Won’t tax global income of NRIs: FM after budget

CLARITY Sitharaman assuages concerns of non-residents, says new tax regime beneficial

NEWDELHI: Finance minister Nirmala Sitharaman said on Sunday the government has no intention of taxing the global income of non-resident Indians (NRIs), with a proposal announced in Saturday’s Union budget only covering their earnings generated in India.

While presenting the Union budget in Parliament on Saturday, the finance minister proposed to tax those NRIs who neither pay tax in India nor in any other country. “It is also proposed to provide that an Indian citizen who is not liable to tax anywhere would be deemed to be resident in India,” she said in the budget speech.

The Union budget for 2020-21 offered an estimated ₹40,000 crore of tax concessions to individual taxpayers resorting to a budgetary stimulus to revive the economy. It also increased government spending, the second way to deliver a budgetary stimulus, albeit by a modest amount, but with a focus on capital expenditure. The 2020-21 budget comes against the backdrop of the slowest rate of growth in 10 years.

Sitharaman clarified on Sunday that such NRIs will be taxed “only for their income generated in India”. “I’m not taxing what you are earning in Dubai,” she told reporters while replying to a specific query on this matter and said the government will soon issue a clarification.

Later in the day, the Central Board of Direct Taxes (CBDT) 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”.

“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 CBDT said in a statement.

It said the new provision is not intended to include in tax net those Indian citizens who are bona fide workers in other countries. The budget provision regarding taxing NRIs is a move to prevent tax abuse, the budget memorandum said.