Sunday, August 14, 2022

New tax law has made it difficult for Indian businesses with offshore connections

According to the Finance Bill: “The term liable to tax, in relation to a person, means that there is a liability of tax on that person under the law of any country and will include a case where subsequent to imposition of such tax liability, an exemption has been provided.”

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 Indian businessmen who have been evading taxes in India by parking money in offshore accounts will now have a major problem. India now has amended its tax laws and redefined the term ‘liable to tax’. The new provisions, for example, has put an end to the parking of money abroad to avoid paying taxes at home, according to a report ToI some time ago.

The redefined ‘liable to tax’ was in an annexure in the Indian Finance Minister’s budget speech. According to the Finance Bill: “The term liable to tax, in relation to a person, means that there is a liability of tax on that person under the law of any country and will include a case where subsequent to imposition of such tax liability, an exemption has been provided.”

The amendment has not affected salaried professionals working in the Gulf region since they will not have to pay tax in India on the salary drawn there

The move has had an impact on NRI-owned groups in popular tax havens like the UAE. These companies are incidentally operated from India. The redefinition will ensure that the money earned by these NRIs from the foreign group companies will be taxed in India. Perhaps, what is most important is that the amendment is valid for FY 2020-21 as well as subsequent years.

There are many Indians who live in the Gulf which has no tax laws for individuals, and who earn more than Rs 15 lakh of taxable income in India. These people will now come under the “Resident and Not Ordinarily Resident” category in India.

The amendment has not affected salaried professionals working in the Gulf region since they will not have to pay tax in India on the salary drawn there.

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Tirthankar Ghosh
Tirthankar Ghosh is a senior journalist and presently Managing Editor, Newsline Publications. He has also been writing for well over 15 years for the New York-based Air Cargo News Flying Typers.

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