No tax on what you earn in Gulf, Indian govt clarifies
The Indian government on Sunday clarified that the newly proposed tax on non-resident Indians (NRIs) will not apply on bonafide Indian workers working in tax-free countries like Oman and other Middle Eastern countries.
The government said that NRIs will have to pay taxes on income generated only in India and not on what they earn outside the country.
‘In some section of the media the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in the 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,’ the statement issued by India’s Ministry of Finance said.
It said, ‘This interpretation is not correct. The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries.’
In order to avoid any misinterpretation, the Indian government’s statement said, ‘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 Indian business or profession’.
Earlier in the annual budget, which was presented on Saturday before the Indian parliament, Finance Minister Nirmala Sitharaman announced changes in the definition of NRI, along with a proposal to tax Indians who are not tax residents in India but are neither tax residents in any other countries.
As per the new proposal, an NRI could lose NRI status if he or she resides in India for 120 days or more during a financial year, instead of the current 182day stipulation.
However, it is the wording of the proposed bill, which enables authorities to tax those NRIs who are currently not paying taxes in the country to be deemed as resident Indian, that have left NRIs worried about its implications.
Speaking to Muscat Daily, Ashwini Sawrikar, chairperson ICAI Muscat Chapter, explained that it is the wording of the bill which created confusion. “The bill’s wordings are that if any non-resident Indian is not paying tax in any other country he or she will be deemed as resident and their world income will be taxed in India.”
Later, a finance ministry official also clarified that there are some who are not residents of any country but have economic ties in India and other countries, and are using the loop holes to evade taxes.
“Instances have come to notice where period of 182 days specified in respect of an Indian citizen or person of Indian origin visiting India during the year is being misused,” the official said while interacting with media on budget proposals.
Ashwini said that the ICAI has been involved in informal discussions with the Indian government over the issue and they hope that it will soon provide more clarification.