Kerala objects to Budget proposal on period of stay for NRI status

Kerala Chief Minister Pinarayi Vijayan.

Kerala Chief Minister Pinarayi Vijayan.   | Photo Credit: S. Gopakumar

Pinarayi writes to Modi, says Keralites will be hardest hit

The Kerala government said on Sunday that it strongly disagreed with the Centre’s move to reduce the minimum period that an Indian citizen employed or living abroad should stay in the country to claim residential status for taxation purposes.

In an open letter to Prime Minister Narendra Modi, Chief Minister Pinarayi Vijayan said the move to reduce the number of days of compulsory stay from 182 to 120 would hurt lakhs of Indians who had left their homes for foreign shores to fend for their families.

Section 6 of the Income Tax Act, 1961, lays down the conditions for claiming residential status on taxation. As per the provision, the global income of a resident Indian is taxable, whereas, in the case of a Non Resident Indian (NRI), only the person’s revenue earned India falls within the tax net.

Currently, Indian citizens or persons of Indian origin are treated as residents only if they stay in India for at least 182 days.

‘Tax abuse’

The Finance Bill tabled by the Central Government in the Parliament has proposed to reduce the compulsory period of domicile in India to 120 days, ostensibly to net tax dodgers who flit between countries to hide their actual finances from regulators.

Mr. Vijayan said the move to purportedly “check tax abuse” would hit toiling NRIs from Kerala hardest. They formed the bulk of the workforce in the Gulf.

Keralites did not even remotely fall under the category of willful tax evaders, the Chief Minister said. They did not hail from the “economic upper crust” who sought to hide their wealth in tax havens. In contrast, Keralites have poured foreign exchange into the country’s coffers through sheer hard work, Mr. Vijayan said.

If enacted, the law would compel NRIs to compulsorily remain away from home for 240 days to retain their NRI status.

‘Visiting home’

Mr. Vijayan said the majority of non-resident Keralites visited their home State to attend to their domestic affairs and not to escape tax by shifting their base periodically.

A bulk of them, like oil rig workers, toiled for months and years at a stretch in harsh environments, with reduced scope for leave or holiday. The proposed law was a cruel blow to them, he said.

Approximately 15% of Kerala’s Gross State Domestic Product (GSDP) hinged on remittances from the Gulf. The amendment would drastically diminish the flow of remittance and worsen the national economic slowdown, the CM said.

The proposed amendment would affect all persons working in countries of the Gulf region that levy no personal income tax, he said.

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Printable version | Apr 4, 2020 12:21:09 PM |

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