Proposed Indian tax overhaul to hit nris harder

Tax burden on NRIs


Oct 06, 2009

Indian tax laws are due to undergo extensive facelift which will affect tax burden on NRIs more than resident Indians. In an exclusive article in India Abroad (October 2, 2009), tax consultants A.N. Shanbhag and Sandeep Shanbhag wrote that the 48-year-old Indian Income Tax Act is set to be replaced by a new Direct Tax Code from April 1, 2011. A draft of the new Direct Tax Code has been released by the government for public debate Comments and suggestions from taxpayers and other shareholders will be taken into consideration before enacting the bill according to the government. According to Shanbhags, the Indian Diaspora will be adversely affected by the provisions. Briefly, those points affecting the Diaspora are as follows:

Under the new tax code, the tax liability of NRIs/PIOs in India could go up as much as 10 times.
Hitherto fully exempt long-term capital gains on equity and equity mutual funds are slated to be taxed at a float rate of 30 percent.Distinction between long-term and short-term gains will go.In the case property, elimination of tax deduction and the presumptive rate of taxation will adversely impact potential investors.For equity investors, in most cases, the jump will be from zero tax to paying at the rate of 30 percent.


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