Centre should desist from amending NRI status: Kerala CM
Thiruvananthapuram: Kerala Chief Minister Pinarayi Vijayan on Sunday criticised the Centre to amend the section 6 of the Income Tax Act, 1961, which stipulates conditions for determining the residential status for tax purposes in India.
“We record our strong disagreement with the move in the Finance Bill, 2020, brought in under the guise of checking tax abuse, but is in reality going to hurt those who toil and bring foreign exchange to the country.
“The Central government should desist from going ahead with the amendment to section 6 of the Income Tax Act, 1961, proposing to reduce the stay period for the Indian citizens or persons of Indian origin from 182 days to 120 days, for being treated as residents for tax purposes,” said Vijayan in a statement issued here.
He pointed out that most of the people working in the Middle East from Kerala are having houses and families in Kerala and they visit and stay in their home state to look after their domestic affairs.
“Tax Evasion is not their intention and they do not fall in the category of persons who shift their bases to avoid taxes. Such persons will be hard hit by the amendment to section 6 of the Income Tax Act,1961,” added Vijayan.
Vijayan also pointed out that Kerala’s economy is substantially supported by remittances, especially from those in the Gulf countries, who will be adversely affected by this amendment.
He, however, pointed out that they have no dispute with the fact that the undisclosed income of those who transfer money to tax havens need to be brought within the tax net and government should utilise such tax proceeds for social welfare programmes.
“This has been our consistent position. But here too, persons working in countries of the Gulf region which have no personal income tax, will be hit. Most of such persons are not in the economic upper crust. They need to be excluded from the ambit of this proposed amendment as they are mostly middle income people who bring to our country a part of their hard earned income,” said Vijayan.
According to the latest Kerala Migration Survey conducted by the Centre for Development Studies, here there are 2.1 million emigrants from Kerala across the world, whose estimated total remittances to Kerala stands at Rs 85,092 crores.
Many people from Karnataka and Goa work in the Gulf. Karnataka and Goa are ruled by the BJP. Will the CM’s of Goa and Karnataka oppose the amendment to section 6 of the Income Tax Act, 1961, proposing to reduce the stay period for the Indian citizens or persons of Indian origin from 182 days to 120 days, for being treated as residents for tax purposes, which will adversely affect Karnatakans and Goans working the Gulf?
The rule is draconian for the majority of the NRIs while only a few smart NRI businessmen abuse the “NRI definition” to escape taxes. What the government as part of the budget last week should have done instead was to make the new 120-days rule applicable to only those NRIs who do not live/work in one foreign country for at least 182 days in a year, instead use the “country-hopping” trick to spend a couple of months every year in each country where they have long term residency visas, while living most of the year in India to escape the tax regime in any country. That would have been a sensible approach.
Implementation of my suggestion would be difficult but they could have started off with the self-declaration from the NRIs every year and the IT auditing a few random ones. For the sins of the few, the vast innocent majority shouldn’t suffer. That’s my view but the governments use one fell swoop to entirely shut the loophole without any due diligence.