Under the current Income Tax provision, foreign land tax revenue is taxable if they live in India for more than 182 days a year, thereby increasing their tax liability in the country.
The Foreign Investors India Forum has called on the government to exempt foreign taxpayers working in India and align them with similar provisions in countries such as Singapore and China, with the aim of attracting investors and encouraging airline executives and overseas financiers.
Under the current Income Tax provision, foreign land tax revenue is taxable if they live in India for more than 182 days a year, thereby increasing their tax liability in the country. This arrangement serves as a stumbling block for foreigners, with worldly income, to stay in India longer.
The letter was written by India’s International Investor Chairman B B K Modi to Prime Minister Narendra Modi who referred the matter to the Department of Trade for consideration. The department reportedly took up the matter with the Treasury.
India, according to the Forum, needs smart international cooperation and heavy investment from new growth partners that is only possible when the government creates a more tolerant tax regime with a sustainable personal tax framework.
Although foreign nationals living in India may receive double taxation on non-Indian wages, challenges such as higher taxes, higher tax credit benefits, compliance with tax examinations and risks arising from reporting requirements may arise.
The pace of economic growth could be accelerated by increasing the level of FDI in India and with this, foreigners need to be encouraged to live and invest in India, it said.
Foreign nationals should be allowed to invest in their investment and stay in India for a longer period of time. It is recommended that the personal tax policy of such individuals be reviewed and that they should be taxed only on any income generated in India, the Forum said.
This can increase the tax liability and the burden of compliance with the person depending on the applicable tax to be paid on income from India. Therefore, foreigners do not have enough incentives to invest in India as they will not be able to stay in India to manage their finances, industry experts say.
In line with the Integrated Income Tax, the Forum suggests that the government may consider exempting direct tax provision for immigrants who propose to live and work in the country to manage the major FDI in India. Singapore, Asia’s largest financial center, pays taxes only on their local income.
The government could offer exceptions to foreign nationals working or living in India under section 6 of the Indian Income Tax Act on the same terms and conditions in other economies to attract FDI to India, experts said. PTI CS RR ANU ANU.