Some emails can be downright scary, such as the one saying that the IRS wants to audit us. And this one that has been landing in some inboxes and even appears as a news item (seemingly) on the website of India Journal, making it available through Google News.
NEW DELHI – The Government of India announced April 22 imposition of a flat 5% tax on all NRIs over their world-wide income.
Income that is already taxed in India has been kept out of the purview to avoid double taxation. No double taxation benefits would be available for this 5% tax, meaning even if you are paying tax on your income in a country with which India has double taxation agreement, the benefit would not be allowed against this 5% tax.
All those Indians who are holding Indian Passports and have been out of the country for more than 180 days during the year are under this requirement. Income proof would have to be submitted in form of employer certificates, foreign tax filings etc.
The Indian government is also coordinating with Australia, Europe, America, UAE and other countries on collecting Income data for its citizens as part of data sharing initiative on terror prevention measures. This has been hailed as bringing in compulsory participation in development of India from Non Resident Indians. This means NRIs can no more just continue to retain their Indian citizenship without paying taxes in India. …
Having recently filed my taxes, the thought of having to hand over another piece of my income almost gave me a lump in my throat. Thankfully, Fawaz Iqbal put me at ease when I came across a post on his blog that confirmed the email’s hoaxity (is that a word?). But I’m still a little concerned and join a commenter named Guru on Fawaz’s blog in asking — even begging — the creator of the email “not to give such ideas to our Indian politicians.”
The U.S. double-taxes–with some exceptions.
Man, are you gullible if you fell for this 😉
Doubt it will happen; the Indian state can’t even tax the 30% of the black economy in India which is growing every year, would be suicidal to try and tax NRIs particularly as they don’t get muhc if anything from the state. Given the ideological complexion of the mainstream parties, I doubt you will be seeing introduction of any tax measures that would be new and controversial.
Here’s the official word on taxation for NRIs.
I’m really glad that you posted this. It was bothering me but I never actually got around to researching it myself.
would be suicidal to try and tax NRIs particularly as they don’t get muhc if anything from the state
They have enjoyed the benefit of being the small minority getting fancy degrees from good universities in India which are financed by the state at the cost of neglecting the elementary educational needs of the hundreds of millions of poor in India.
Yeah, that was worth a laugh; direct taxation in India is a joke.
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That is a fair point; though I was thinking mainly of NRIs are people who have been brought up and schooled abroad and usually born abroad as well. Their direct connections and experience with India tend to be tenous. You are right to point out that there is a newer trend of NRIs who go out from elite institutions to work abroad but many of them though strictly speaking NRIs in terms of visa and tax purposes; I tend just to regard as Indians abroad since they come back after a few years. Those that remain will be a small minority of the total NRI population I would have thought. Aside from which my understanding is that now IITs and IIMs are pretty much revenue generating rather than being generously subsidised by the state but I could be wrong here.
For “Non-Resident Americans” like me (I recently returned to India, and I’m a US citizen), this is already true – I get taxed on my world-wide income by the IRS even if I’m sipping Margaritas in Goa for all 365 days of the year (although I probably wouldn’t have much income in that case :-P).
If you are born and raised outside of India, you are not an “NRI.” You are an Indian-American, Indo-Canadian, or perhaps British Asian as the case may be.
NRI refers to Indians living abroad, not to people of Indian origin born and raised abroad who are citizens and residents of their home countries. The term “non-resident” implies that you could have been or once were “resident” in India. Look at it this way, if you have to get a visa to enter India, then you are not an NRI.
If this isn’t a hoax, I wont be too much against a 5% tax. If that money is well spent, it will only leave cleaner roads and air when I go for a visit. Hey – a man can dream, cant he?
Also, it might also make all the green card holders to get that coveted citizenship, instead of having benefits in both countries. Yes, the benefit includes not having to vote too :))
NRI = Indian citizen who lives out side India for more than 182 days between 1st April and 31st March. You can be born anywhere say UAE, if you are an Indian Citizen and satisy the residence conditions you are a NRI
Not Ordinarily Resident – An individual, who is defined as Resident in a given financial year is said to be “not Ordinarily Resident” in any previous year if he has been a Non-Resident in India nine out of the 10 preceding previous years or he has during the seven preceding previous years been in India for a period of, or periods amounting in all to, 729 days or less.
I think the operative phrase is that if you “hold an Indian passport”, then you would be taxed, which is OK. As #1 and 8 pointed out US taxes her citizens’ world-wide income, so why not India. India kisi se kum nahin 😉
With the US however, you can get credit for tax paid to a foreign country, so it’s not really double taxation. I don’t know what the Indian rule will be…
As an NRI I wouldn’t necessarily be opposed to this, if it were true. I also believe in voting rights for NRIs, and I think the two go hand-in-hand. The right to vote along with the responsibility of contributing.
You are right about the state financing universities, though government subsidies have been on a decreasing trend, and alumnis do contribute these days to IITs at least. But there are very few such universities, and the amount spent on them IMHO would be miniscule compared to the cost of educating the entire youth of the country. I don’t think you can blame these subsidies for “neglecting the elementary educational needs of the hundreds of millions of poor in India”. The “elementary educational needs” are denied simply because India is still a very poor country with very poor infrastructure and there is corruption at every level of government.
In fact, a study has shown that IITians contribute Rs 20 lakh crore to the Indian economy :that is Rs 15 for every Rs spent on them and that each IIT graduate meant 100 new jobs. I haven’t read the report myself, but it might be difficult to fudge such big numbers.
Thanks for posting about this tax issue: I was a bit worried. But seriously the tax system in India must be revamped: First of all they should make it easlier (the current adm has made it even more complicated), and there should be a method the persistent and all-pervading tax-dodgers (mostly businessmen and doctors with private practice).