High profile Non Resident Indians (NRIs) from the Gulf have once again urged the Indian government to reconsider its decision to impose tax on expatriate Indians living in India for more than a stipulated timeframe.
The Indian government has tabled in parliament a resolution for the proposed amendment to the Direct Tax Code (DTC) Bill which is scheduled to come into effect from April 1, 2012.
According to the amendment, expatriate Indians living in India for 60 and more days in a financial year and 365 days or more over a period of four years will be entitled to pay income tax once the proposed bill is passed. Currently an NRI can claim tax exception if he stays outside the country for a total number of 183 days or more.
The opposition comes from the fear that the introduction of the law could hurt Indian blue collar workers, especially those who travel home on holiday once in two years for 60 days and more.
However some experts say the amendment to the bill will prevent large Indian businessmen from continuing to avoid paying taxes by living abroad for 183 days.
Dinesh Vyas, Senior Advocate, Supreme Court of India speaking during a programme organised by The Indian Business and Professional Council (IBPC) in Dubai on the topic explained about the nature of the new amendment and how it would affect the individual tax structure of a Non Resident Indian.
Since India also has a law against double taxation it is mostly the NRI’s who live and work in the Gulf countries who would be most affected by the new amendment.
“It will only result in NRIs counting the number of days they live in India. It will discourage NRIs from travelling to India. There are many low income workers who cannot afford to go on holiday ever year. They travel once every two or three years and stay back for two to three months. The introduction of the amended bill will definitely affect such workers, especially in the absence of any ceiling on income,” said Surendra Jain head of the group of Indian Chartered Accountants in the UAE.
“Labourers, maids helpers and those working in cafeterias all go on leave two 2 months and once every two years. They would end up paying ten per cent of their salary earned here as tax if the new law comes into force,” he said.
Another senior Indian businessmen who did not want to be identified told Emirates 24|7 that serious efforts are on to at least try and increase the timeframe from 60 to 90 days.
“Under the new amendment if an NRI stays in India for 60 days in a financial year, his income would be taxed for the fifth year even if he fails to stay for 365 days or more over a period of four years. By increasing the timeframe to 90 days we can avoid including the ordinary workers into the tax bracket,” he said.
K V Shamsudheen, Chairman Pravasi Bandhu Welfare Trust most organization who are opposing the bill now failed to make use of the opportunity to do so when it when it was in the public domain before being tabled in the parliament.
“That was a great opportunity to react. But unfortunately, except for the Pravasi Bandhu Welfare Trust, no body else raised any objections to it,” he said.
Experts agree that the government would stand to earn million of dollars, only from the Gulf NRIs if the new amendment is brought into force.
One senior Indian lawyer yesterday said that the new amendment is mainly aimed at businessmen who try and make use of the provision to avoid paying taxes. “The existing Income Tax Act exempts the income of NRIs staying out of India for more than 183 days in a year. There are many businessmen who manage to stay out of the country for more than 183 days and avail the status of an NRI,” he said.
Reports quoting officials from the Indian finance ministry said that many high-profile NRIs were opposing this proposal. “We are getting inputs from many NRIs who are citizens of India, but stay here only for 181 days so that they do not become a resident. So, they are not citizens of any country and do not pay tax,” the report said.