Non-resident Indians (NRIs) living in the United Arab Emirates have been thrown into confusion by India's budget for 2020-21 which the government announced on Saturday.
The 2020-21 budget raised the threshold over which Indians abroad acquire NRI status, and hence avoid double-taxation on their income overseas. Under the new regulations, if an Indian citizen stays out of India for more than 240 days, they automatically accrue non-resident status. The previous threshold for NRI status was 182 days.
In the annual budget, Indian expats could be considered resident in India and their global income will be taxed if they are not registered as resident in another country, such as the UAE.
If any Indian citizen is not a resident of any country in the world, he’ll be deemed to be a resident of India and his worldwide income will be taxed.”
HP Ranina, a tax lawyer in India, told the Khaleej Times: "You are a resident of UAE under India-UAE Double Taxation Avoidance Agreements (DTAA) and holding residency visa of UAE. Therefore you will not be covered by the law proposed in today's budget. It may be recalled that the Double Tax Treaty UAE-India was signed in 1993."
Naveen Sharma, head of accounting at Audit & Advisory Services Focus Group, told Zawya: "A lot of Gulf-based Indians go to their motherland India to start or expand their business and it is usual that they have to spend lot of time initially in their new business and now they will have one more headache: Worry about their NRI status because if they lose their NRI status, their entire global income will be taxable."
Sharma continued: "These are backward looking budget proposals and will create lot of confusion and anxiety among the hardworking Indian population in the Gulf region. This is one of the worst budget proposal in the last 30 years and Government should immediately withdraw this as it is against the interest of the hardworking Indians overseas citizens who remit billions of dollars every year to India."
In a briefing after the budget statement, Ajay Bhushan Pandey, revenue secretary, said: "Some people are residents of no country. They may be staying in different countries for certain number of days. So, if any Indian citizen is not a resident of any country in the world, he'll be deemed to be a resident of India and his worldwide income will be taxed."
Krishnan Ramachandran, CEO of Barjeel Geojit Securities, told Khaleej Times: "With the UAE-India DTAA in place, an NRI holding a valid residence visa will not be taxed in India with respect to his income in the UAE. This can be validated by furnishing a Tax Residency Certificate to the income tax authorities."
The new threshold will come into effect on 1 April 2021.