India’s federal finance ministry on Sunday clarified that the new provision to tax its diaspora is only if they are "not liable to be taxed in any country or jurisdiction”.
The clarification follows widespread criticism that the new proposal was to enlarge the tax net to include non-resident Indians.
The ministry said it was only intended as “an anti-abuse provision since it is notified that some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India”.
“The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries. In some sections of the media the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in the Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there. This interpretation is not correct”, the ministry said in a statement.
India has the largest diaspora in the world – 17.5 million per a UN report with the majority of them living in the Gulf region, where several countries are tax-free.
News agency PTI previously quoted Revenue Secretary Ajay Bhushan Pandey as explaining how the reforms to the income tax system would work:
"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", Pandey said.