Beware Of Email Hoax: 5 % Income Tax On NRIs
by SuperRaJJ on Apr.08, 2009, under Crazy Forwards, India, What's New?
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Calling all Non-Resident Indians or NRIs to pay attention here.
It is just today that I received an email from one of my colleagues regarding a news item notifying NRIs about a directive from the Department of Income Tax, Government of India that mandates a levying of 5% income tax on NRIs’ income from abroad or place of residence outside India. It mentions that the Indian government is coordinating with governments of countries with major populace of Indians to bring their means of earning and their incomes under taxation by way of government to government contact.
To be more clear about what I received, I will reproduce the email here:
5% TAX ON FOREIGN INCOME FOR NRI STARTING 2009 -10
Government of India today announced imposition of a flat 5% tax on all NRIs over their world-wide income. Income that is already taxed in India has been kept out of the purview to avoid double taxation. No double taxation benefits would be available for this 5% tax, meaning even if you are paying tax on your income in a country with which India has double taxation agreement, the benefit would not be allowed against this 5% tax. All those Indians who are holding Indian Passports and have been out of the country for more than 180 days during the year are under this requirement. Income proof would have to be submitted in form of employer certificates, foreign tax filings etc. Indian government is also coordinating with Australia, Europe, America, UAE and other countries on collecting Income data for its citizens as part of data sharing initiative on terror prevention measures.
This has been hailed as bringing in compulsory participation in development of India from Non resident Indians.. This means NRIs can no more just continue to retain their Indian citizenship without paying taxes in India. Though it may not be favorable in view of the NRIs who already bring substantial forex in form of remittances and Investments. This is bound to cause a lot of heart burn for the Indian community residing outside..
This is expected to generate ~10 Billion INR tax collection for the government in the year 2009-10.. For more information on this rule, tax filings and forms visit http://www.incometaxindia.gov.in/
As you can see, the email feeds on the fear of taxation of NRIs who earn their hard money abroad. Please note that I researched the topic (mostly because of selfish reasons), I found the email to be a hoax. To support my argument in this regard, I have found one other worried gentleman getting a reply from one qualified CA professional. To view the topic, please follow this link.
So, please stop panicking about this email and I request everyone who reads my article to STOP this email from circulation. It’s claims are totally unfounded and untrue and therefore DO NOT need to be circulated. In the future if you receive emails, please check out the basis of that email before forwarding it to your friends or family.
I hope this post will be helpful to all the people affected by this BASELESS email regarding 5% income tax on NRIs
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10 Comments for this entry
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All Pumped Up! » Announcing My New Blog: Crazy Forwards
April 9th, 2009 on 10:14 pm[...] around the email world on the internet. By receiving these emails in my inbox and finally getting a 5% percent Income Tax on NRIs hoax, I decided to think about setting up a blog to showcase the kind of forwards that are in [...]
April 8th, 2009 on 9:09 pm
Thanks SuperRaj for going the lengths in doing the research I did the same too and found it was Hoax, I don’t know which sick minded A’hole did that but this is not fun. But anyway atleast in the email chain in which I got I had everyone notified hope this stupidity stops right away.
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April 9th, 2009 on 7:58 pm
hey Diwakar Raj!
Happy 2 Help
But you have done the right thing in notifying your peers about this hoax email…
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April 11th, 2009 on 11:18 pm
I was surprised to see this email, well written and generally uses tax lingo. My first reaction was that it was a April fool joke.
Then being a CA I did some research to find out how to calculate my taxable income, deductions etc.
• Like elsewhere salaried people – the mango man (i.e. aam aadmi) is usually screwed because all income is in black and white (i.e. employment contract usually gives all the info).
• Countries like Middle East, Cayman, Bermuda, there are no tax returns etc. so if one has a business abroad I tried to locate how would the income taxes be levied and if there were losses would the Govt. of India refund some of the taxes.
• What about investment income and income from house rent?
• What exchange rate to use – closing rate, average rate etc?
• Is there a minimum amount i.e. Rs. 100,000 or a dollar/euro/yen/gbp equivalent?
What is mysterious is that there was no mention if the gross income is taxable or net income.
I can confirm it is an April fool joke for the following reasons:
• Currently only one country taxes its citizens on its worldwide income – the US. But then there are privileges for holding a US passport i.e. no visa requirements for almost any country, access to US embassies worldwide, diplomatic access etc. Now a lot of Indians would like a US passport but they would have to pay taxes on their worldwide income. Given that the benefits outweigh the taxes people usually don’t mind shelling out a few dollars.
• Usually the government has to follow a protocol. They have to introduce a tax bill or a proposal (usually during the budget), debate on it and then pass it in both houses of parliament. Once the President gives their accent only then it becomes law. I did not see any mention of this bill in the interim budget given by Mr. Pranab Mukherjee.
• Also, usually income taxes (direct taxes) bill is usually introduced in February (i.e. one month before the effective date April 1), so that the individuals can effectively plan their income to minimize taxes.
• If some of the questions above have to be answered there will have to be a whole new manual in the Income tax Act.
• Besides the NRI community should also be informed of these pronouncements na? How would the information be dispersed to the NRIs?
• Considering I am in several CA email groups and not one mentioned this was a bit strange. Such an important pronouncement and no discussion in the CA circles?
• Also did some research on google to confirm… the first 3 hits confirmed my thoughts.
http://shahidpages.wordpress.com/2009/04/06/tax-for-nri-in-india/
http://fiqbal.com/blog/2009/04/beware-of-email-hoax-5-percent-income-tax-on-nris/
http://www.investmentyogi.com/cs/blogs/taxes/archive/2009/04/07/tax-for-the-nri.aspx
There are lots more reasons but I will stop here.
Please pass this on to the worried NRIs you may have forwarded this message to.
Cheers,
Rudy D’Cunha, ACA, FRM, CFSA
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April 12th, 2009 on 2:06 pm
Thanks for your precious opinion, Rudy…
I’m sure this information will dispel the rumors raised by this hoax email regarding the “5% Income Tax on NRIs”. I am sure as and when people read this post, they should and they MUST forward the info here to their friends and family in order to ensure that they are not worried about this JOKE or HOAX….
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April 28th, 2009 on 10:09 am
Thank you for the clarifications on this issue. Now we feel relaxed. But through this message I would like to request the people who inolved in seding this HOAX mails not to give such ideas to our Indian politicians.
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May 11th, 2009 on 8:12 pm
Well Said Guru
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February 11th, 2010 on 2:20 pm
Its a hoax, probably. Most of our foreign currency earnings are through NRI deposits. Levying taxes on them can have a negative impact on their sentiment.
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March 30th, 2010 on 11:46 am
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June 5th, 2010 on 10:58 am
Hey…..nice post!!
Awesome, No more words to explain
just….cool blog.
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