A few tax proposals in the Budget 2020 would make the life of many non-resident Indians more taxing, especially those living in tax-free regimes like UAE.
The budget has proposed to tax Indians who are not tax residents in India but are neither tax residents in any other countries. The budget proposes changes in the income tax law to make such individuals deemed tax residents of India.
Explaining the new proposal, revenue secretary Ajay Bhushan Pandey said: "We have seen that in many cases some people are residents of no country of the world. Any Indian citizen, if he is not a tax-resident of any other country in the world, then he would be deemed to be a resident of India and their income would be taxed."
This particular provision would impact those Indian citizens living in tax-free countries like the UAE, Saudi Arabia, and many other Middle-East countries. This is a big jolt for many Indian citizens living on these jurisdictions.
FULL COVERAGE: Union Budget 2020
Dinesh Kanabar, CEO, Dhruva Advisors LLP, says: "The tax imposed on Indian citizens abroad if they are not taxable in their home country could have serious ramifications in the hands of UAE residents."
Bijal Ajinkya, Partner, Khaitan & Co, says: "This is an interesting move as many individuals who were in such a position and consequently benefitted would now be within the Indian tax net."
There are other changes in provisions related to non-resident status in budget that could severely impact NRIs. A change in income tax law now makes it difficult for NRIs to prove themselves not a tax resident of India.
Earlier, if an Indian citizen who stayed out of India for 182 days, they would become non-residents. Now, the law has been changed and it now requires one to remain outside India for 240 days or more to become a non-resident (for tax purpose).
Many Indian citizens who do not stay in India but have significant economic activities in India, would now find it difficult to escape paying taxes in India.
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