Dubai: Salary earning Non-Resident Indians (NRIs) will not be impacted by the new tax proposals in the latest Indian Budget.
This is because of their residency status in the country they are working in, and the double taxation avoidance agreement (DTAA) which India has with most of these countries. “If an individual lives in the UAE for more than 180 days, he is automatically a resident of UAE,” said Dixit Jain, Director, The Tax Experts DMCC.
“And balance days, if he is living in any other country taking the total to more than 240 days outside India, only his Indian income will be taxable and he will (still) be considered as NRI.”
Earlier, if an Indian citizen who stayed out of India for 182 days, they would become non-residents. Now, the law is being changed and it now requires one to remain outside India for 240 days or more to be a non-resident (for tax purposes).
What of business owners?
“While most salary earners will automatically fulfil the requirement of 240 days outside India to keep their NRI status, businessmen have the option to get a tax residency certificate from respective government authorities where they are resident,” said Jain.
Tax consultants have clarified that while an Indian citizen is required to remain a total of 240 days a year out of the country to maintain non-resident status for tax purposes, he/she is not required to reside in any one country or territory. Instead, he or she needs to fulfill the minimum tax residency requirement of the respective countries.
Business owners need reassurance
Indian business owners in the UAE have expressed concern over the new rules for residency status and its potential tax implications. They will not be impacted by the proposed changes in income tax rules if they stay less than 120 days in India, and/or able to prove their tax residency in the countries their businesses are located.
“The number of days an NRI can spend in India to be get the tax exemption is reduced from 182 days to 120 days - this will have significant impact on businessmen having significant investments in India,” said Dr. Azad Moopen, Chairman & Managing Director, Aster DM Healthcare.
“Our India-listed company has 13 hospitals in India invested through the FDI route, whereas we have only 12 hospitals in GCC. Out of our 20,000 employees, majority are in India. This naturally requires us to spend significant time in India.
“Even in the case of others like the offshore company workers who get one-month off after one-year of work, this will be a great disadvantage. Request that this may please be reconsidered.”
Clearly, the new proposals have created panic among expats across all categories. “Most of them are panicking about possible taxation of their income in the UAE and India, including interest income on NRE deposits,” said Anish Mehta, chairman of the Institute of Chartered Accountants of India, Dubai.
“The Government should have given better explanations about the proposals to avoid panic among expats in the Middle East.”
The concept of non-resident status lies at the heart of the expat India’s tax status. The latest India budget proposed some fundamental changes in the provisions related to NRI status.
A change in income tax law now makes it difficult for individuals to prove themselves not a tax resident of India.