|02 February, 2020

"I'm not taxing what you're earning in Dubai," India’s finance minister clarifies tax liability

This should come as great relief to millions of NRIs across the world

India's Finance Minister Nirmala Sitharaman and the Reserve Bank of India (RBI) Governor Shaktikanta Das arrive to attend the RBI's central board meeting in New Delhi, India July 8, 2019. Image used for illustrative purpose.

India's Finance Minister Nirmala Sitharaman and the Reserve Bank of India (RBI) Governor Shaktikanta Das arrive to attend the RBI's central board meeting in New Delhi, India July 8, 2019. Image used for illustrative purpose.

REUTERS/Anushree Fadnavis

Indian finance minister Nirmala Sitharaman clarified on Sunday that the government has no intention to tax the global income of non-resident Indians (NRIs) and that only income generated in India will be taxed.

This should come as great relief to millions of NRIs across the world, especially in the income-tax free Gulf nations, where many of whom were particularly concerned about the implications of tax liability on their global income.

"What we are doing now is that the income of an NRI generated in India will be taxed here. If he's earning something in a jurisdiction where there is no tax, why will I include that into mine that has been."

"Whereas if you have a property here and you have a rent out of it, but because you are living there, you carry this rent into your income there and pay no tax there, pay no tax here, since the property is in India, I have got a sovereign right to tax," the minister said in post-budget interaction with the media.

"I am not taxing what you're earning in Dubai but that property which is giving you a rent here, you may be an NRI, you may be living there but that is revenue being generated here for you. So that's the issue," the national daily Times of India quoted the minister as saying.

The Finance Bill 2020 has 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.

"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 finance ministry said.

"In order to avoid any misinterpretation, it is clarified that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession. Necessary clarification, if required, shall be incorporated in the relevant provision of the law," the statement from the ministry added.

(Reporting by Seban Scaria seban.scaria@refinitiv.com, editing by Anoop Menon)

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