Modi Govt. Tax To NRI’s – Burning Issues

Table of Contents

Who pays Income tax in India?

Any Indian citizen aged below 60 years is liable to pay income tax if their income exceeds 2.5 lakhs
Any income earned by a taxpayer from sources in India or received in India is taxable in India
Another factor is the residential status of the taxpayer during the financial year.

The worldwide income of an Indian resident is taxable in India
In the case of a non-resident Indian, only the income earned in India is taxable

A proposal in the Budget 2020 mentions that any Indian citizen who is not liable to pay tax in any other country, shall be deemed to be resident in India and hence “liable to tax.
” The time limit of 183 Days out of India (to be a Non – Resident) is also proposed to be increased to at least 246 days.
But isn’t someone living and earning in a foreign country already taxed by that country?
Not necessarily.
There are a number of countries without the burden of income taxes, and many of them are very ATTRACTIVE for wealthy individuals/HNWIs

High net worth individuals keep moving around countries in such a way that they do not get caught in the domicile rules of any country and thus avoid paying their fair share of tax in any country
Deeming such people who aren’t liable to tax in any other country and considering them as resident in India would mean that they would have to pay a tax ranging from 5 to 42.7 per cent on their global income, even though they do not enjoy any benefits in the country nor earn any income from India

NRIs working in countries with no income tax liability will have to pay the tax in India
The move could deal a blow to non-resident Indians (NRIs) working in countries in West Asia, expats who account for a major chunk of foreign remittances received by India
A 30% tax plus cess and surcharge on NRIs’ income earned abroad can impact remittances to India
Among countries, the top remittance recipients were India with $79 billion, followed by China ($67 billion), Mexico ($36 billion), the Philippines ($34 billion), and Egypt ($29 billion).
India had the largest number of migrants living abroad (17.5 million), followed by Mexico and China (11.8 million and 10.7 million respectively)

Citizens of the United States cannot escape paying U.S. income taxes just by moving to another country
All U.S. citizens, regardless of where they choose to reside, are still legally obligated to file U.S. income taxes in the same way as if they were living in the U. S

The finance ministry issued a statement, 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
The proposed tax on NRIs will not apply on bonafide Indians working in tax-free foreign countries and is intended to tax only those seeking to escape tax by exploiting their nonresident status