Indian expatriates have expressed grave concern over their government's move to bring Non-Resident Indians (NRIs) under the tax net. Under a proposed Direct Taxes Code (DTC) bill, which is likely to come into effect from April 1 this year, NRIs who have stayed in India for 365 days or more in the preceding four financial years, together with 60 days in a financial year will be liable to pay tax. It also affects those NRIs going home for good, because DTC changes their special status given by the Income Tax Act, 1961, as “Resident but Not Ordinarily Resident (RNOR).” Indian nationals falling under the RNOR category enjoyed tax benefits available to NRIs and were exempted from paying taxes for a period of two years from the date of their final return to India. But DTC has proposed removing the RNOR category and if the DTC comes into effect there will only be two categories: “Residents” and “Non-Residents”. DTC, which is currently being studied by a standing committee of parliament, annuls a provision that gave tax exemption to NRIs to avoid double-taxation. “If this bill becomes a law, then we will have to calculate and cut down on our stay in our home country,” said Fazlur Rahman, a senior official at a trading company. Under the Indian Income Tax Act, 1961, a tax on income depends upon the residential status of a person in India. DTC proposes to change the definition of “residential status”. “This move will hurt us in a big way, because it will be a drain on our lifelong savings,” said Akhtar Alam, a businessman. A global organization of Indian expatriates also urged the government to withdraw the proposal. The tax proposal is detrimental to the interests of NRIs who contribute substantially to the country's development, the Global Organization of People of Indian Origin (GOPIO), said in a statement. However, Pranab Mukherjee, India's Finance Minister, has assured NRIs that the proposed DTC will not hurt their savings. If a person becomes a resident in any financial year, his global income will only be taxable if he also stayed in India for nine out of 10 preceding years or 730 days in the preceding seven years, he explained. He said DTC is part of a tax reforms agenda aimed at “rationalization of tax rates, broadening of the tax base, special focus on sunrise areas like transfer pricing and international taxation, and the strengthening of the tax information exchange network.” __
