Finance Minister Pranab Mukherjee today allayed apprehensions of non-resident Indians (NRIs) that the proposed Direct Taxes Code (DTC) will be harsher on them in terms of their tax liability.
Clarifying that no decision has been taken in terms of DTC as the bill is currently being scrutinised by a standing committee of Parliament, Mukherjee said it is a wrong perception that NRIs become Indian resident for the purpose of taxation if he stays in 60 days in a financial year.
Ministry of Overseas Affairs has approached the Finance Ministry over this clause, which the Finance Minister termed as misconception.
At a CII-organised Pravasi Bharatiya Divas, Mukherjee explained that as per the DTC proposal, an individual will be resident only if he has also stayed for 365 days or more in the preceding four financial years, together with 60 days in a financial year.
"Only when the two criteria are met, an individual will be considered resident," Mukherjee said.
Explaining further, the Finance Minister said even if a person becomes a resident in any financial year, his global income does not immediately becomes taxable in India.
Global income will only be taxable if he also stayed in India for 9 out of 10 precedent years or 730 days in the preceding seven years, he explained.
DTC bill was tabled by the Government in Parliament last year and is expected to replace the archaic Income Tax Act from April one, 2012.