Union Budget 2011: DTC is a time bomb for NRIs with regard to proposed change in residency definition
Wednesday, March 02, 2011http://economictimes.indiatimes.com/news/news-by-industry/services/travel/union-budget-2011-dtc-is-a-time-bomb-for-nris-with-regard-to-proposed-change-in-residency-definition-says-ajai-randhawa/articleshow/7601232.cms
The current budget presented in parliament by the union Finance minister was in a way predictably lacking surprises as a budget of a developed economy should be. Having lived across the globe the Indian finance ministers budget speech is an unparalleled spectacle of mega proportion not experienced in any other part of the world.
I remember nostalgically my father a senior police officer glued to the radio/TV on budget day year after year listening carefully to the new maze of complex rules the finance minister would throw at compliant service class imposing complex taxes on capital gains, Estate duty or dividends one year and removing them the next. Meanwhile the corporate and the big fish cared less as they knew how the system worked and used it to their advantage.
In the early 60's to earn over a lakh of rupees was considered super rich and taxes as high as 90 % applied taking away any incentive to earn an higher income honestly. However today in balance the Indian tax regime has reduced taxation slabs to fair levels and become customer friendly and thereby reaped growing tax collections.
The soft spot still seems to be weak implementations and the unnecessary harassment by the field staff in delaying legitimate tax refunds and looking for petty oversights during "random" scrutiny and letting the big and mighty go untouched.
However there still exist nagging problems for various interest groups and initiatives to that end need to be addressed at some stage by either the sitting parliament committee on DTC or in future budgets. The Direct tax code slated for implementation in 2012 is a time bomb for Non residents specially as regards the proposed change in the residency definition for Indian citizens which is effectively being reduced to on an average from current 181 days a year to 41 days a year under the previous 4 year 365 day cumulative definition, which will become effective next financial year unless amended.
This will have serious consequence to those senior citizen, consultants businessmen and semi retired Indian citizen NRI'S who live overseas and having met their financial goals would like to spend equal time in India and enjoy their semi-retirement without losing their nonresident tax status. Neighboring South East Asian countries such as Thailand, Malaysia and Philippines recognizing retirees as an excellent source of expendable dollars and thus encourage even non citizen to purchase retirement property, use medical services and enjoy local food & entertainment so as to positively impact the local economy.
They have come up with attractive retirement visa which not only exempt those with this visa from taxes on their world income but give them a hassle free 5 year renewable multiple visa to come and go in their chosen country of residence as they please.
To make it difficult for non resident Indians to visit their home country and potentially face tax harassments under the new residency definition would be a highly negative step and needs to be addressed early. Several nonresident gatherings in India and foreign associations have directly made the finance minister aware of this negative impact on the NRI definition and were hopeful of relief in this budget.
The glass ceiling experienced by the earlier generation of Indian professionals has all but disappeared and is actually working for the positive as can be seen by the explosion of top management positions being held by Indian in top multinationals, banks, universities and now even the government. India will benefit immensely by allowing these successful Indians maintain and grow their ties with their motherland rather than imposing restrictions on the days spent in India which would be a big negative.
