Double taxation sword hangs over NRIs’ heads, SC aid to be sought once more


Gaurav Baid, the 27-year previous NRI chartered accountant, whose writ petition earlier than the Supreme Court triggered a response from India’s direct tax authority, will as soon as once more knock on the court docket’s door. Baid, who works in Dubai, would both transfer a recent petition or file an utility difficult the latest communiqué from the Central Board of Direct Taxes (CBDT) which gave no aid to NRIs who, having overstayed in India as a result of pandemic, now worry that their abroad earnings could be taxed by the Indian authorities.

“Mr. Baid intends to re-approach the Supreme Courtroom for acceptable aid… the federal government has refused to grant common leisure sought by us,” stated Amish Tandon, companion, Innovatus Legislation Workplaces which is representing Baid.

Not solely has CBDT kept away from giving a blanket aid, its round this week may have worsened the scenario for a lot of NRIs like Baid. Whereas the tax physique has promised there could be no “double taxation” — and, the willpower of residence shall be completed on the idea of related double tax avoidance agreement (DTAA) — such an assurance is meaningless for NRIs working in UAE, Bahrain, Oman, Qatar, Kuwait, Bahamas, or in another nation the place there isn’t a direct tax on revenue.

Residency standing, underneath Indian legislation, is set by the period of bodily presence within the nation: an individual is taken into account resident if the interval of keep in India is 182 days or extra; or, if the individual has greater than Rs15 lakh home revenue and stays for 120 days or extra. Not like a resident whose international revenue is taxed, NRIs must pay tax on revenue earned in India however not on revenue earned exterior India. So, most NRIs plan their go to and period of keep in India to satisfy the residency situation and keep away from paying tax in India on what they earn exterior India.

“The CBDT round merely reiterates the present rules and supplies no aid which most NRIs had hoped for. No exemption for pressured keep in India resulting from COVID has been given as the only function of the round is to make sure that an individual doesn’t escape tax by being non-resident in each international locations. However now NRIs have to use for particular aid on a case to case foundation and the matter is left to the discretion of the tax division,” stated Mitil Chokshi, companion, Chokshi & Chokshi.

The tax board has requested NRIs who may expertise “double taxation” within the current monetary yr to file illustration in a prescribed type by March 31. “However NRIs (like Baid) from the UAE, who needed to involuntarily reside in India for a interval of greater than 182 days and whose grouse may not be associated to ‘double taxation‘ however to ‘taxation of revenue in India’ which in any other case wouldn’t have been taxed in any respect on account of the tax impartial nature of UAE may not have the choice to make a illustration to the federal government,” stated Tandon.

Because of both suspension or disruption of flights, Baid, who works as an account supervisor with Kuber Buying and selling FZE in UAE, may go away India solely on October 5, 2020 — by when the 182-day residency situation had been breached. Quickly after the lockdown final yr, the federal government issued a leisure to exclude the variety of days keep in India — from 22nd March, 2020 to 31st March, 2020 — for the monetary yr 2019-20. Baid’s prayer earlier than the apex court docket was that an individual who was assessed as NRI in FY 2019-20, needs to be thought-about as NRI in FY20-21 on account of the pandemic, whatever the variety of days spent in India.

In keeping with senior chartered accountant Dilip Lakhani, “The tie breaker rule in DTAAs — which comes into play when an individual is taken into account resident of two international locations — may even not assist NRIs stranded right here. The circumstances to be happy underneath this rule will generally result in NRIs having residency in India — thus exposing their international revenue to taxation right here.”

There are greater than 13 million NRIs unfold throughout 209 international locations, and plenty of of them search employment and pursue enterprise in tax impartial jurisdictions like UAE. Certainly, the round may affect many NRIs who are based mostly out of nations the place the incidence of direct tax is decrease than that of India.

In keeping with company circles, extra NRIs are exploring authorized choices. “To many NRIs, the latest CBDT round comes throughout as a shock. First, final Might the finance ministry had stated that the variety of days in 2020-21 until normalisation of flights can be excluded in figuring out residency. Second, the court docket in Baid’s case took notice of the profit given for 2019-20. Within the curiosity of equity, CBDT ought to exclude, say, 90days starting April 1, 2021,” stated Sanjay Sanghvi, Senior tax companion on the legislation agency Khaitan & Co.

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