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Dear Friends,
Good wishes.
News reports published in the Economic
Times of the Times of India Group as also Emirates247.com
re: global income of Non-Resident Indians (NRIs) being
taxed in India if their stay exceeeds 60 days have created
ripples of fear amongst NRIs at large. Unfortunately, an
erroneous view has been taken by the Editors as also
professional experts. Links for the same are provided
herein:-
http://www.emirates247.com/business/...09-06-1.288006
http://www.emirates247.com/more-nris...09-06-1.288197
2. A detailed study of the provisions clearly show that
global income of Non-Resident Indians (NRIs) will continue
to be exempt from tax even if their stay exceeds 60 days in
a financial year so also even 365 days in a financial year
provided they have either of the following conditions is
fulfilled:-
01 the NRI has been a non-resident in nine out of ten
financial years preceding the relevant current financial
year".
OR
.02 has stayed in India for less than 730 days in
immediately preceding seven financial years proceeding the
relevant current financial year"
3. Copies of letters addressed to the editors of the said
publications which will clarify the doubts of NRIs at large.
4. In a few days’ time, I shall also forward copy of
Representation being prepared and to be sent to the Hon.
Finance Minister of India as regards certain changes in said
Amendments and also anomalies as regards Foreign Currency
Non Resident (FCNR) deposits.
Best wishes.
RAJESH H DHRUVA
===========================================
----- Original Message -----
From:
councelor@femaonline.com
To: Economic Times (ET);
toieditorial@timesgroup.com
Sent: Tuesday, October 19, 2010 6:27 PM
Subject: "Non-Resident Indians (NRIs) face new tax threat" -
an erroneous alert to NRIs
October 19, 2010.
To
The Editor,
Economic times,
Mumbai.
Dear Sir,
Sub: - "Non-Resident Indians (NRIs) face new tax threat" -
an erroneous alert to NRIs.
This has reference to the news article "Non-Resident Indians
(NRIs) face new tax threat" published in 08/09/2010 edition
which conveys an erroneous alert to NRIs at large.
Said article states that under the proposed Direct Tax Code
,2010 [ DTC ] an NRI is liable to pay tax on his global
income if he resides in India for 60 days or more in a
Financial Year [ FY ] being a year commencing on 1st April
and ending on following 31st March clubbed with a stay of
365 days or more in immediately preceding 4 [ four ] FYs 365
days or more whereas under the present provisions of Income
Tax Act, 1961 [ IT Act] an NRI's global income is exempt
from tax if his stay does not total to 181 days or more. It
also states that Pricewaterhouse Coopers Executive Director
(Tax) Mr. Kuldeep Kumar has said that "a Non-Resident would
be on a greater risk of becoming ordinary citizen and liable
to pay tax in India ...Pay tax on all the global income in
India....".
No doubt, the definition of "Resident but Not Ordinarily
Resident (R but NOR)" whereby global income of an NRI is
exempt from income tax in India under the present provisions
of IT Act is being eliminated and thus in a Financial Year
an NRI whose stay is 60 days or more and also 365 days or
more in immediately preceding 4 Financial Years will be
covered by the definition of "Resident".
But it is erroneous to conclude that the global income of an
NRI will be liable to income tax in India if his stay 60
days or more in any year wedded with stay of 365 days or
more in immediately preceding 4 Financial Years as this view
is based entirely on the proposed elimination/change in the
definition of "R but NOR" whereas the fact is that inspite
of this change, global income of NRIs and every other
individual who has been a Non-Resident in 9 out of 10
immediately preceding financial years or whose stay does not
totals to 730 days or more in immediately preceding 7
financial years is granted the benefit of tax exemption on
global income by virtue of a specific provision of Para. 29
under the Sixth Schedule r.t.w. Section 18(1) (a) [copies
enclosed in Annexure 4].
Said Para. 29 clearly exempts from tax in India :
"Any income accruing to an individual outside India, will be
exempted if he:-
.01 has been a non-resident in nine out of ten financial
years preceding the relevant current financial year".
OR
.02 has stayed in India for less than 730 days in
immediately preceding seven financial years preceding the
relevant current financial year"
Of course, said change will affect NRIs who have left Indian
shores during last 6 years as their stay in immediately
preceding 7 years will exceed 730 days in most of the cases.
But, however, for great majority of NRIs who have been
abroad for a long period, said change will literally not
affect taxability of global income.
Incidentally, Mr. Kuldeep Kumar's statement mentioning an
NRI becoming ordinary citizen is also erroneous as the IT
Act or DTC has nothing to do with citizenship of an NRI or
any individual.
I request you to look into the same and if my arguments find
favour, do the needful for appropriate publishing of said
corrections in forthcoming issue of your publication and
thereby remove serious doubts created in the minds of NRIs
at large..
Thanking you in anticipation,
Sincerely,
RAJESH H DHRUVA
Chief Executive
femaonline.com
Tel. No. : 0091 281 245 3367 (four lines) / 245 9613
email
rajesh@femaonline.com ;
keynote@nribanks.com
===========================================
Income-Tax Act, 1961
Annexure 1
RESIDENCE IN INDIA
Section 6. For the purposes of this Act,—
(1) An individual is said to be resident in India in any
previous year, if he—
(a) is in India in that year for a period or periods
amounting in all to one hundred and eighty-two days or more
; or
(b) [* * *]
(c) having within the four years preceding that year been in
India for a period or periods amounting in all to three
hundred and sixty-five days or more, is in India for a
period or periods amounting in all to sixty days or more in
that year.
[Explanation.—In the case of an individual,—
(a) being a citizen of India, who leaves India in any
previous year [as a member of the crew of an Indian ship as
defined in clause (18) of section 3 of the Merchant Shipping
Act, 1958 (44 of 1958), or] for the purposes of employment
outside India, the provisions of sub-clause (c) shall apply
in relation to that year as if for the words “sixty days”,
occurring therein, the words “one hundred and eighty-two
days” had been substituted ;
(b) being a citizen of India, or a person of Indian origin
within the meaning of Explanation to clause (e) of section
115C, who, being outside India, comes on a visit to India in
any previous year, the provisions of sub-clause (c) shall
apply in relation to that year as if for the words “sixty
days”, occurring therein, the words “one hundred and
[eighty-two] days” had been substituted.]
Annexure 2
GLOBAL INCOME
Section 5 (2) Subject to the provisions of this Act, the
total income of any previous year of a person who is a
non-resident includes all income from whatever source
derived which—
(a) is received or is deemed to be received in India in such
year by or on behalf of such person ; or
(b) accrues or arises or is deemed to accrue or arise to him
in India during such year.
Explanation 1.—Income accruing or arising outside India
shall not be deemed to be received in India within the
meaning of this section by reason only of the fact that it
is taken into account in a balance sheet prepared in India.
Bill No. 110 of 2010
THE DIRECT TAXES CODE, 2010
THE DIRECT TAXES CODE, 2010
A
BILL
to consolidate and amend the law relating to direct taxes.
BE it enacted by Parliament in the Sixty-first Year of the
Republic of India as follows:—
CHAPTER I
PRELIMINARY
1. (1) This Act may be called the Direct Taxes Code, 2010.
(2) It extends to the whole of India.
(3) Save as otherwise provided in this Code, it shall come
into force on the 1st day of
April, 2012.
--------------
Annexure 3
RESIDENCE IN INDIA
4. (1) An individual shall be resident in India in any
financial year, if he is in India—
(a) for a period, or periods, amounting in all to one
hundred and eighty-two days
or more in that year; or
(b) for a period, or periods, amounting in all to—
(i) sixty days or more in that year; and
(ii) three hundred and sixty-five days or more within the
four years
immediately preceding that year.
(2) The provisions of clause (b) of sub-section (1) shall
not apply in respect of an individual who is—
(a) a citizen of India and who leaves India in that year as
a member of the crew of an Indian ship; or
(b) a citizen of India and who leaves India in that year for
the purposes of employment outside India.
Annexure 4
GLOBAL INCOME
THE SIXTH SCHEDULE
(See sections 10 and 18 (1) (a))
Income not included in the total income
29. Any income accruing to an individual outside India, in a
financial year from a source other than a business
controlled in or a profession set up in India, if the
individual—
(a) has been a non-resident in India in nine out of ten
financial years preceding that financial year; or
(b) has during the seven financial years preceding that
financial year been in India for less than seven hundred and
thirty days.
====================================================================
From:
councelor@femaonline.com
To:
letters@emirates247.com
Sent: Tuesday, October 19, 2010 6:26 PM
Subject: Direct Taxes Code does away with certain provisions
that protected Indians abroad from tax.
October 19, 2010.
The Editor,
Emirates 247.com.
Dubai
Dear Sir,
Sub:- Direct Taxes Code does away with certain provisions
that protected Indians abroad from tax.
This has reference to the news item on the subject "More
Non-Resident Indians (NRIs) Falling Under India's New Tax
Net" (Emirates247.com)
on 6th September 2010 ,which conveys an erroneous alert to
NRIs at large.
Said article states that under the proposed Direct Tax Code
,2010 [ DTC ] an NRI is liable to pay tax on his global
income if he resides in India for 60 days or more in a
Financial Year [ FY ] being a year commencing on 1st April
and ending on following 31st March clubbed with a stay of
365 days or more in immediately preceding 4 [ four ] FYs 365
days or more whereas under the present provisions of Income
Tax Act, 1961 [ IT Act] an NRI's global income is exempt
from tax if his stay does not total to 181 days or more.
In another article on the same day under the heading of
"Non-Resident Indians (NRIs) face new tax threat" , the
author has expressed similar views and quoted Vikas Vasal,
Executive Director at KPMG stating "---------overseas income
of NRIs may be subject to tax under certain situations" and
Mr.Amitabh Singh, Partner at Ernst & Young, saying "... this
could become a dampener for the overseas Indian population
who routinely visit India to meet their relatives and
friends....They will now have to restrict their stay to less
than 60 or be in danger of becoming tax residents.”
No doubt, the definition of "Resident but Not Ordinarily
Resident (R but NOR)" whereby global income of an NRI is
exempt from income tax in India under the present provisions
of IT Act is being eliminated and thus in a Financial Year
an NRI whose stay is 60 days or more and also 365 days or
more in immediately preceding 4 Financial Years will be
covered by the definition of "Resident".
But it is erroneous to conclude that the global income of an
NRI will be liable to income tax in India if his stay 60
days or more in any year wedded with stay of 365 days or
more in immediately preceding 4 Financial Years as this view
is based entirely on the proposed elimination/change in the
definition of "R but NOR" whereas the fact is that inspite
of this change, global income of NRIs and every other
individual who has been a Non-Resident in 9 out of 10
immediately preceding financial years or whose stay does not
totals to 730 days or more in immediately preceding 7
financial years is granted the benefit of tax exemption on
global income by virtue of a specific provision of Para. 29
under the Sixth Schedule r.t.w. Section 18(1) (a) [copies
enclosed in Annexure 4].
Said Para. 29 clearly exempts from tax in India :
"Any income accruing to an individual outside India, will be
exempted if he:-
.01 has been a non-resident in nine out of ten financial
years preceding the relevant current financial year".
OR
.02 has stayed in India for less than 730 days in
immediately preceding seven financial years preceding the
relevant current financial year"
Of course, said change will affect NRIs who have left Indian
shores during last 6 years as their stay in immediately
preceding 7 years will exceed 730 days in most of the cases.
But, however, for great majority of NRIs who have been
abroad for a long period, said change will literally not
affect taxability of global income.
I request you to look into the same and if my arguments find
favour, do the needful for appropriate publishing of said
corrections in forthcoming issue of your publication and
thereby remove serious doubts created in the minds of NRIs
at large..
Thanking you in anticipation,
Sincerely,
RAJESH H DHRUVA
Chief Executive
femaonline.com
Tel. No. : 0091 281 245 3367 (four lines) / 245 9613
Cell : 0091 98240 49944.
email rajesh@femaonline.com ;
keynote@nribanks.com
===========================================
Income-Tax Act, 1961
Annexure 1 to 4 as above
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