New Delhi: Allaying fears of non-resident Indians (NRIs), Finance Minister Nirmala Sitharaman on Sunday has made it clear that the Indian government has no plans to tax the income that NRI earn outside India.
She said that non-resident Indians (NRIs) will have to pay taxes on income generated only in India, and not on what they earn outside the country. Union Finance Minister came with an explanation as her Budget proposal to tax NRI income was misinterpreted on Media. A controversial provision in the Union Budget 2020 said an Indian citizen, who is not taxed in any other country or territory, will be deemed to be an Indian resident. Under the current law, the worldwide income of an Indian resident is taxable in India.
Sitharaman also said she doesn't want officials to be confused on this new tax rule proposed in the Budget for the financial year 2020-21. This gave rise to worries among NRIs who work in countries like the United Arab Emirates (UAE), which do not levy taxes on personal income, will have to pay tax in India. A 30% tax plus cess and surcharge on NRIs’ income earned abroad can impact remittances to India. A World Bank report of 2018 said that India is the world's top recipient of remittances with its diaspora sending a whopping USD 79 billion back home.
Sitharaman said the intention of redefining the concept of residence for tax purposes was to plug a gap that leaves the India income of NRIs out of the tax net because they do not live here.
The finance ministry issued a statement today, clarifying that if an Indian citizen becomes a deemed resident of the country, income earned outside India shall not be taxed in India unless it is derived from an Indian business or profession. “Necessary clarification, if required, shall be incorporated in the relevant provision of the law," the ministry said in the statement.
"What we are doing now is that the income of an NRI generated in India will be taxed here. If he's earning something in a jurisdiction where there is no tax, why will I include that into mine that has been generated there. Whereas if you have a property here and you have a rent out of it, but because you are living there, you carry this rent into you income there and neither pay tax there nor here. Since the property is in India, I have got a sovereign right to tax,” she said.