Overseas Indian slams panel's new tax suggestion

Thursday, 02 January 2003, 20:30 IST
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DUBAI: A prominent expatriate in the United Arab Emirates (UAE) has warned that remittances from non-resident Indians (NRIs) may be hit if the suggestions of a panel to impose tax on Non-Ordinary Resident (NOR) Indians is accepted. Bharatbhai Shah, a businessman and social worker, says the suggestions of an Indian government-appointed panel to do away with NOR status for NRIs will discourage remittances and investment back home. The committee, which submitted its report on December 27, has suggested a slew of radical measures including lowering of corporate and personal tax with an aim to rationalise the tax structure and boost government revenue. The panel, headed by Vijay Kelkar, an adviser to the finance ministry, was set up six months ago to prepare a roadmap for initiating sweeping reforms in the complex Indian taxation structure. According to Shah, NOR status has been beneficial to both NRIs and India as it encourages returning expatriates to bring all their savings back. "The NOR status has been a positive policy initiative that has always encouraged NRI investors to participate in the development of India, something seen by the unexpected success of the Resurgent India Bond and the Millennium Deposit Fund to which NRIs contributed over $12 billion," Shah told IANS. "The removal of NOR status will be detrimental to the interest of NRIs who may, due to some unforeseen circumstances, become resident (by staying more than 183 days a year in India), if the Kelkar committee recommendations are implemented," he pointed out. Shah said many NRIs would be forced to keep their funds outside India, while some would not even declare their funds in India. It would also deter NRIs from making further investments in industry and business in the country and may lead to the withdrawal of technically qualified and competent NRI professionals from assignments in India. Shah says some of the inconveniences NRIs would have to face if NOR status was removed include losing the right to be exempted from income tax in respect of their non-resident external rupee account and foreign currency non-resident account deposits. Such deposits would have to be converted to Indian rupees under the existing rules of the Reserve Bank of India. He added that the move would also have an impact on the Overseas Corporate Body (OCB) owned and controlled by NRIs as members would be treated at par with companies resident in India. The NRIs would also lose the benefits they derive from holding, owning, possessing or transferring foreign exchange, foreign security or immovable property situated outside India, Shah said. There would be also a setback to investments that NRIs and OCBs do on a repatriable basis. The benefits of remittance of income on non-repatriable investments, which NRI and OCBs are entitled to, would also not be available to them, he added. But prominent non-resident Indians in the UAE have welcomed the Kelkar panel report for its bold approach to taxation reforms. B.R. Shetty, vice chairman and managing director of New Medical Centre Group, said the recommendation to bring the agricultural income of non-agriculturists under the tax bracket would certainly reduce frivolous agriculturists. He said another welcome recommendation was the identification of issues on taxation of non-residents.
Source: IANS