04 June Sunday

NRI Tax : Kerala Assembly Passes Resolution Demanding Cancellation of Tax Amendment

Web Desk‌Updated: Thursday Feb 6, 2020

THIRUVANANTHAPURAM : Kerala Assembly on Thursday passed a resolution demanding Centre to drop its plan to  amend Sec 6 of Income Tax Act 1961 via its  Finance Bill, given that it would have a devastating impact on NRIs especially those employed in the gulf region. While stringent laws are welcome to check undisclosed income, illegal money transfer and tax evasion, the Centre should take steps to exempt commoners and NRIs with limited income from the its ambit, the resolution urges.

On Feb 1, alongside Union Budget for 2020-21, the Union Finance Minister tabled the Finance Bill seeking to tax NRI income, by effecting changes to Sec 6 of 1961 Income Tax Act.

The amendment  is slated to take effect from 1 April, 2021 and also modifies another aspect. Presently, if an Indian citizen or person of Indian origin resides in the country for more than 182 days, he is considered to be a resident Indian and becomes liable to pay income tax. The Finance Bill presented on Feb 1, seeks to shrink that period  to just 120 days, meaning a person of Indian origin would be subject to income tax if he has spends 120 or more days here, with effect from April 2021.

Thus the Bill, purportedly meant to arrest tax evasion, will in effect prevent Gulf employees from spending reasonable time with their families back home. These individuals are not visiting their native places to dodge tax, rather it is their familial ties and responsibilities that keep them here for days that may sometimes extend up to 180 in a year.

Also, the new tax law if passed, would drastically cut incomes of those who hold small businesses in south Asian countries, where they are required to spend at least 240 days outside the country to upkeep their ‘Non-resident’ status. To these small-time entrepreneurs, 182 days presently allowed becomes crucially essential.

Persons working in high-risk sectors like oil rigs  are allowed a month off against each work month. This segment too will suffer losses to their income.

The Kerala economy is substantially supported by incomes send in by NRIs. These monies make for at least 15 percent of the State’s gross domestic product. These incomes are treated as external funds. Besides, the consumption and expenditures made by NRIs during their stay here, is a major push to the growth of home enterprises.  This in turn boosts the State economy.

Given the overhanging economic slowdown, the proposed amendment would hit the State very hard.

The other proposed amendment to Sec 6 of Income tax Act seeks to tax non-resident Indians who might not be taxed by the country they earn their income from. Such amendment will adversely effect people of ordinary means working in country with either no tax system or double tax treaty with India. The Centre should also work ways to enhance income on taxes for States  and provide adequate social welfare benefits.

The State govt had brought aforesaid problems to the notice of the Centre soon after the Budget, to which the Centre responded with a press release stating , the amendment did not aim to target people working in ‘other’ countries for tax purpose.  Even so, if Sec 6 of the 1961 tax law is  amended as proposed in the Bill, the outcome would be just the opposite, said the resolution.