Union Finance Minister Nirmala Sitharaman on Sunday gave a statement that the new provisions introduced in the Budget would include Indian workers’ income in zero tax jurisdictions into the Indian tax net.
The recently shared Finance Bill has submitted three new major changes to prevent tax abuse by imcome earners that don’t pay taxes all over the world. One of the changes include reducing the number of days that an Indian citizen can be granted non-resident status for tax purposes from 182 to 120. Second change explains that citizens who don’t pay taxes anywhere will be deemed to be a resident and the final major change explains definition of ‘not ordinarily resident’ has been restrained.
“Let’s say an NRI, living in Dubai or elsewhere, is not taxed for his income there, but has some earnings through something in India for which he doesn’t pay tax here. We are saying, for that income which is generated in India, pay a tax,” Ms. Sitharaman said.
“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 that they have earned there. This interpretation is not correct,” the Finance Ministry said.
There was a criticism to the fact that the lower tax rates for those earning upto ₹15 lakh a year wouldn’t lead to tax savings, once the withdrawal of exemptions and deductions on the existing tax rates is calculated in and replying to this Ms. Sitharaman said the Ministry will soon issue more clarifications on this matter.
“There are a few exemptions which we allow under the new rates too. I believe that many of the calculations which have come out in the newspapers today have probably not taken those on board into account,” she said.
Later in the day, officials clarified that less than 10% of taxpayers claim deductions of over ₹2 lakh in their tax filings. Therefore, comparing the old and new tax rates, assuming deductions in the range of ₹4 lakh to ₹5 lakh may be erroneous. In fact, a meagre 3.77 lakh out of 5.78 crore tax filers have claimed deductions exceeding ₹4 lakh in 2018-19.