India's tax authorities are going through the ‘residential' status of non-resident Indians (NRIs) with a fine-tooth comb as it targets undisclosed overseas assets.
Several NRIs have received notices from the department for reopening tax assessments of the past five to six years and were also told to share photocopies of their passports.
Finance minister Nirmala Sitharaman proposed to change the definition of ‘assessee' retrospectively from July 1, 2015, to include a non-resident or resident but not ordinarily resident, who was residing in India in the year before an undisclosed asset was acquired.
A resident can attain NRI status by staying overseas for more than 182 days. The law also states that a person is a ‘resident' if he has been in India for more than 60 days in the year in question and 365 days during the four years prior to that year.
Due to severe tax implications, many Indians carefully divide their time between India and abroad. While an NRI is spared tax on income from outside India, a resident is required to pay tax on global earnings.
Under the law, tax evaders will have to pay 30% tax plus a penalty of 90%. They could also face up to 10 years of rigorous imprisonment. The changes to the Act had become imperative to give more teeth to the authorities to go after tax evaders, who may have changed their residency status.
Tax experts, however, said that prosecution with retrospective effect might get questioned in courts, though the retrospective nature as well as the tax, penalty and impounding of assets may still hold.