Govt clarifies on Budget proposal to tax NRIs in India

The government has clarified, via a press release that in case of an Indian citizen who becomes deemed resident of India under the changes proposed by UnionBudget 2020, income earned outside India by him/her 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 clarification has come after 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, says the release issued today.

The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries. The intrepretation of the proposed provision 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 that they have earned there, is not correct, as per the press release.