The Narendra Modi government's proposal to tax non-resident Indians (NRIs) if they are not paying duties in their country of residence, has sent shockwaves among the largest diaspora in the world, which is estimated to be 17.5 million, according to a UN report.
The government’s contention was that many NRIs use the tag to take advantage of loopholes in the existing taxation system.
"We have made changes to the income tax (system). Earlier, an Indian citizen would become an NRI if he stayed out of the country for over 182 days. Now he has to stay for 241 days. In many cases, we found that some people were residents of no country... we've said that if any Indian citizen, if he is not a citizen of India, is deemed to be a citizen of India and his worldwide income will be taxed", news agency PTI quoted Revenue Secretary Ajay Bhushan Pandey as saying.
The majority of the Indian diaspora lives in the Gulf region, where many countries, including the United Arab Emirates and Saudi Arabia, are tax-free.
Former UN diplomat and parliamentarian from the opposition Indian National Congress Shashi Tharoor has alleged that the proposal would badly affect Indian workers in Gulf states, the bulk of them from his home state of Kerala.
There were an estimated four million Keralites in the Gulf region, according to a study by the provincial government-funded organisation NORKA Roots.
This proposal to tax those NRIs who aren't paying tax abroad will badly affect Indian workers in the Gulf countries where there is no income-tax: https://t.co/cUIqn92wvi— Shashi Tharoor (@ShashiTharoor) February 1, 2020
The bulk of them are Keralites &don't vote for the BJP anyway, or so the Govt may have reasoned! Will oppose.
The new tax proposal has resonated across the internet, too:
NRIs in UAE do not have to pay India income tax— Shilpa Nair (@shilpamdas) February 2, 2020
Indian budget has redefined Non-Resident Indians (NRIs) as those who stay abroad for 240 days
Persons who are RESIDENTS OF NO COUNTRY and is out of India for as many days just to maintain the NRI status will be taxed back home. pic.twitter.com/wiKwXT8czZ
#Budget2020 "... a non-resident Indian, who is not taxed in the foreign country, will become taxable in India..."— Rudra Chowdhury (@prudent_invstor) February 1, 2020
A big blow for gulf remittances as these NRIs might find their global income taxable in India. Major impact on #Kerala economy and #FederalBank
Income tax shocker: Budget 2020 proposes tax on non-taxpaying Indians residing overseas.— Syed Maqbool (@maqbool_sm) February 1, 2020
A non-resident Indian, who is not taxed in the foreign country, will become taxable in India.#SeedhiBaatBudgetBakwaas#Budget2020https://t.co/cG6uQOEpJC
One NRI driver or a cafeteria— Prakasan Balliyod (@Balliyodan) February 1, 2020
Worker who tirelessly work 2 year with out single off and he planned to stay back country more than 4 month to fix his close relatives medical needs or plan built a home not possible any more!#BudgetSession2020#Budget2020https://t.co/F4DpWPCRvr
Budget 2020: Govt proposes tax on non-taxpaying NRIs. To be categorized a non-resident, an Indian now has to stay abroad for 240 days,against 182 previously. The second rule is more deadly: NRI, who is not taxed in the foreign country, will become taxable in India.— Rashi Sadhu (@RashiSadhu) February 1, 2020
The new taxation provision for Indians abroad would come into effect starting the next fiscal year, 2021-2022.