Dubai: KEL Hosts Talk on Indian Budget, its Impact on NRIs

Media Release

Dubai, Apr 24: The much-awaited KEL Dubai event on 'Indian Budget 2012 and its Impact on NRIs' conducted by Mark D’Souza, president elect KE Bangalore, was indeed an eye-opener for the attendees. The event was held at the India Club on recently and was sponsored by Sky Jewellers.

The session highlighted the importance of existing and proposed tax laws/amendments and its implications – in particular for the ‘Non Resident Indians’.

Mark is a chartered accountant who runs his own Tax Advisory firm Mark D’Souza & Co in Bangalore. He is the auditor and consultant to several reputed commercial organizations as well as educational and charitable institutions. Mark, in his presentation brought out the essence of the 2012 budget and touched items of the direct tax code hitherto unknown to majority of the audience.

In a short time, Mark succinctly covered the following areas

Budget highlights of 2012
Analysis and overview of Tax proposals
Current income tax law applicable to NRI’s
Tax on sale of properties - Recent changes and Planning of Capital Gain Tax
Taxation on Rental, Interest and other income
Tax concessions, exemptions and benefits available for NRI’s
Tax implications on returning to India
Gifts, inheritance and repatriation
Filing tax returns? How does one file them?

Although India seems to have a resilient domestic economy, it is still subject to external factors such as Euro crisis and the rising crude oil prices. This in addition to the slow pace of reforms has drastically brought the GDP growth to less than 7% compared to 8.5% couple of years ago. The budget of 2012, in Mark’s words was ‘Anti-Tax Evasion’.

For the Non Resident Indian the following areas where touched upon

Marginal increase in existing tax slabs on personal taxation.
Basic tax exemption limit increased to Rs. 2,00,000 (existing limit Rs 1,80,000).
Non-resident entitled to claim relief in India only based on Tax Residence Certificate from the Government of resident country.
Payment by specified class of persons to non-resident to pass scrutiny by tax officer for determining income chargeability.

What appeared to be scary is the Government of India’s proposal to amend certain sections of the IT Act, 1961 retrospectively from April 1, 1962. This will give the tax man the rights to go back and check the corporate books and IT returns, right from the year 1962 although the IT law only allows for reviewing tax returns in the last six years. One does knows whether it is the right step forward, in the world’s largest democracy and how it will be implemented. Nevertheless it is sending a mixed signal to the International community and has resulted in vociferous objections from various governments, business councils and international tax organizations.

Declaration of foreign assets in income tax form – Mark informed that the income tax form has been modified to capture details of foreign assets including financial interests in any entity held by residents outside India. While the same form is used by NRIs for filing taxes in India, it is still not clear if they will have to declare their foreign assets as well.

In this finance bill, the government has also introduced a new law called General Anti-Avoidance Rule or GAAR. GAAR empowers the IT officials to deny tax benefits on transactions by foreign companies which do not have any commercial substance or consideration other than achieving tax benefit. It contains a provision allowing the government to retroactively tax overseas deals involving local assets (like Vodafone). It could also be used by the government to target participatory notes (P-notes). GAAR gives power to the tax department to deny double taxation benefits to foreign funds based out of tax havens like Mauritius.

Mark also covered the taxation rates on long terms and short term capital gains. Mark gave some interesting examples on what are the laws pertaining to sale of such properties and how can one minimize the impact of capital gains tax. Mark covered areas of taxable rental income and tax deduction at source for NRIs. A large number of NRI’s hold more than one residential property either singly or jointly with their spouse. He also pointed out that, rental income from residential properties that have not been let out during the financial year will be taxed on deemed rental basis except one residential property.

Frequent travelers to India need to be careful on how many days one can stay in India in order to be qualified as an NRI. While NRIs believe that they are non-resident if they are outside the country for more than 183 days, Mark mentioned, they need to also check the total number of days they were in India in the last four years if they have spent more than sixty days in the country the financial year. He reiterated that if in the last four years you have exceeded your stay in India over 365 days, then you become resident for tax purpose the moment you exceed 60 days in the current year.

At the end of the session the audience raised a large number of questions. ‘It wasn’t surprising how ignorant and out of touch that we NRIs are with regards to our tax obligations’. Mark’s session was a wake-up call for those who have substantial interests in India.

Mark had one key message delivered for all at the end – Its time to be proactive and ensure one stays on the right side of the law and engages a professional tax advisor in case one has invested in India.

Shobha Mendonca, president of KEL welcomed the gathering and introduced Mark D’Souza to the audience. At the end of the program, Alfred Vaz, president elect proposed the vote of thanks.