The Associated Chamber of Commerce and Industry of India (ASSOCHAM)
has proposed the government to make announcement before the Pravasi
Bhartiya Divas (PBD) amendment in the Income Tax Act that those senior
citizens who come back and bring their wealth from overseas will be
taxed only on the income earned in India and not on their global income.
The change would encourage these senior citizens to bring their overseas wealth back to India and this would also help in solving the issue of ‘Black money' and create a more conducive investment atmosphere.
In a communication to the Finance Minister, ASSOCHAM has stated that the post-independence era has shown that a sizeable population of Indian who have become Overseas Citizen of India (OCI) / Persons of Indian Origin (PIO) has contributed significantly to the overall development of the country. Recent estimates from the Ministry of Overseas Indian Affairs indicate the Indian Diaspora to be the second largest in the world, with 25 million people with a cumulative purchasing power of approximately $300 Billion.
These persons are often Indian origin entrepreneurs, who have spread their business empire worldwide or professionals who have taken important international assignments. Even if they desire to come back to settle permanently in India as Senior Citizens due to love for the mother land and near and dear ones due to the prevalent tax regime of the country.
Under Income Tax Act, 1961 if an individual stays in India for more than 182 days in a particular financial year or 60 days in the relevant tax year and 365 days or more in the preceding four financial years, the individual becomes resident of India.
The individual is considered to be not ordinarily resident (NOR) where his or stay in India during the past 7 financial years is 729 days or less or individual has been non-resident in nine out of ten financial years.( NOR conditions). However, where both these conditions are not fulfilled, individual is considered to be ordinarily resident (ROR) and taxed in India on his global income and also required to disclose his global assets.
NOR are taxed on their India sourced income like non residents and therefore, practically this window is available to the returning individual for the 2 to 3 years depending on the timing of their return. Thereafter they become ROR as they are not able to fulfill NOR conditions mentioned above. This has become a major contributor in the creation of ‘Black money', which is a menace to economic development.
Keeping in view the contribution of OCIs / PIOs in the development of the country mentioned hereinabove, ASSOCHAM has suggested that the provisions of Taxation Law should be amended so as to encourage the OCIs / PIOs to return and re¬settle in India by taxing them only on their Indian income and giving them exemption from payment of tax on income earned outside India
This is a practice in certain developed countries in Europe- where residents are taxed only in respect to the income earned in that country or on the income brought in the country. The income earned outside and not brought into the country remains outside the tax net. The rationale of such a policy is to tax on territorial jurisdiction of the country only and to bring a balance between domestic and international taxation. If an individual resident of the country intends to consume the income earned outside the territorial jurisdiction, he/she is free to do so after paying due tax thereon to the exchequer.
The change would encourage these senior citizens to bring their overseas wealth back to India and this would also help in solving the issue of ‘Black money' and create a more conducive investment atmosphere.
In a communication to the Finance Minister, ASSOCHAM has stated that the post-independence era has shown that a sizeable population of Indian who have become Overseas Citizen of India (OCI) / Persons of Indian Origin (PIO) has contributed significantly to the overall development of the country. Recent estimates from the Ministry of Overseas Indian Affairs indicate the Indian Diaspora to be the second largest in the world, with 25 million people with a cumulative purchasing power of approximately $300 Billion.
These persons are often Indian origin entrepreneurs, who have spread their business empire worldwide or professionals who have taken important international assignments. Even if they desire to come back to settle permanently in India as Senior Citizens due to love for the mother land and near and dear ones due to the prevalent tax regime of the country.
Under Income Tax Act, 1961 if an individual stays in India for more than 182 days in a particular financial year or 60 days in the relevant tax year and 365 days or more in the preceding four financial years, the individual becomes resident of India.
The individual is considered to be not ordinarily resident (NOR) where his or stay in India during the past 7 financial years is 729 days or less or individual has been non-resident in nine out of ten financial years.( NOR conditions). However, where both these conditions are not fulfilled, individual is considered to be ordinarily resident (ROR) and taxed in India on his global income and also required to disclose his global assets.
NOR are taxed on their India sourced income like non residents and therefore, practically this window is available to the returning individual for the 2 to 3 years depending on the timing of their return. Thereafter they become ROR as they are not able to fulfill NOR conditions mentioned above. This has become a major contributor in the creation of ‘Black money', which is a menace to economic development.
Keeping in view the contribution of OCIs / PIOs in the development of the country mentioned hereinabove, ASSOCHAM has suggested that the provisions of Taxation Law should be amended so as to encourage the OCIs / PIOs to return and re¬settle in India by taxing them only on their Indian income and giving them exemption from payment of tax on income earned outside India
This is a practice in certain developed countries in Europe- where residents are taxed only in respect to the income earned in that country or on the income brought in the country. The income earned outside and not brought into the country remains outside the tax net. The rationale of such a policy is to tax on territorial jurisdiction of the country only and to bring a balance between domestic and international taxation. If an individual resident of the country intends to consume the income earned outside the territorial jurisdiction, he/she is free to do so after paying due tax thereon to the exchequer.
