The government doesn’t intend to tax the global income of Non-Resident Indians (NRIs) and only the income generated in India will be taxed, Finance Minister Nirmala Sitharaman clarified on Sunday (February 2), a day after the Budget announcement raised confusion over the tax liabilities of NRIs.
In a post Budget interaction with the media, the finance minister said only the income of an NRI generated in India will be taxed here. “If an NRI is earning something in a jurisdiction where there is no tax, why will I include that into mine that has been generated there?” she asked.
“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 said.
“I am not taxing what you’re earning in Dubai but that property which is giving you 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.
The Finance Bill, 2020 has proposed that an Indian citizen shall be deemed to be resident in India, if he is not liable to be taxed in any country or jurisdiction. This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India, the finance ministry said in a statement.
“The new provision is not intended to include in tax net those Indian citizens who are bona fide workers in other countries. In some section of the media, the new provision is being interpreted to create an impression that those Indians who are bona fide 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,” it said.
In order to avoid any misinterpretation, it is clarified that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession, it added.
(With inputs from agencies)