NRI’s Pay To Tax – Economics

Table of Contents

CURRENT AFFAIR

An amendment is proposed to the Income Tax Act in the Finance Bill or the Union Budget 2020.
It says that all Indians who are working abroad and not paying any income tax in those countries would be liable to pay tax in India.

Kerala Chief Minister wrote to Prime Minister recording his government’s disagreement with the provision.
He said that the proposal would hurt those who toil and bring foreign exchange to the country.

Two parameters determine whether India levies income tax on an individual.
Residency – In India, residency requires a person to actually live in the country for a specified number of days in a year.
The Source of the Income – It is the country where the income is being generated.
For a resident Indian citizen, the income tax law applies to that person’s worldwide income and such a resident Indian is required to pay tax on all of it.
But for a non-resident Indian, the income tax law applies only to the income earned from within India.

The proposed amendment to the IT Act has three parts.
Number of Days – The number of days that an Indian citizen can stay in India without becoming a resident is cut from 182 to 120.
NOR category – The Memorandum has carved out the “Not Ordinarily Resident (NOR)” category.
This status ensures that an individual who isn’t ordinarily a resident isn’t taxed as a resident, just because he spends more than specified number of days in India during a particular year.
The amendment states that an NOR would be someone who has not been a resident of India for seven of the past 10 years.
Under the existing law, it is nine out of the past 10 years.
This amendment said that an Indian citizen who isn’t liable to tax in any other country or territory shall be deemed to be resident in India.

The amendment tries to tax non-residents as residents.
All non-residents working in tax-free jurisdictions concluded that all their income there will now attract the Indian income tax rate.
Apart from the likely harassment, this undermined the whole point of people leaving their homes in India to work in tax-free jurisdictions.

The government has clarified that its intention isn’t to target bona fide workers.
It says it wants to catch tax evaders who game the residency provisions to evade all taxes.
It says that the tax laws should not encourage a situation where a person is not liable to tax in any country.

The Diaspora encompasses a group of people who can either trace their origins to India or who are Indian citizens living abroad, either temporarily or permanently.
It includes Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCI).
PIO and OCI card holders were merged under OCI category in 2015.

An Indian citizen who is ordinarily residing outside India and holds an Indian Passport.
A person is considered NRI if she is not in India for 182 days or more during the financial year Or;
If he/she is in India for less than 365 days during the 4 years preceding that year and less than 60 days in that year.

India every year celebrates its Pravasi Bhartiya Diwas on 9th January to commemorate return of its most iconic Pravasi M.K. Gandhi from Africa on 9th Jan 1915.