Why NRIs are livid with India’s new tax proposals
DOHA INDIAN Finance Minister Pranab Mukhrjee who presented the budget on Friday, said he must be cruel to be kind. Non-Resident Indians (NRIs) feel he has been kind this year to be cruel next.
By deferring implementation of the Direct Tax Code (DTC) from April 1, 2011 to April 1, 2012, he has only postponed what every Indian living abroad wants shelved for ever.
The new code, which among other things, aims to tax the income of expatriate Indians by treating them as residents if they stay within the country over sixty days at one stretch or over several visits, has only given cold comfort to one of the world’s biggest expatriate communities.
Expatriate Indians living in Qatar feel DTC would hit most the salaried workers and those low-paid workers in the Middle-East, who visit their homeland once in three-four years for four to six months to stay.
“The bill is draconian and simply unwarranted. The remittances sent by NRIs contribute substantially to the India’s gross domestic product. For five decades NRIs did not even have a ministry of their own. And when they have one now, it came with a price so dear that they would be regretting it. Its like kicking the cow that gives milk”, an accountant working with a private firm remarked.
Terming the bill as regressive, he said that at a time other countries showed care for their expatriate workers by offering dual citizenship and other facilities, the government of India was placing new restrictions on NRIs.
ICAI Doha Chapter Chairman CA Venkat Rammurthy appeared to be unconvinced about the practicability of the move. It would be difficult for any government push the provision through as it would be highly unpopular and against the grain of policies being followed by the present dispensation as well. “At a time when the government is planning to introduce electronic voting for NRIs, a move like this might prove detrimental and the government is well aware of that.
The DTC has been on the anvil for years now.
The government is discussing every aspect of the proposal and is well aware how adversely it can affect the salaried class”, Rammurthy remarked.
“Besides, there is also lack of clarity on the mechanism to assess global income of NRIs. For example, people are ignorant about how the income of businessmen would be assessed”, he added.
Another expert KPMG Partner Gopal Subramaniam said, “Under the DTC if an NRI becomes a resident in any financial year, his global income does not immediately become liable to tax in India. Global income would become taxable only if the person also stayed in India for nine out of 10 preceding years or 730 days in the preceding seven years.” He added, “Therefore if a person’s average yearly stay in India is not more than 104 days (say approx. 3.5 months) his global income will not be taxed in India.” Subramaniam further pointed out, “It is important to understand that as per the Direct Tax Code (DTC) proposal, NRIs will be deemed resident for an assessment year only if they stay for 182 days or more in India in the previous year or stay in India should be 60 days or more in the previous year and 365 days or more during the 4 years immediately preceding the previous year.