A day after the Union Budget was presented in the Parliament, the Finance Ministry Sunday clarified on one of its new announcements. The budget had a provision of taxing Indian citizens who live abroad but don’t pay income tax in any country. On Sunday, the government said the provision was an “anti-abuse” measure applied only to income generated in India.
“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,” a statement issued by the Finance Ministry read.
“The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries. In some sections of the media, the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in Middle East, and who are not liable to tax in these countries, will be taxed in india on the income they have earned there,” the statement added.
“In order to avoid any misinterpretation, it is clarified that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession. Necessary clarification, if required, shall be incorporated in the relevant provision of the law,” the statement read.
Addressing the media post the Budget presentation, Finance minister Nirmala Sitharaman also clarified, “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 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 added.
“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 said.
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