially for self-employed individuals and job-seekers who previously benefited from the non-resident tax exemption.

Know Practical Aspects of Tax Planning, Click Here

What Should You Do If You’re Moving Abroad?

If you are planning to relocate abroad for work, business, or freelancing, you should take the following precautions to avoid tax complications:

• Secure a job before leaving India to ensure you qualify as a non-resident.
• Keep employment-related documents ready, such as Offer letter or employment contract and Foreign business registration (for self-employed individuals)
• If you are a freelancer or consultant, maintain official proof of work abroad, such as Client contracts and invoices and Tax registration in a foreign country
• Limit your stay in India to avoid exceeding residency thresholds.
• Consult a tax expert to assess your risk under the new law.

Other Key Residency Changes in the Income Tax Bill 2025

NRIs with Indian Income Over Rs. 15 Lakh May Face Stricter Residency Rules

• New Law: If an NRI earns Rs. 15 lakh or more from Indian sources, they may be considered residents if they stay in India for just 120 days (instead of 182 days).

“Deemed Residency” for NRIs in Tax Havens

• New Law: Any Indian citizen earning Rs. 15 lakh or more from Indian sources, who does not pay taxes anywhere else, will now be deemed a resident of India.
• This prevents tax avoidance by NRIs in tax-free countries like UAE, Monaco, or the Bahamas.

Stricter Rules for Business Owners & Companies

• Foreign companies with effective management in India will face higher tax scrutiny.

Read more of the other key Residency changes here

The Income Tax Bill 2025 will tighten tax residency rules, particularly for job-seekers, freelancers, and self-employed individuals moving abroad. It is still in the proposed status, if approved, the new bill will be effective from April 1, 2026 (not officially confirmed). If you’re planning to relocate abroad, make sure you have a confirmed job offer or official proof of employment. Without it, you may end up paying Indian taxes on your global income.

To Read the full text of the Tax Bill CLICK HERE

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