Finance Minister Pranab Mukherjee on Saturday sought to allay apprehensions among non-resident Indians (NRIs) that the proposed Direct Taxes Code (DTC), when implemented, would affect them adversely by way of their tax liability owing to a clause in the Bill defining their residential status,
In a detailed response to a query at the ‘Pravasi Bharatiya Divas' here, Mr. Mukherjee clarified that it was a “misconception” that the status of NRIs turns into Indian residents for taxation purposes following their stay in India for 60 days in a financial year. Moreover, no final decision has been taken as yet on the clauses incorporated in the DTC as the Bill is still under scrutiny by a standing committee of Parliament.
Noting that the Ministry of Overseas Affairs had approached his Ministry over the provisions of this clause, Mr. Mukherjee explained that, as per the DTC proposal, an NRI will be deemed as resident only if he has also resided in India for 365 days or more in the preceding four financial years, together with 60 days in any of these fiscal years. “Only when the two criteria are met, an individual will be considered resident,” he said.
In a further clarification, Mr. Mukherjee pointed out that even if an NRI becomes a resident in any financial year, his global income does not immediately become liable to tax in India. Global income, he said, would become taxable only if the person also stayed in India for nine out of 10 precedent years, or 730 days in the preceding seven years.
Turning to the domestic front, the Finance Minister said the government is committed to take all necessary steps to contain the price spiral even as he attributed the surge in inflation to the stimulus measures and rising global commodity prices. “We have to take all the necessary steps to keep inflation at moderate levels,” he said.
Mr. Mukherjee said that following the global meltdown, the stimulus measures put in place by the government to combat the slowdown were also responsible for rising prices. “In economy, every action has reaction. We have to face a situation where fiscal expansion led to rise in fiscal deficit ... that led to unstable price regime coupled with the global commodity price increase. [These] are the current challenges of the policy makers,” he said.
Stating that the government was making efforts to attain double-digit growth, Mr. Mukherjee urged the Indian diaspora to make investments and contribute to country's growth and prosperity.
Seeking larger investments by NRIs, Mr. Mukherjee reminded them that the Indian economy has continued to be a “vibrant and attractive” investment destination even when the developed economies remained fragile and offered limited productive opportunities.