Money Earned in India by NRIs Will be Taxed: FM Nirmala Sitharaman

Nirmala Sitharaman, Finance Minister scotched fears that the provisions introduced in Budget will bring Indian workers’ income in the zero-tax jurisdictions, like the United Arab Emirates - into the Indian tax net.

Money Earned in India by NRIs Will be Taxed: FM Nirmala Sitharaman

Union Finance Minister Nirmala Sitharaman has put an end to doubts that provisions introduced in the Budget would bring Indian workers income in zero tax jurisdictions, like the UAE, into the Indian tax net. 

The Finance Bill has presented three major changes to prevent tax abuse by citizens that don’t pay taxes anywhere in the world:-

  • Decreasing the number of days that an Indian citizen can be granted non-resident status for tax purposes from 182 to 120.
  • Citizens who don’t pay taxes will be deemed to be a resident.
  • The clause of 'not ordinarily resident' has been tightened. 

Sitharaman said that "Let’s say an NRI, living in Dubai or elsewhere, is not taxed for his income there, but has some earnings through something in India for which he doesn't pay tax here. We are saying, for that income which is generated in India, pay a tax". 

On Sunday, Kerala Chief Minister Pinarayi Vijayan wrote to Prime Minister Narendra Modi about possible conclusion of the new provisions. Recording the State’s strong rejection over the Budget provision as it will hurt Indians working in the Middle East ' who toil and bring foreign exchange to the country’ as a gift.

The Finance Ministry said in a statement that "the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in Middle East, and who are not liable to tax in these countries, will be taxed in India on the income that they have earned there. This interpretation is not correct".

She added that the Ministry will incorporate a clarification, if required, into the law so that only income derived from an Indian business or profession will be taxable for such citizens. 

Criticism that the lower tax rates for those earning upto ₹15 lakh a year wouldn’t necessarily lead to tax savings, once the withdrawal of exemptions  and deductions on the existing tax rates is factored in

Ms. Sitharaman answered to the criticism that the lower tax rates for those earning upto ₹15 lakh a year wouldn’t necessarily lead to tax savings, once the withdrawal of exemptions  and deductions on the existing tax rates is factored in and she said that the Ministry will issue more clarifications on the matter. 

She added that "There are a few exemptions which we permit under the new rates too. I believe that many of the calculations which have come out in the newspapers today have probably not taken those on board into account".

Later, officials said that taxpayers claim deductions of over ₹2 lakh in their tax filings and are less than 10% of them. So, comparing both the tax rates i.e old and new, assuming deductions in the range of ₹4 lakh to ₹5 lakh may be incorrect. They pointed out that around 3.77 lakh out of 5.78 crore tax filers have claimed deductions exceeding ₹4 lakh in 2018-19. 

 

Author - Rishabh Bhan