Indian Finance Minister Nirmala Sitharaman announced in her Union Budget speech that NRIs who don't pay taxes in a foreign country will now do so in India but also clarified that only income generated in India would be taxed.
[The Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman addressing a Post Budget Press Conference, in New Delhi on February 01, 2020. The Minister of State for Finance and Corporate Affairs, Shri Anurag Singh Thakur and the Secretary, Finance & (Financial Services), Shri Rajiv Kumar are also seen.]
The Union Minister for Finance and Corporate Affairs Nirmala Sitharaman (centre) addressing a Post Budget Press Conference in New Delhi. The Minister of State for Finance and Corporate Affairs, Anurag Singh Thakur (left) and Atanu Chakraborty, the Revenue Secretary are also seen. Photo courtesy: PIB
The Budget redefined NRIs as Indian passport holders who reside abroad for 240 days in a year, up from the previous period of 182 days.
NRIs working in income tax-free jurisdictions such as the UAE will have to pay tax only on their income generated in India, and not on their earnings outside the country, the FM said on Sunday, clarifying that the provision would be added to the tax statute to avoid any confusion.
“I would certainly not desire any confusion in the minds of the tax authority. If there is any confusion in the minds of assessees, I am here to answer," Sitharaman added.
Revenue Secretary Ajay Bhushan Pandey had said in the post Budget briefing, "Some people are residents of no country. They may be staying in different countries for a certain number of days. So, if any Indian citizen is not a resident of any country in the world, he'll be deemed to be a resident of India and his worldwide income will be taxed."
Amending Section 6 of the Income Tax Act, 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".
"Some individuals who actually carry out substantial economic activities from India manage their period of stay in India so as to remain a non-resident in perpetuity and not be required to declare their global income in India," the memorandum to the budget read.
The provision is aimed at NRIs who used the previous domicile regulations to avoid paying taxes in India or resided in countries where paying Income tax was not required, including the United Arab Emirates, Panama and the Bahamas.
Netizens took to Twitter to express their displeasure over the proposed amendment.