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Finance Minister Pranab Mukherjee

The proposed changes in the new direct tax code, which makes NRIs liable to pay tax if they stay in India for over 60 days a year, has led to some distress among the Indian diaspora in the Gulf region as they tend to spend a longer time in India due to their different socio-economic background, prominent NRIs say.

‘NRIs in the Gulf cannot be considered at par with the NRIs in the rich Western countries. They should be given differential tax treatment,’ Ram Buxani, president of Dubai-based Cosmos-ITL Group, told  in an interview.

The new direct tax code (DTC) proposes to make non-resident Indians (NRIs) liable to pay tax if they reside in India for more than 60 days in a particular year, down from the current provision of 182 days in the existing Income Tax Act.

‘NRIs who are in the Gulf tend to visit India for a longer period. They do it for various purposes like long-term medical treatment, children’s marriages and education,’ said Buxani, adding the proposed tax regulation had created unrest among Indians in the Gulf region as a majority of them visit their homeland for more than 60 days in a year.

Buxani, founder of the erstwhile Overseas Indians Economic Forum that was later merged with Indian Business and Professional Council, said the Gulf region should be given differential treatment under the new direct tax regulation in line with the Customs Act that gives special treatment to neighbouring countries like Nepal and Bhutan.

‘Our demand is that the current provision of 182 days should stay. If it is brought down to 60 days, the Gulf region should be exempted,’ said Buxani.

He said prominent NRIs from the Gulf region were lobbying against proposed changes and had already raised their concern with the Indian government.

The Direct Tax Code (DTC) Bill was tabled in parliament in the monsoon session last year. The new rule is aimed to replace the archaic Income Tax Act from April 1, 2012.

According to the draft bill, NRIs become Indian residents for the purpose of taxation if he/she stays in India for 60 days or more in a financial year and also stayed for 365 days or more in the preceding four financial years.

Finance Minister Pranab Mukherjee said the government was aware of the concerns of the Indian diaspora and had not yet taken any final decision on the issue.

‘It is still in the formulation stage – under scrutiny of relevant parliamentary committees, no final decision is taken yet,’ Mukherjee said at the Indian diaspora meet here.

M.A. Yusuffali, managing director of EMKE Group that runs LuLu hypermarket chain in the Gulf region, said the proposed regulation would hurt low-paid workers.

‘Many people take two-three months’ long vacation after working for two-three years. The new law will be a big problem for them,’ said Yusuffali, who is also a member of the prime minister’s global advisory council.

Yusuffali pointed out that the over five million NRIs in the Gulf countries are a very important source of foreign remittance for India and they should be given fair treatment.

Non-resident Indians in the Gulf countries contribute nearly one-third of foreign remittance flow to India. According to the Reserve Bank of India (RBI) data, India received $55 billion remittance during the last fiscal, which constitutes nearly four percent of the country’s gross domestic product (GDP).


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2 Comments on "Gulf NRIs seek exemption under new direct tax rules"

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S Chaudhary
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The NRI working in middele east specially on employement have a number of different conditions as compared to West & US. Like (i) An employee has to take exit permit to go home. This permission is not granted every year to most of worker & even engineers so they have to take accumulated leave of two months or more every two year which will invite income tax whithout any additional income. It is highly unfare. (ii) In most of the gulf region the medical is either very expensive and not very much recommended for major opration as compared to Indian… Read more »
P.Haramohan
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Concern expressed by NRI community in Gulf over the proposed amendment in Residential status of NRI visiting home country for a period exceeding sixty days and thereby creating tax implication on their earning is quite justified in comparision to the provisions in force . Considering their construtive contribution to the Forex -inflow into India and related impact in strengthening the economy of the country over the years , it is the onerous duty of the Parliamentary committees involved in formulation of the DTC and analysing the repercussions thereof , to take a considered view on the issue by letting the… Read more »
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