New Delhi: Finance Minister Nirmala Sitharaman on Sunday said that there is no intention to tax global income of NRIs and only income generated in India will be taxed.
Following the Budget announcement on Saturday there was confusion about the tax liability of Non-Resident Indians (NRIs) on their global income.
"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 your income there and pay no tax there, pay no tax here ... since the property is in India, I have got a sovereign right to tax," she said in a post Budget interaction with media.
"I am not taxing what you're earning in Dubai but that property which is giving you a rent here, you may be an NRI, you may be living there but that is revenue being generated here for you. So that's the issue," she added.
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 finance ministry said in a statement.
Tightening the residency provisions, the Budget had proposed to reduce the period of stay in India to 120 days from 182 days earlier for persons of Indian origin (PIOs) to be categorised as non-resident Indians (NRIs).
"...In many cases we have found that some people are residents of no country in the world, they may be staying a certain number of days in different parts of the world. So... any Indian citizen - if he is not a resident of any country in the world - would be deemed to be resident in India, and then his worldwide income will be taxed," Revenue Secretary Ajay Bhushan Pandey had said.
Gopal Bohra of NA Shah Associates said at present, it is entirely possible for high net worth individuals to arrange his affairs in such a fashion that he would not be liable to tax in any other country and also not in India.
The new provision "will adversely impact High Networth Individuals using the domicile mechanism to evade tax globally," he said.
(With inputs from agencies)