Mr. Mukherjee, during his Budget speech, made it clear that the new Direct Taxes Code will be coming into place from April 1, 2012. So, when you make your tax investments this year, plan ahead for the new regime.
More NRIs may fall under the tax net if the Direct Taxes Code (DTC) Bill proposal to impose a levy on their global income if they stay in India for more than 60 days in a year is approved by Parliament. As per the existing Income Tax laws , an NRI is liable to pay tax on global income if he is in India in that year for a period or periods amounting to 182 days.
Furthermore, in case an NRI resides in India for a period of 365 days or more over a period of four years prior to the assessment year, he is also liable to pay tax on his global income.
The new DTC Bill has proposed to make an NRI liable to pay tax on global income is he resides in India in a particular year for a period or periods amounting to 60 days, down from the existing provision of 182 days in the existing Income Tax Act.
However, the present dispensation for taxation of global income if an NRI resides in India for 365 days or more over a four-year period has been retained in the proposed DTC.
Commenting on the proposal PwC Executive Director (Tax) Kuldeep Kumar said, "With this change, a non-resident would be at greater risk of becoming an ordinary citizen and become liable to pay tax in India as the threshold limit has been reduced."
There would be liability on a resident belonging to a country where the tax rate is lower than India and there is a Double Taxation Avoidance Agreement (DTAA) between both the countries. The non-resident would be considered a resident if the threshold limit of stay has been exceeded for the purpose of imposing tax.
In the case of a resident of a non-treaty country, which India has no DTAA with, the tax burden would be higher if he exceeds the threshold limit of stay in India, Kumar said, adding that he has to pay tax on all the global income in India as well as the country of residence as per the prevailing tax laws of that country.
At present, India has comprehensive DTAAs with about 74 countries, including the USA, Singapore, UK, Thailand, South Africa, Saudi Arabia, New Zealand and Australia.
Experts feel that the DTC proposal could be a damper for NRIs visiting India to meet their relatives or for business promotion.
The DTC hopes to plug loopholes with the proposed changes with the aim of preventing tax evasion through this route, said a senior Finance Ministry official.
In addition, the DTC has also removed the 'Resident Not Ordinarily Resident (RNOR)' category to simplify the tax laws, the official said.
Now, there will be only two categories, 'Resident' and 'Non-Resident', the official added.
More NRIs may fall under the tax net if the Direct Taxes Code (DTC) Bill proposal to impose a levy on their global income if they stay in India for more than 60 days in a year is approved by Parliament.
As per the existing Income Tax laws, an NRI is liable to pay tax on global income if he is in India in that year for a period or periods amounting to 182 days.Furthermore, in case an NRI resides in India for a period of 365 days or more over a period of four years prior to the assessment year, he is also liable to pay tax on his global income.The new DTC Bill has proposed to make an NRI liable to pay tax on global income is he resides in India in a particular year for a period or periods amounting to 60 days, down from the existing provision of 182 days in the existing Income Tax Act.However, the present dispensation for taxation of global income if an NRI resides in India for 365 days or more over a four-year period has been retained in the proposed DTC.
http://www.indianexpress.com/news/dtc-bill-brings-bad-news-for-nris/677538/
NRIs want change in DTC clause on stay in India
Some high-profile non-resident Indians (NRIs) are lobbying hard with the Centre to amend a clause in the Direct Taxes Code (DTC) Bill that proposes to tax the income of a person living in India for more than 59 days.
The existing Income Tax Act exempts the income of NRIs staying out of India for more than 183 days in a year.
In the DTC Bill, which was tabled in Parliament in the monsoon session, the finance ministry had proposed that NRIs who are working abroad and visit India would become residents if they are present in the country for 60 days or more in a financial year, and 365 days or more over a period of four years prior to the financial year. They would be liable to pay taxes on their global income.
A finance ministry official said several high-profile NRIs were opposing this proposal. “We are getting inputs from many NRIs on this. Many of them, who are citizens of India, stay here only for 181 days so that they do not become a resident. So, they are not citizens of any country and do not pay tax. Under DTC, they will have to pay tax if their stay in India stretches to 60 days or more,” the official said.
The official said the DTC proposal, when implemented, would also affect Indian captains on foreign ships, many of whom stay out of the country for 183 days and do not pay any tax. The rule will not apply to Indian citizens who leave the country as a member of the crew of an Indian ship or for employment.
Experts said this might affect people who visit India or those who come on a vacation, as they would have to make sure that their stay is less than 60 days and residency rules is not triggered.
Rajesh Srinivasan, senior director, Deloitte, said the residency clause was subject to the double taxation treaty. “First, we need to look at the domestic law. If the income is taxable under the law in India, then it has to be seen which country has the primary right to tax the income under the tax treaty,” he said.
Sources said UB Group Chairman Vijay Mallya, Claridges’ Groups of Hotels Chairman Suresh Nanda, Jet Airways Chairman Naresh Goyal, Vedanta Resources Chairman Anil Agarwal, Hotmail co-founder Sabeer Bhatia, Essar Group Chairman Ravi Ruia and chess player Vishwanathan Anand are some of the high-profile NRIs. However, the extent to which they would be affected by the DTC proposal could be ascertained only after applying the test of residency in each particular case in a financial year.
DTC Bill brings bad news for NRIs
More NRIs may fall under the tax net if the Direct Taxes Code (DTC) Bill proposal to impose a levy on their global income if they stay in India for more than 60 days in a year is approved by Parliament.
As per the existing Income Tax laws, an NRI is liable to pay tax on global income if he is in India in that year for a period or periods amounting to 182 days.
Life becomes less taxing
Furthermore, in case an NRI resides in India for a period of 365 days or more over a period of four years prior to the assessment year, he is also liable to pay tax on his global income.
The new DTC Bill has proposed to make an NRI liable to pay tax on global income is he resides in India in a particular year for a period or periods amounting to 60 days, down from the existing provision of 182 days in the existing Income Tax Act.
However, the present dispensation for taxation of global income if an NRI resides in India for 365 days or more over a four-year period has been retained in the proposed DTC.
The DTC hopes to plug loopholes with the proposed changes with the aim of preventing tax evasion through this route, said a senior Finance Ministry official. In addition, the DTC has also removed the 'Resident Not Ordinarily Resident (RNOR)' category to simplify the tax laws, the official said.
New Direct Tax Code: Has it lost its original benefits Now, there will be only two categories, 'Resident' and 'Non-Resident', the official added. Commenting on the proposal PwC Executive Director (Tax) Kuldeep Kumar said, "With this change, a non-resident would be at greater risk of becoming an ordinary citizen and become liable to pay tax in India as the threshold limit has been reduced." There would be liability on a resident belonging to a country where the tax rate is lower than India and there is a Double Taxation Avoidance Agreement (DTAA) between both the countries. The non-resident would be considered a resident if the threshold limit of stay has been exceeded for the purpose of imposing tax. In the case of a resident of a non-treaty country, which India has no DTAA with, the tax burden would be higher if he exceeds the threshold limit of stay in India, Kumar said, adding that he has to pay tax on all the global income in India as well as the country of residence as per the prevailing tax laws of that country.
DTC's impact on India Inc At present, India has comprehensive DTAAs with about 74 countries, including the USA, Singapore, UK, Thailand, South Africa, Saudi Arabia, New Zealand and Australia. Experts feel that the DTC proposal could be a damper for NRIs visiting India to meet their relatives or for business promotion.
Dear NRI's , Now ball is in your court. Come wake up and act. This is the right time to make recommendations. If you want your voices to be heard and to make representations please do so now because if the new law is implemented you cannot do any thing about it comply. The details of the DTC system are still being debated by the parliamentary standing committee in India, the new system will be implemented in the next fiscal year. "I would suggest, if you're worried (about the new tax regulations), that this is the right time to submit representations to the parliamentary committee". Do so before the Direct Taxes Code is passed into law.
I have one more suggestions, its better to start campaign through Internet media's like Face Book and Twitter, so we can create more awareness and new sound from the common man. Unorganized crowd, no matter how big it is, may not help.
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