Indian workers abroad, including Qatar, not liable to tax on global income
IANS / Agencies
New Delhi: A day after Union Budget proposed to tweak the rule to prevent NRIs from evading tax in India, the Finance Ministry has clarified that bona fide workers in other countries including in the Middle East who are not liable to tax in these countries will not be affected by the new provision.
A Finance Ministry official said that the proposed provision is not intended to include in tax net those Indian citizens who are bona fide workers in other countries.
Earlier, an Indian citizen would become an NRI if he stayed out of the country for over 182 days and enjoyed tax benefits. As per the budget proposal, he now would have to stay for 241 days to get the tax relief.
Amending the present provision in the income tax law, the budget proposed that “notwithstanding anything contained in Clause (1), an individual — being a citizen of India — shall be deemed to be a resident in India in any previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of a similar nature”.
LiveMint website reported that Finance minister Nirmala Sitharaman on Sunday said non-resident Indians (NRIs) will have to pay taxes on income generated only in India, and not on what they earn outside the country.
Sitharaman also said she does not want officials to be confused on this new tax rule proposed in the Budget for the financial year 2020-21.
The Finance Ministry official on Sunday said that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession.
Tax experts have claimed that the new NRI provision would disincetivise people from spending more time in India and hence make the country less attractive for entrepreneurs.
“Reducing the threshold of physical presence to 120 days in a year will make visiting NRIs more conscious of their travel dates. On one hand, the government has been keen to attract talent and onshore the funds and fund managers whereas on the other hand, this move will disincentivise people from spending more time in India,” said Shefali Goradia, Partner, Deloitte India.
A controversial provision in the Finance Bill 2020 said an Indian citizen, who is not taxed in any other country or territory, will be deemed to be an Indian resident. Under the current law, the worldwide income of an Indian resident is taxable in India.
This gave rise to worries that NRIs who work in Gulf countries, which do not levy taxes on personal income, will have to pay tax in India.
The finance ministry issued a statement today, clarifying that if an Indian citizen becomes a deemed resident of the country, income earned outside India shall not be taxed in India unless it is derived from an Indian business or profession.
“Necessary clarification, if required, shall be incorporated in the relevant provision of the law,” the ministry said in the statement.
