India announced major relief measures for non-resident Indians by relaxing a budget proposal to tax them, putting in place a threshold of Rs1.5m for the levy of tax on incomes emanating from India, while leaving out global incomes.
The changes formed part of the amendments in the Bill, which was passed in the Indian parliament by voice vote without discussion.
The government had proposed to tax global income of NRIs who are not taxed in any jurisdiction, but later clarified that only incomes of NRIs derived from doing business in India or undertaking a profession in the country will be taxed.
The liability to pay tax on such deemed resident will be only in respect of business controlled in India or profession set up in India and that too when such income exceeds the threshold of Rs1.5m"
This was by way of an anti-abuse provision against non-residents who don't stay long enough in any tax jurisdiction to qualify as a resident and thus avoid being taxed.
The government has now amended the budget provision to tax only those Indian citizens who have who have stayed in the country for a period of 120 days or more and had total income, other than from foreign sources, exceeding Rs 15 lakh in the previous year.
"The liability to pay tax on such deemed resident will be only in respect of business controlled in India or profession set up in India and that too when such income exceeds the threshold of Rs1.5m," analysts said.
"Even in such cases, it will only be this income earned from business controlled in or a profession set up in India that will be taxable in India and not the entire global income as was proposed in the Finance Bill. Thus, such Indian non-residents who are not paying tax in any country by reason of domicile/ residence or any other criteria, such Indian non-resident will be deemed to be resident but not ordinary resident. Consequently, there will be no liability to pay tax on foreign income," said Dixit Jain, director, The Tax Experts DMCC.
Indian business leaders in the UAE have welcomed the Indian government's decision to restrict taxation only to the income generated by them from businesses in India.
"BLF secretariat is pleased to announce that the BLF representation on both counts was considered and accepted by the government," said BLF Secretary General Sripriyaa Kumaria.
The chairman of Giant Group of Industries Sudesh Aggarwal added that this will boost the confidence of NRIs and will certainly help in more business and investments.