The Ministry of Finance on Sunday clarified that non-resident Indians, or NRIs, will have to pay taxes on income earned only in India, and not on what they earn outside the country.
The clarification was issued after the Finance Bill, 2020, proposed that an Indian citizen shall be deemed to be resident in India, if he is not liable to be taxed in any country or jurisdiction. After the Budget announcement, there was confusion whether such a person may become liable to pay tax in India. It could have impacted NRIs staying in countries such as United Arab Emirates, which do not impose income tax on individuals under local tax laws.
“This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India,” the finance ministry said in a statement.
“The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries,” the ministry added. “In some section 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 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.”