DTC May create more Tax pressure to NRI's
Tuesday, September 7, 2010
DTC May create more Tax pressure to NRI's
More non-resident Indians (NRIs) are likely to start paying income tax in the country when the proposed Direct Taxes Code (DTC) Bill becomes law and comes into effect from April 1, 2012.
The new bill introduced in Parliament proposes to impose tax on the global income of NRIs if they stay in India for a period or periods amounting to more than 60 days in a year.
Under the existing Income Tax Act, 1961, 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.
In short, if an NRI wants to escape the tax net he will have to spend 10 months out of the country compared to six months under the existing law.
The new DTC also retains the existing provision under which an NRI is also liable to pay tax on his global income if he resides in India for a period of 365 days or more over a period of four years prior to the assessment year.
According to senior officials, the purpose is to prevent the evasion of tax by some individuals who deliberately take up NRI status and organise their travel plans merely to avoid paying tax.
It is expected that longer stays abroad would be more costly and also more inconvenient for such individuals who enjoy a higher standard of living in their own country.
"They are, therefore, likely to offer to pay tax rather than incur a higher expenditure and face the inconvenience of a long stay abroad," a senior official said.
In addition, DTC has removed the ' resident but not ordinarily resident (RNOR)' category to simplify tax laws. Now, there will be two categories, 'resident' and 'non-resident', which makes things simpler and clearer.
According to tax experts, there would be a liability on an NRI who carries out business in a country with which India has a double taxation avoidance agreement (DTAA). The non-resident would be considered a resident if he stays for more than 60 days in India.
In the case of a resident of a non-treaty country with which India does not have a DTAA, the tax burden would be higher if he stays for more than 60 days in India.
The individual will have 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 US, the UK, Singapore, Thailand, New Zealand, Australia and Saudi Arabia.
NRIs to face more tax pressure in new DTC
More non-resident Indians (NRIs) are likely to start paying income tax in the country when the proposed Direct Taxes Code (DTC) Bill becomes law and comes into effect from April 1, 2012.
The new bill introduced in Parliament proposes to impose tax on the global income of NRIs if they stay in India for a period or periods amounting to more than 60 days in a year.
Under the existing Income Tax Act, 1961, 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.
In short, if an NRI wants to escape the tax net he will have to spend 10 months out of the country compared to six months under the existing law.
The new DTC also retains the existing provision under which an NRI is also liable to pay tax on his global income if he resides in India for a period of 365 days or more over a period of four years prior to the assessment year.
According to senior officials, the purpose is to prevent the evasion of tax by some individuals who deliberately take up NRI status and organise their travel plans merely to avoid paying tax.
It is expected that longer stays abroad would be more costly and also more inconvenient for such individuals who enjoy a higher standard of living in their own country.
"They are, therefore, likely to offer to pay tax rather than incur a higher expenditure and face the inconvenience of a long stay abroad," a senior official said.
In addition, DTC has removed the ' resident but not ordinarily resident (RNOR)' category to simplify tax laws. Now, there will be two categories, 'resident' and 'non-resident', which makes things simpler and clearer.
According to tax experts, there would be a liability on an NRI who carries out business in a country with which India has a double taxation avoidance agreement (DTAA). The non-resident would be considered a resident if he stays for more than 60 days in India.
In the case of a resident of a non-treaty country with which India does not have a DTAA, the tax burden would be higher if he stays for more than 60 days in India.
The individual will have 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 US, the UK, Singapore, Thailand, New Zealand, Australia and Saudi Arabia.
NRIs to face more tax pressure in new DTC
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