Union Finance Minister Nirmala Sitharaman feared on Sunday that the budgetary provisions would bring Indian workers' income to the Indian tax network in tax-free countries like the United Arab Emirates.
The Finance Act has proposed three major changes to prevent tax abuse by non-taxpayers worldwide: the number of days that an Indian citizen can be considered non-resident for tax purposes has been reduced from 182 to 120. Citizens who pay no taxes anywhere are considered resident. and the definition of "not habitually resident" has been tightened.
"Let's say an NRI who lives in Dubai or elsewhere is not taxed on his income there, but has some income from something in India for which he doesn't pay tax here." We say a tax must be paid on this income generated in India, ”said Ms. Sitharaman.
Concerned about the potential impact of the new regulations, Kerala's Prime Minister Pinarayi Vijayan wrote to Prime Minister Narendra Modi on Sunday, noting the state's wide disagreement over budgetary regulations, as this would harm the Middle East Indians who make efforts and bring currency to the countryside "through transfers.
"The new provision is designed to give the impression that those Indians who work in good faith in other countries, including the Middle East and are not taxable in those countries, are taxed on their income in India there. This interpretation is not correct, ”said the Ministry of Finance in a statement.
If necessary, the ministry will include clarification in the law so that only income from an Indian company or profession is taxable for these citizens, the finance minister said.
In response to criticism that lower tax rates for those earning up to £ 15 a year would not necessarily result in tax savings, Ms. Sitharaman said that the Ministry will allow for tax exemptions and deductions for further clarification on the issue.
“There are some exceptions that we also allow under the new sentences. I believe that many of the calculations published in the newspapers today probably didn't take into account those on board, ”she said.
Officials later said that less than 10% of taxpayers request tax deductions of more than £ 2 in their tax returns. Therefore, comparing the old and new tax rates, assuming that £ 4 to £ 5 deductions are made, can be erroneous. In fact, a meager 3.77 lakh from 5.78 crore tax filers in 2018-19 required prints of more than 4 lakh, they emphasized.