Follow-up to the Global Goans Convention 2010 on Matters of Importances & Discussions
"Direct Tax Code, 2010 (DTC)"
Date: Fri, 17 Dec 2010 10:22:48
Subject: Direct Tax Code Bill
Dear Mr. Santos,
I had received your email on the above subject on 31 October 2010 on the Direct Tax Code Bill awaiting consideration of the Central Parliament in Delhi.
Subsequently, you will recollect that this matter was raised by Mr. Rabindranath Gonsalves during the Question and Answer Session of the Global Goans Convention on 17th November 2010.
However, as I wanted to gather the relevant information on the subject, it took time for me to respond.
As you are aware, "Income Tax" is a Central Subject coming within the purview of Government of India, Ministry of Finance, New Delhi and the State Government has no control over the imposition or collection of income tax on Goans, whether residents or non residents.
Be that as it may, please be informed that income tax liability of an individual tax payer depends upon "residence" as defined under Section 6 of Income Tax Act 1961. In the case of "ordinary resident". his global income ie. income all over the world is liable for tax in India as per Indian tax laws. However in the case of "non-resident", he will be liable for tax in India only in respect of income earned / received in India and income deemed to accrue or arise in India as per Indian tax laws. Income which is earned or arises abroad is not liable for tax in India.
As regards test of residence, an individual is regarded as a "resident" in India if i) he stays in India for 182 days or more during a previous year; OR ii) he stays in India for 60 days or more during a previous year, and 365 days or more during the 04 years preceding that previous year. The short period of stay in India of 60 days, however, gets extended to 182 days if an Indian citizen or a Person of Indian Origin who is abroad, comes on visit to India in any previous year. However, in case NRI returns on transfer of residence or leaving the job, the period of stay will still be 60 days and not 182 days since he is not on visit to India.
The Government of India has brought forth a new legislation entitled "Direct Tax Code, 2010 (DTC)" which when adopted by Parliament will come into effect from 01 April 2012. Under Clause 4 of DTC, the benefit of 182 days available to an Indian citizen or a Person of Indian Origin who is abroad, comes on visit to India in pervious year, has been omitted. As a result, if NRI/PIO stay in India on visit exceeds 60 days in a year and 365 days or more in previous 04 years, he will be treated as "resident" in that particular financial year and will be liable for tax on his entire world income including on his earnings abroad.
Considering that many a Goans who are working on oil rigs in the Gulf visit India every alternate month on leave, will be affected by the proposed legislation, the Hon Commissioner for NRI Affairs would make an appeal to the Union Finance Minister for restoring the benefit of 182 days.
Please inform Mr. Rabindranath Gonsalves and other interested parties accordingly.
U. D. Kamat
Director for NRI Affairs
On Sun, 31 Oct 2010 10:41:52 +0530 wrote
Dear Mr. U.D. Kamat
Director of NRI Affairs
Government of Goa
Dear Mr. Kamat,
Please find attached a copy of the Direct Tax Code Bill which will be effected soon.
As more and more NRI Goans are very, very concerned about the new Taxation, it would be advisable to have someone prepare a short narrative to explain the nitty-gritty of the subject Tax Code Bill.
This will surely be a relief as the subject would be understood, if explained in simple terms, and surely the delegates attending the Global Goans Convention 2010 will be grateful for such an effort from your end.
Thank you for your consideration. We look forward to your support in this endeavour.
Carmo Santos, Hon. Chairman
Suresh Naik, Hon. President
Goan Cultural Centre-Kuwait
Shri Eduardo Faleiro
Hon. NRI Commissioner
Government of Goa
A concerned Goan (Gaspar Almeida) forwarded this link in September 2010 and accordingly the Goa NRI Commissioner's Office was alert to this subject:
Impact of Direct Tax Code ( DTC ) on Resident Indian & NRI Individuals
Last week the cabinet approved the Direct Tax Code bill and forwarded it to the parliament for approval. This is a good sign of the changes happening in the modern India. The Income tax act which we follow today is more than 50 years old. The objective is to widen the tax base and make the tax law much simpler & more effective.
These are some of the salient feature's of the DTC for Resident & NRI Investors.
Tax slabs to be changed
Slab 1: Upto INR 200000 the tax rate is NIL. ( Present Slab 1 is upto INR1.65 lacs @ NIL)
Slab 2: INR 200,001 to INR 500,000 the tax rate is 10% ( Present slab 2 is INR 1.65 to 5 @ 10%).
Slab 3: INR 500,001 to INR 1,000,000 the tax rate is 20% (Present Slab 3 is INR 5 to 8 @ 20%).
Slab 4: INR 1,000,001 and above the tax rate is 30% ( Present Slab 4 is INR 8 & above @ 30%).
In the case of a resident individual of the age of 65 years or above, the basic exemption limit to be INR 250,000
Corporate tax will come down from 33% to 30% but the Minimum Alternate Tax (MAT) will be increased to 20% from 18%.
STT (Securities Transaction Tax) remains the same
Wealth Tax to be levied @ 1% after the basic deduction of INR 1 Cr.
For NRI's the income from Dividend, Interest, Income from MF, Royalty or fees for technical purpose & income from insurance all to be taxed @ 20%
For NRI's the income from lottery, race, gambling or betting to be @ 30%
Short term & long term redefined. Any investment has to cross the financial year of purchase for the number of days counting to start. That means if one buys a mutual fund on June 1 2010, his investments will be short term till March 31st 2012 (Count 365 days from April 1st 2011)
Normal rates as it is now will apply.
Indexation benefits are available for long term capital assets only.
Dividend Distribution Tax :
Corporate DDT of 15% will remain.
DDT on Equity Oriented MF will change from present NIL to @ 5%.
DDT on money market & liquid fund for individuals will change from present 25% to NA.
Surcharge & Education cess to be removed.
Dividend distributed by equity mutual funds where DDT is paid will be tax free at the hands of the investor.
Dividend distributed by non equity mutual funds will be taxed at the hands of the investor from present NIL to 10% if dividend above INR 5000 in the year.
TDS on NRI Capital Gains:
TDS on LTCG on equity funds remains the same @0%
TDS on other capital gain will be @ 30% which seems to be high.
No surcharge & education cess.
Sec 80 C: ELSS (Equity Linked Savings Scheme) will not be a part of the Sec 80 C benefit.
This is not an exhaustive list but I have tried to cover the most important ones which can effect our investing decision. To understand the full report you can view the discussion paper on the DTC at the Finance Ministry website Link.