MONEY EARNED IN INDIA BY NRIS WILL BE TAXED
Context: The Union Budget 2020 proposed to tax Indians who are not tax residents in India but are neither tax residents in any other countries.
The budget proposes changes in the income tax law to make such individuals deemed tax residents of India.
- The Finance Bill, 2020 has proposed that an Indian citizen shall be deemed to be resident in India, if he is not liable to be taxed in any country or jurisdiction.
- This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India
- The government added, the new provision was not intended to include bonafide Indian workers in tax net who were working in other countries.
- At present, if an Indian or a person of Indian origin managed his stay in India such that he remained a non-resident in perpetuity, he was not liable to pay tax on his global income in India.
- In order to avoid any misinterpretation, it is clarified that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession
- Tightening the residency provisions, the Budget also proposed to reduce the period of stay in India to 120 days from 182 days earlier for persons of Indian origin (PIOs) to be categorized as non-resident Indians (NRIs).
- Reworking the definition of non-resident Indians (NRIs), the Budget document said that the I-T Act provides that an Indian citizen or a person of Indian origin shall be Indian resident if he is in India for 182 days in that year.
- Indian citizens who do not stay in India but have significant economic activities in India would now find it difficult to escape paying taxes in India.
- A government budget is an annual financial statement which outlines the estimated government expenditure and expected government receipts or revenues for the forthcoming fiscal year.
- Depending on the feasibility of these estimates, budgets are of three types — balanced budget, surplus budget and deficit budget.
A government budget is said to be a balanced budget if the estimated government expenditure is equal to expected government receipts in a particular financial year.
A government budget is said to be a surplus budget if the expected government revenues exceed the estimated government expenditure in a particular financial year.
A government budget is said to be a deficit budget if the estimated government expenditure exceeds the expected government revenue in a particular financial year.
This type of budget is best suited for developing economies, such as India.
UNION BUDGET OF INDIA
- The Union Budget of India also referred to as the Annual Financial Statementin the Article 112 of the Constitution of India, is the annual budget of the Republic of India.
- It is a statement of the estimated receipts and expenditure of the government for that particular year.
- The Government presents it on the first day of February so that it could be materialized before the beginning of new financial year in April.
- Until 2016 it was presented on the last working day of February by the Finance Ministerin Parliament.
- The budget, which is presented by means of the Finance bill and the Appropriation bill has to be passed by Lok Sabha before it can come into effect on 1 April, the start of India’s financial year.
- An interim budget is not the same as a ‘Vote on Account’.
- While a ‘Vote on Account’ deals only with the expenditure side of the government’s budget.
- An interim budget is a complete set of accounts, including both expenditure and receipts.
- An interim budget gives the complete financial statement, very similar to a full budget.
- While the law does not disqualify the Union government from introducing tax changes, normally during an election year, successive governments have avoided making any major changes in income tax laws during an interim budget.
- In the Budget, the receipts and disbursements are shown in three parts in which Government Accounts comprise (i) the Consolidated Fund, (ii) the Contingency Fund and (iii) the Public Account.
Consolidated Fund of India is the most important of all government accounts. Revenues received by the government and expenses made by it, excluding the exceptional items, are part of the Consolidated Fund.
Contingency Fund is created as an imprest account to meet some urgent or unforeseen expenditure of the government.
Public Account of India accounts for flows for those transactions where the government is merely acting as a banker.
Discuss the union budget of India? (20 marks)