Double taxation sword hangs over NRIs’ head, search SC aid

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Gaurav Baid, the 27-year previous NRI chartered accountant, whose writ petition earlier than the Supreme Court triggered a response from India’s direct tax authority, will as soon as once more knock on the court docket’s door. Baid, who works in Dubai, would both transfer a recent petition or file an software difficult the current communiqué from the Central Board of Direct Taxes (CBDT) which gave no aid to NRIs who, having overstayed in India because of the pandemic, now worry that their abroad earnings could be taxed by the Indian authorities.

“Mr. Baid intends to re-approach the Supreme Courtroom for applicable aid… the federal government has refused to grant common rest sought by us,” mentioned Amish Tandon, associate, Innovatus Legislation Places of work which is representing Baid.

Not solely has CBDT kept away from giving a blanket aid, its round this week could have worsened the scenario for a lot of NRIs like Baid. Whereas the tax physique has promised there could be no “double taxation” — and, the dedication of residence shall be carried out on the premise of related double tax avoidance agreement (DTAA) — such an assurance is meaningless for NRIs working in UAE, Bahrain, Oman, Qatar, Kuwait, Bahamas, or in another nation the place there isn’t any direct tax on revenue.

Residency standing, underneath Indian legislation, is decided by the period of bodily presence within the nation: an individual is taken into account resident if the interval of keep in India is 182 days or extra; or, if the particular person has greater than Rs15 lakh home revenue and stays for 120 days or extra. Not like a resident whose world revenue is taxed, NRIs should pay tax on revenue earned in India however not on revenue earned exterior India. So, most NRIs plan their go to and period of keep in India to fulfill the residency situation and keep away from paying tax in India on what they earn exterior India.

“The CBDT round merely reiterates the prevailing rules and supplies no aid which most NRIs had hoped for. No exemption for pressured keep in India on account of COVID has been given as the only goal of the round is to make sure that an individual doesn’t escape tax by being non-resident in each international locations. However now NRIs have to use for particular aid on a case to case foundation and the matter is left to the discretion of the tax division,” mentioned Mitil Chokshi, associate, Chokshi & Chokshi.

The tax board has requested NRIs who could expertise “double taxation” within the current monetary yr to file illustration in a prescribed type by March 31. “However NRIs (like Baid) from the UAE, who needed to involuntarily reside in India for a interval of greater than 182 days and whose grouse will not be associated to ‘double taxation‘ however to ‘taxation of revenue in India’ which in any other case wouldn’t have been taxed in any respect on account of the tax impartial nature of UAE could not have the choice to make a illustration to the federal government,” mentioned Tandon.

Due to both suspension or disruption of flights, Baid, who works as an account supervisor with Kuber Buying and selling FZE in UAE, might depart India solely on October 5, 2020 — by when the 182-day residency situation had been breached. Quickly after the lockdown final yr, the federal government issued a rest to exclude the variety of days keep in India — from 22nd March, 2020 to 31st March, 2020 — for the monetary yr 2019-20. Baid’s prayer earlier than the apex court docket was that an individual who was assessed as NRI in FY 2019-20, ought to be thought-about as NRI in FY20-21 on account of the pandemic, whatever the variety of days spent in India.

Based on senior chartered accountant Dilip Lakhani, “The tie breaker rule in DTAAs — which comes into play when an individual is taken into account resident of two international locations — may also not assist NRIs stranded right here. The circumstances to be glad underneath this rule will normally result in NRIs having residency in India — thus exposing their world revenue to taxation right here.”

There are greater than 13 million NRIs unfold throughout 209 international locations, and lots of of them search employment and pursue enterprise in tax impartial jurisdictions like UAE. Certainly, the round might influence many NRIs who’re based mostly out of nations the place the incidence of direct tax is decrease than that of India.

HIGHLIGHTS

# NRIs who keep 182 or extra days should pay tax on world revenue

# NRIs caught in India had been hoping for a aid from govt

# CBDT merely assured there could be no “double taxation”

# This has no consequence for NRIs from Gulf the place there isn’t any revenue tax





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