Last week, the Lok Sabha passed the Finance Bill, 2021, which has a provision that likely means Non-Resident Indians (NRIs) not paying taxes in any country will be liable to pay taxes in India. It is believed that the move may affect millions of bonafide Indians working in the Middle East.
Lok Sabha MP and Trinamool Congress leader Mahua Moitra tweeted, "Complicated words in Finance Bill 2021 - in reality a Special Gulf workers tax. FM going back on her words. Hardworking Indian workers in Saudi/UAE/Oman/Qatar to be taxed EXTRA (sic)." She even tagged Thiruvananthapuram MP and Congress leader Shashi Tharoor to highlight the importance of the issue.
While responding to the tweet, Tharoor sought clarification from Finance Minister Nirmala Sitharaman on the matter. He tweeted, "This would be a calamity for our hard-working expatriates. Demanding an urgent clarification from @nsitharaman"
It is estimated that nearly 8.5 million NRIs out of the 31 million NRIs working in the Gulf region do not have to pay tax on the individual income that they earn in some Middle East countries.
According to the 29th amendment of the bill, "liable to tax", in relation to a person and with reference to a country, means that there is an income-tax liability on such person under the law of that country for the time being in force and shall include a person who has subsequently been exempted from such liability under the law of that country."
It is reportedly, this definition, which has been questioned by the MPs. However, the amended finance bill removes the confusion pertaining to the term "liable to tax," the new definition stresses that if a person is liable to taxes other than the income tax, then such person would not be considered satisfying the definition of "liable to tax."
On this background, Union Finance Minister Nirmala Sitharaman clarified that salary income earned by non-resident Indians in Gulf countries would continue to be excluded from tax in India. She was responding to Mahua Moitra's tweet.