THIRUVANANTHAPURAM: The Union Budget proposal increasing the number of days one has to stay abroad to get NRI status and avoid taxation from 182 to 240 has caused a flutter with several expatriates raising concerns as to whether they will be forced to pay income tax for the remittances they make to India.
As the proposal to amend Section 6 of the Income Tax Act, 1961, and another proposal to tax non-resident Indians who are not taxed in the foreign country where they stay caused confusion and worries, Chief Minister Pinarayi Minister wrote to Prime Minister Narendra Modi expressing the deep anguish of the state and requesting him to desist from amending the section.
Following this, Union Finance Minister Nirmala Sitharaman on Sunday came out with a clarification that there is no intention to tax global income of NRIs and only income generated in India will be taxed.
“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,” Sitharaman said.
“Whereas if you have a property here and you have a 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 got a sovereign right to tax,” she further said in a post-Budget interaction with media.
“I am not taxing what you’re earning in Dubai but that property which is giving you a rent here. You may be an NRI, you may be living there but that is revenue being generated here for you. So that’s the issue,” she added.
Though the explanatory memorandum to the Finance Bill states that this is a provision to ‘check tax abuse’, the proposal caused heartburns in Kerala as it has a large number of people working in foreign countries, whose remittances alone comprise approximately 15 per cent of the state’s GDP.
However, only a section of NRIs who work in oil rigs, merchant navy and some businessmen who have to stay in India for more than 120 days as part of their work schedule, will be most affected by the new proposal.
A majority of Keralites who toil in West Asian countries will not fall under the ambit of this tax net.
Sachin Menon, national head, indirect tax practice, KPMG India, said it seems this is mainly aimed at a section of businessmen who use NRI status to avail tax evasion and this will not affect the ordinary workforce employed abroad.