There is no need for India to tax the global income of an NRI if he had stayed only up to six months in the country in the relevant assessment year, according to the parliamentary standing committee on finance. The committee doesn’t favour the Direct Taxes Code (DTC) Bill proposal to tax NRIs’ global income even if their stay in India is more than 60 days in the year.
Essentially, the committee concurs with the extant provision in the Income Tax Act that NRI global income can be taxed only if the individual stays in India for more than 182 days in a year. A member of the standing committee on condition of anonymity told FE that many countries give visa to Indians for six months, which means they want to encourage them to stay for longer periods. ?We should give similar treatment, at least to NRIs coming to India and not tax them (for their somewhat prolonged stay here),? he said.
Deloitte’s Neeru Ahuja said if the panel’s view is accepted by the government, it would help boost NRI investment in India.” The committee is also likely to suggest flat 30% tax on corporate income as against effective rate of around 23.5% they pay currently. The committee is learnt to have taken the view that deduction on account of depreciation, various incentives could be done away with. Besides, there would be no surcharge and cess on the corporate tax.
The DTC bill has provision for 30% corporate tax. There is no mention of surcharge or cess. The Finance Act pegs corporate tax at 30%, excluding cess and surcharge.
Taking into account, cess and surcharge, the rate comes to 32.5%. However, most big corporations end up paying around 23.5% tax as they get incentives for various investments, besides depreciation.
The standing committee would meet on Friday, February 24 and March 2 to discuss all the clauses of the DTC Bill, after which the report would be submitted to Parliament in the Budget Session.
The DTC was expected to be implemented from April 2012. However, it is now likely to be implemented from April next year.