New Delhi, May 14 -- For over two decades, an Oman-based NRI has called Muscat home, building a career in a country that levies zero personal income tax.

In India, he filed his tax returns dutifully, claimed NRI status and availed the concessional rates that came with it, including the 5-20% flat tax on interest and dividend income, which would otherwise be taxed at slab rates for residents. It was meant to be a watertight benefit under the Double Taxation Avoidance Agreements (DTAA).

Then, last year, the income tax department came knocking. The assessing officer opened the NRI's assessment and labelled him a deemed resident of India under Section 6 (1A) of the Income Tax Act, stripping away all non-resident benefits in one move.

Secti...