India’s Finance Ministry has hastened to dispel the apprehensions of millions of Indian expatriates in the Gulf who may believe they are being brought under the ambit of Indian tax laws.
The Finance Bill 2020 proposes that Indian citizens will only be considered residents in India if they have no tax liability in another country or jurisdiction. The new provision does not intend to include in tax net those Indian citizens who are bonafide workers in other countries, the Finance Ministry clarified on Sunday.
The clarification follows extreme disquiet among non-resident Indians, NRIs, that they stand to lose a big chunk of their income earned outside India.
The Ministry blamed alarmist reports in the media in some countries interpreting the new provision and creating an impression that those "Indians who are bonafide 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."
The decision to increase the number of days a person is required to stay in India to be eligible for exemption from income tax here "is an anti-abuse provision." The Ministry pointed out that it had "noticed that some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India." In order to avoid any misinterpretation, it was explained that in the case of Indian residents in India under this proposed provision, income earned outside India shall not be taxed in India unless it is derived from an Indian business or profession.
Indian workers in the Gulf have been assured that "necessary clarification, if required, shall be incorporated in the relevant provision of the law."
Pinarayi Vijayan, Chief Minister of Kerala, from where the largest number of Indian expatriates in the Gulf come, today sought Prime Minister Narendra Modi’s urgent intervention in the provisions of the Finance Bill, 2020, which have caused concern among Indians in the GCC. His intervention was also a factor which prompted the hasty clarification by the Finance Ministry.
In his communication to Modi, the Chief Minister pointed out that "Kerala’s economy is substantially supported by remittances from those in the Gulf countries. Remittances comprise approximately 15 per cent of Gross State Domestic Product," Vijayan argued.
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