Dubai: The proposal to bring NRI's income abroad into the tax net in the 2020 budget presented by finance minister Nirmala Sitharaman in parliament on Saturday, has caused concern among the millions of Indian expatriates living in the Gulf region.
Amidst growing worries about economic recession and consequent difficulty for the average Gulf Indian expatriate to make both ends meet, the looming threat of a tax being imposed on their income within their country of residence is sure to unsettle every expatriate. While most of such residents use normal banking channels to send their earnings home, and if their remittances through banks are treated as income abroad, NRI's would either have to suffer the declared taxation or find it beneficial to send money via hawala or illegal cash channels.
Amidst the uproar that has already been raised against the government's move, the finance minister has come out to clarify that NRI's would not be taxed for their income abroad, but only their income in India will be taxed. However, that clarification would rather betray either possible ignorance unbecoming of a minister or an attempt to cover up, for income of NRI's in India is already taxable and that being the case, there was no point in making a mention at all about it in the budget speech.
The text of the budget speech in Section-H 'Preventing Tax Abuse' item (iii) reads "an individual who is not liable to tax in any other country or territory shall be deemed to be resident in India."
Further, her speech spells out that those who will be treated as residents, and therefore taxed for their global income, are those who are "not liable to tax in any other country" and residents in the Gulf countries fall under this category. Given this position, attempts to assuage the nervousness of NRI's would only be seen as eyewash.
Further the Central Board of Direct Taxes (CBDT) also issued a Press Release which again would serve only to justify the move, rather than to allay the fears.
There is a further aspect of NRI's situation that would attract taxation according to the budget speech. Till now, those who stay in India for 182 days or less in a financial year, have been treated as non-residents, whereas the new budget brings this maximum period of stay in India to 120, i.e. those who stay for 4 months in the native country cease to be NRI.
With a sizeable section of businessmen and self-employed abroad, choose to stay in India longer than that for various reasons, this too spells risks for them. In addition, there are also those working in certain sectors (mainly petroleum sector) whose work cycle constitutes 50/50 on/off duty thereby having to travel outside and stay in home country for half of a year. They will also be adversely affected by this proposed change.
When NRI's generally complain that their legitimate grievances are never addressed by the union government in immigration, financial and welfare aspects, and even as their foreign exchange remittances form a vital element boosting the country's economy, such added blow on their earning capacity is sure to breed discontent.
There is the further risk that if officially routed funds are tracked for taxation, remitters will tend to opt out of it in favour of illegal channels thereby weakening the national banking sector too.
All such factors are particularly relevant for Keralites who form the bulk of Indian expatriates in the Gulf and other West Asian countries. Hence the chief minister of Kerala Pinarayi's immediate critical reaction in support of the NRI's case. He was joined in no less severe language by Opposition Ramesh Chennithala who demanded immediate withdrawal of the proposal. Socio-political organizations were also quick to air their disapproval of the move.