WEB DESK / NEW DELHI
The government on Sunday clarified that 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 non-resident status.
Finance Minister Nirmala Sitharaman on Sunday clarified that only those NRIs will be taxed who are having income in India but are living outside the country.
“I am not taxing what you are earning outside India. If an NRI is getting rent in India and living abroad, he or she will be liable to pay tax. I am not taxing what you are 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,” Sitharaman told reporters here.
Soon after the Finance Minister’s media interaction, the government also 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.
Sitharaman also gave a clarification on the new tax regime announced in the Union Budget 2020-21, which she tabled in the Lok Sabha on Saturday. In reply to a question, she said: “Most of the people are questioning the tables, which have come up in newspapers, maybe because of us, there is definitely a lack of clarity, many of calculations in newspapers have not taken on board that set of exemptions.”
The minister said that there are a few exemptions in the new system and a list of exemptions has been issued. “I may be wrong, but I believe that many of the calculations which have come up in newspapers today have probably not taken into considerations all exemptions,” she said.
Sitharaman said in the new tax system people will be taxed at the lowest possible rate and will still benefit. “All exemptions are not being removed,” she said.
Finance Minister Nirmala Sitharaman in her Budget for 2020-21 had proposed to tax Non-resident Indians (NRIs) who do not pay taxes in any foreign country.
This provision raised anxiety in minds of those working in the Gulf region where countries don’t tax income earned by individuals.
First Sitharaman clarified that only Indian income of NRIs is proposed to be taxed under the new provision, and later the tax department issued a statement to say that “the new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries”.
The Union Budget for 2020-21 presented on Saturday had tightened the screws on those seeking to escape tax by exploiting their non-resident status. While earlier it was possible to be classified as a non-resident by staying out of the country for 183 days or about six months in a year, this has now been, in effect, enhanced to 245 days.
She said Indian earnings of NRIs such as rental income from property in the country is what was intended to be taxed by way of the new provision.
“Whereas if you have a property here and you have 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 in a post Budget interaction with media.