{"id":6219,"date":"2020-02-07T18:30:51","date_gmt":"2020-02-07T13:00:51","guid":{"rendered":"https:\/\/triumphias.com\/blog\/?p=6219"},"modified":"2020-02-07T18:32:16","modified_gmt":"2020-02-07T13:02:16","slug":"income-tax-act-proposed-amendment","status":"publish","type":"post","link":"https:\/\/triumphias.com\/blog\/income-tax-act-proposed-amendment\/","title":{"rendered":"Income Tax Act &#038; Proposed amendment"},"content":{"rendered":"<p><strong>Relevance: Mains: G.S paper III: Economy: Taxation<\/strong><\/p>\n<p><strong>Context:<\/strong><\/p>\n<ul>\n<li>An amendment is proposed to the Income Tax Act in the Finance Bill or the Union Budget 2020.<br \/>\n\u2022 It says that all Indians who are working abroad and not paying any income tax in those countries would be liable to pay tax in India.<\/li>\n<\/ul>\n<p><strong>What is the response?<\/strong><\/p>\n<ul>\n<li>Kerala Chief Minister wrote to Prime Minister recording his government\u2019s disagreement with the provision.<br \/>\n\u2022 He said that the proposal would hurt those who toil and bring foreign exchange to the country.<\/li>\n<\/ul>\n<p><strong>What is the existing law?<\/strong><\/p>\n<ul>\n<li>Two parameters determine whether India levies income tax on an individual.<br \/>\n\u2022 Residential status: In India, residency requires a person to actually live in the country for a specified number of days in a year.<br \/>\n\u2022 The Source of the Income: It is the country where the income is being generated.<br \/>\n\u2022 For a resident Indian citizen, the income tax law applies to that person\u2019s worldwide income and such a resident Indian is required to pay tax on all of it.<br \/>\n\u2022 But for a non-resident Indian, the income tax law applies only to the income earned from within India.<br \/>\n\u2022 This difference between residents being taxed on their global income and non-residents being charged only on their Indian income lies at the heart of the confusion.<\/li>\n<\/ul>\n<p><a href=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/Incom.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-6222\" src=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/Incom.png\" alt=\"\" width=\"455\" height=\"463\" srcset=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/Incom.png 455w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/Incom-147x150.png 147w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/Incom-295x300.png 295w\" sizes=\"auto, (max-width: 455px) 100vw, 455px\" \/><\/a><\/p>\n<p><strong>What is the amendment proposed by the government?<\/strong><\/p>\n<ul>\n<li>The proposed amendment to the IT Act has three parts.<br \/>\n\u2022 Number of Days: The number of days that an Indian citizen can stay in India without becoming a resident is cut from 182 to 120.<br \/>\n\u2022 The Memorandum to the Budget said this provision was being misused.<br \/>\n\u2022 NOR category: The Memorandum has carved out the \u201cNot Ordinarily Resident (NOR)\u201d category.<br \/>\n\u2022 This status ensures that an individual who isn\u2019t ordinarily a resident isn\u2019t taxed as a resident, just because he spends more than specified number of days in India during a particular year.<br \/>\n\u2022 The amendment states that an NOR would be someone who has not been a resident of India for seven of the past 10 years.<br \/>\n\u2022 Under the existing law, it is nine out of the past 10 years.<br \/>\n\u2022 The Confusion: This amendment said that an Indian citizen who isn\u2019t liable to tax in any other country or territory shall be deemed to be resident in India.<\/li>\n<\/ul>\n<p><strong>Arising problem with this:<\/strong><\/p>\n<ul>\n<li>The amendment tries to tax non-residents as residents.<br \/>\n\u2022 This led to panic because, in the absence of clarifications, all non-residents working in tax-free jurisdictions concluded that all their income in there will now attract the Indian income tax rate.<br \/>\n\u2022 Apart from the likely harassment, this undermined the whole point of people leaving their homes in India to work in tax-free jurisdictions.<\/li>\n<\/ul>\n<p><strong>Way ahead:<\/strong><\/p>\n<ul>\n<li>The government has clarified that its intention isn\u2019t to target bona fide workers.<br \/>\n\u2022 It says it wants to catch tax evaders who game the residency provisions to evade all taxes.<br \/>\n\u2022 It says that the tax laws should not encourage a situation where a person is not liable to tax in any country.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Relevance: Mains: G.S paper III: Economy: Taxation Context: An amendment is proposed to the Income Tax Act in the Finance<\/p>\n","protected":false},"author":1,"featured_media":3247,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[123,42,43],"tags":[392],"class_list":["post-6219","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","category-general-studies-iii-technology-economic-development-bio-diversity-environment-security-and-disaster-management","category-indian-economy","tag-union-public-service-commission-upsc"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/6219","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/comments?post=6219"}],"version-history":[{"count":3,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/6219\/revisions"}],"predecessor-version":[{"id":6223,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/6219\/revisions\/6223"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/media\/3247"}],"wp:attachment":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/media?parent=6219"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/categories?post=6219"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/tags?post=6219"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}