The Central Board of Direct Taxes (CBDT) has formed a five-member committee to oversee the tax implications of the high net worth individuals (HNIs) who leave the country and settle abroad.
The panel, which is led by a joint secretary-rank official and four revenue officers, is expected to meet on Friday and look into the cases of Vijay Mallya, Nirav Modi, Mehul Choksi and likes. The panel will also look into various hidden clauses so that the government can evaluate the "substantial risk" such migrations pose and devise a policy response accordingly.
A CBDT office order said: "The new panel will coordinate with various Divisions/Directorates of Board in order to evaluate India's position in taxing the migrating HNIs. The Working Group shall also make recommendations for policy decision in respect of tax risks of migrating population."
A recent global survey said that around 23,000 high net worth individuals (HNIs) have left India since 2014, with 7,000 left in 2017 alone. This is the highest among other countries. Around 2.1% super rich have left India, while it is 1.3% for France and 1.1% for China.
A non-resident Indian enjoys a lot of tax benefits as our country, like many others, follows a residence-based tax system. Under this system, residents are taxed on their global income, while the non-residents are taxed on income sourced (received or accrued) in India.
Besides, a non-resident also gets benefits under the country's bilateral tax treaties with countries they have migrated to. The dividends the non-residents receive from Indian companies are tax exempted as per the Indian law. US is the only exception in such cases.
HNI migration has become a global phenomenon as most individuals aspire for better work, better education and better living conditions. Tax mitigation and evasion in many cases is also a big cause.
Experts quoted in various news reports have lauded the move but have said the policy change should target the "intended audience", i.e. those who evade taxes and migrate to other countries.
The existing laws, such as the Prevention of Money Laundering Act, have enough scope, where authorities can reopen cases involving foreign assets for up to 16 years. However, they pointed that the practical approach of the tax authorities to book the fraudsters.
They added that cases such the Nirav Modi episode should make lawmakers rethink and re-examine the existing taxation system and the relaxations it gives.
Recently, to avoid cases like Nirav Modi-PNB scam, the government has introduced the Fugitive Economic Offenders Bill (FEOB), which will help in freezing and confiscating the assets of economic offenders fleeing India to escape the reach of law. The Bill is still awaiting Parliament's approval.