It proposes to tax a person living in India for more than 59 days.
Some high-profile non-resident Indians (NRIs) are lobbying hard with the Centre to amend a clause in the Direct Taxes Code (DTC) Bill that proposes to tax the income of a person living in India for more than 59 days.
The existing Income Tax Act exempts the income of NRIs staying out of India for more than 183 days in a year.
In the DTC Bill, which was tabled in Parliament in the monsoon session, the finance ministry had proposed that NRIs who are working abroad and visit India would become residents if they are present in the country for 60 days or more in a financial year, and 365 days or more over a period of four years prior to the financial year. They would be liable to pay taxes on their global income.
A finance ministry official said several high-profile NRIs were opposing this proposal. “We are getting inputs from many NRIs on this. Many of them, who are citizens of India, stay here only for 181 days so that they do not become a resident. So, they are not citizens of any country and do not pay tax. Under DTC, they will have to pay tax if their stay in India stretches to 60 days or more,” the official said.
The official said the DTC proposal, when implemented, would also affect Indian captains on foreign ships, many of whom stay out of the country for 183 days and do not pay any tax. The rule will not apply to Indian citizens who leave the country as a member of the crew of an Indian ship or for employment.
Experts said this might affect people who visit India or those who come on a vacation, as they would have to make sure that their stay is less than 60 days and residency rules is not triggered.
Rajesh Srinivasan, senior director, Deloitte, said the residency clause was subject to the double taxation treaty. “First, we need to look at the domestic law. If the income is taxable under the law in India, then it has to be seen which country has the primary right to tax the income under the tax treaty,” he said.
Sources said UB Group Chairman Vijay Mallya, Claridges’ Groups of Hotels Chairman Suresh Nanda, Jet Airways Chairman Naresh Goyal, Vedanta Resources Chairman Anil Agarwal, Hotmail co-founder Sabeer Bhatia, Essar Group Chairman Ravi Ruia and chess player Vishwanathan Anand are some of the high-profile NRIs. However, the extent to which they would be affected by the DTC proposal could be ascertained only after applying the test of residency in each particular case in a financial year.
