No move to tax NRIs for income abroad, says govt

Tribune News Service

New Delhi, February 2

Following widespread confusion and consternation over the proposed tax on NRIs, the government today said they won’t be taxed for income out of the country.

On another proposal that classifies person as NRI if he has stayed abroad for 245 days instead of the present 183, officials seem to admit that individual cases in case of difficulty could be examined. However, they indicated that the policy is likely to stay because the government feels that genuine NRIs tend to spend considerable time out of the country and will have no problems with the enhanced limit.

On the tax on NRIs, Union Finance Minister Nirmala Sitharaman explained, “What we are doing now is that the income of an NRI generated in India will be taxed here. If he’s earning something in a jurisdiction where there is no tax, why will I include that into mine that has been generated there?”

She said the idea was to tax Indian earnings of NRIs, such as rental income. “If you have a property here and you have rent out of it, but because you are living there, you carry this rent into your income there and pay no tax there, pay no tax here … since the property is in India, I have a sovereign right to tax,’’ she said.

The minister clarified that the intention was not to tax what is being earned abroad. “`You may be an NRI, you may be living there but that is revenue being generated here for you. That’s the issue.”

Other officials acknowledged that the manner in which the proposal was worded may have created anxieties and clarified that those working in the Gulf and in merchant navy won’t be taxed.

The Central Board of Direct Taxes says…

• Indian citizen shall be deemed to be resident in India if he is not liable to be taxed in any country or jurisdiction. This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or no tax jurisdictions to avoid tax in India. The new provision is not intended to include in tax net those Indian citizens who are bona fide workers in other countries.
• In order to avoid any misinterpretation, it is clarified 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.