As per the recent survey, the complexities of tax compliance for NRIs and OCIs has been a hotbed. With approximately 32 million NRIs and OCIs, it is reported that India has the world’s largest overseas diaspora. Today, India's NRI network has witnessed a significant presence across Gulf countries including Singapore, the US, Canada, the UK, among others.
Furthermore, there is a survey conducted by SBNRI, which is an all inclusive investment platform dedicated towards NRIs and OCIs, which showcases that 14.11% NRIs from Australia, followed by 13.10% and 8.06% from the UK and the US, respectively, shows their unhappiness with respect to the double taxation pertaining to filing tax returns as an NRI and OCI.
At the same time, there is a percentage of NRIs from the US, UK and Australia (12.10%, 9.05%, and 6.02%) who find accessing taxation documents from abroad a grave challenge when it comes to filing taxes as NRIs.
In addition, this much needed survey points out that about 10% of NRIs from the US, followed by 7% from Australia, Canada, and Singapore, respectively, report only the income earned in India to the Indian Tax authorities.
While, on the contrary, about 6% from Canada, 4% from the US and Singapore and 3% from Australia respectively have revealed that they have reported both income earned in India as well as abroad to the Indian Tax authorities.
Understanding this, the Indian government is focusing on simplifying the taxation for NRIs. However, despite their dedicated initiatives, there are challenges that persist in the tax framework. As it is an obligation for NRIs to file income tax returns in India if they have accrued earnings within the Indian territory during a relevant financial year.
As per the mandate given by the provisions of the Indian Income Tax Act 1961, the determination of an NRI's income taxes in India is contingent upon their residential status for that particular year. So, if your residential status is classified as 'resident', then it should be noted that your worldwide earnings will face taxation under Indian jurisdiction.
In addition, to prevent double taxation by allowing taxpayers to pay tax in only one country, there is Double taxation Avoidance Agreement (DTAA) in the income tax department. This can really boost income savings while attracting some lucrative businesses. Furthermore, it can also aid in curbing tax evasion. This can be done by offering relief from double taxation; thereby making the country more appealing for investments.
