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Tax only domestic income of foreigners, industry bodies suggest Finance Ministry: Report

The aim is to make India an attractive destination for residency for expatriates managing foreign direct investment (FDI) in the country

October 27, 2020 / 09:49 AM IST

Assocham, CII, FICCI and the US India Strategic Partnership Forum (USISPF) are among the industry bodies that have approached the Finance Ministry seeking exemption of personal tax of individuals who have not been citizens of India for at least three years.

The aim is to make India an attractive destination for residency for expatriates managing foreign direct investment (FDI) in the country, The Economic Times reported.

As per the proposal, only local income of expats living in India for extended periods to invest or manage FDI or bring in managerial and technical expertise should be taxed.

“Such a policy has worked extremely well for Singapore and China, which was able to achieve 4 percent of its GDP as FDI in its boom phase,” said Dilip Chenoy, secretary general at FICCI.

Chenoy added that India must “act fast” to review residency rules for investors who are adversely affected due to current policies.


Deepak Sood, secretary general of Assocham further emphasised the need for creation of “a conducive environment for expats to live in India for extended periods, adding that the Centre should “… consider taxing foreign personnel on their locally generated income.”

To enable the update, exception has been suggested under Section 6 of the I-T Act for foreign domiciled individuals living or working in India, but not citizens or residents and not having filed returns for at least three previous years – with a possible range increase of five years, the report said.

The proposal is being sent to the Finance Ministry for pre-Budget consultations, a senior executive told the paper.

Moneycontrol could not independently verify the report.

CII on its part has noted the move could increase economic activity and tax collections due to higher FDI; while the USISPF President Mukesh Aghi said it would ensure “job creation and inclusive growth.”

Presently, India taxes foreigners’ global income if they stay in the country for over 182 days a year – and they are considered residents if they lived for the period or more in four preceding years.
Moneycontrol News
first published: Oct 27, 2020 09:49 am

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