New Delhi: Finance Minister Nirmala Sitharaman has moved a proposal in the Union Budget aimed at taxing non-resident Indians (NRIs) who do not pay income tax in other countries, a move that will potentially affect those Indians residing in countries such as United Arab Emirates and Bahrain where no income tax is payable.
The Modi government has also sought to tighten the definition of who will be considered an NRI to bring more such individuals under the tax net. The move is likely to generate widespread opposition from the diaspora, which the government has so far aggressively wooed.
“An Indian citizen who is not liable to tax in any other country or territory shall be deemed to be resident of India,” read the budget documents, effectively making these citizens liable to be taxed in India while reducing the number of days a person can stay in India in a year and still be considered an NRI.
“It is entirely possible for an individual to arrange his affairs in such a fashion that he is not liable to tax in any country or jurisdiction during a year. This arrangement is typically employed by high net worth individuals (HNWI) to avoid paying taxes to any country/ jurisdiction on income they earn,” the memorandum that is part of the budget documents said defending the move.
“Tax laws should not encourage a situation where a person is not liable to tax in any country. The current rules governing tax residence make it possible for HNWIs and other individuals, who may be Indian citizen to not to be liable for tax anywhere in the world,” it added.
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Global income liable to be taxed
The new proposal means that citizens who are not residents in India would be liable to tax in India on their global income, said Amit Maheshwari, managing partner at Ashok Maheshwary and Associates LLP.
He added that individuals who leave the country for employment are considered non-resident if their stay in India is less than 183 days. The time limit of 183 is now proposed to be reduced to 120 days.
“Hence, the non-residents are being cornered from two different sides wherein being stateless would lead to them becoming resident in India. Hence, to qualify as non-resident, they would have to ensure that they remain tax resident of any other country and they should be out of India for at least 246 days,” he pointed out, adding that residents who don’t pay taxes in other countries will be taxed in India.
Defending the government’s move, in a post-budget press conference, Revenue Secretary A.B. Pandey said the government has found instances in which some people are residents of no country in the world and hence escape paying taxes anywhere.
“So, in case of these Indian citizens, their worldwide income will be taxed in India,” he said.
This tax proposal has predictably generated opposition from residents in the middle-eastern countries.
“Soon after the news flashed, there was ambiguity as to what it meant and what the outcome will be. How can the government tax us when we are working in Dubai? This is a very bad move,” said Atul Pandey, a resident of Dubai.
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Now I understood why BJP is interested to give citizenship to foreign minorities…. After getting them inside, levy heavy tax and earn money from them so that nobody should be happy outside the country also!….
I told to many of my friends that very soon NRI will be taxed when they were cheering for ‘Howdy Modi’!!…. I was very confident about that because vote bank will never get affected by NRI
Foreign minorities dont bring millions of dollars while fleeing from their native Islamic countries 🙂
First of all your news is stale news. Read carefully the clarifications by the FM and stop spreading roumours
please don’t spread rumors you have to live to your reputation of anti government but read carefully – NO NRI will be taxed in MIddle east. It is proposed for those NRI who are not RESIDENTS in any country and keep hopping countries to avoid taxes. Since those Indians who are genuine residents in any country including middle east will not be taxed. Correct your headline and publish an unconditional apology immediately.
Are you sure this proposal is for taxing NRIs?
Or is it only to plug a loophole in the current system where residents of India spend >182 days outside the country and circumvent the need to pay tax on their India income, despite having significant economic activity & earnings in India. Please articulate correctly to avoid creating confusion and unnecessary panic.
Now 182 is changed to 240 days so that it will be easy to trouble everyone
It’s the regular reaction of the bureaucracy put thousands into trouble just to catch the few who escape manipulating the system.
A well-crafted misleading headline. Remya Nair may have to consult better tax experts other than Ashok Maheshwari and Associates LLP before furnishing such reports. Either shoddy journalism or blinded by hatred for Modi.
The print.in readers and Atul Pandey, resident of Dubai who has been mentioned in the report are requested to read the Khaleejtimes report for better clarity. Happy journalism!!
https://m.khaleejtimes.com/international/india/will-nris-in-uae-have-to-pay-tax-in-india-heres-the-answer-
Please read the entire provision carefully. Normal people who are Residents of any country and not going to be taxed. This only applied to people who live in various countries, are not resident of any country and avoid being taxed in India
India is bankrupt failed nation
When the government is unable to make resident Indians pay taxes, how on earth can they get NRIs to comply? Additionally the government has no moral right to tax those who do not stay in India and receive nothing from the government. Even the flow of remittances will reduce due to this I’ll advised move.
This move by government would have negative repercussions. I expect a drastic fall in foreign remittances that would eventually hurt the struggling Indian economy.
Howdy ?
Taxing NRIs is a counterproductive and regressive proposal, specially in view of the fact that the Middle East based NRIs who are going to be affected are mostly employed under contracts with hardly any job security and very modest terminal benefits. Also, they are not covered by any welfare schemes of the government such as pension and health benefits. Thus there is no justification for taxing NRIs. To garner revenue, the government needs to look at other areas like reducing government expenditure, eliminating freebies and toning up GST collections.
How about the HNIs that the government wishes to tackle? Thresholds and exemptions can be set to provide relief for contract workers, but how can we justify allowing a group of high earners to exploit loopholes in the system? And oh, by the way, don’t patriotic NRIs want to contribute to nation-building (something they are quick to pontificate to residents about) ?