Saudi Gazette report

JEDDAH — As the Indian government led by Prime Minister Narendra Modi unveiled the budget for financial year 2020-21 on Saturday, the proposed changes in taxation has left expatriates in Saudi Arabia and other Gulf countries in shock and confusion.

As per the changes, an Indian citizen now has to stay out of the country for 240 days, against 182 previously to be treated as a non-resident Indian.

“In the Income Tax Act earlier an Indian citizen stayed out of the country for more than 182 days, he would become a non-resident. Now we've made some changes, according to which to become a non-resident one has to stay out of the country for 240 days,” said Revenue Secretary Ajay Bhushan Pandey in a statement carried by news agency ANI.

Pandey further said that an Indian citizen, staying abroad for a certain period without paying tax, will be considered a resident of India, and his worldwide income will be taxed in India.

This has caused a great deal of concern among Indians living in the Kingdom.

They see the government’s move as an attempt to include them in a wider tax net.

The only comfort they can draw from the development is that at this point, the re-definition of who is a non-resident Indian is still a proposal made by the Finance Ministry. It remains to be seen when, if at all, it would be implemented.

Modi's right-wing government has been trying desperately to revive the economy, which has flagged for several quarters, with per capita consumption falling for the first time in four decades.

Presenting the budget, the finance minister said Indians earning under Rs1.5 million ($21,000) a year could pay lower taxes if they agreed to forego existing exemptions, with a view to raising their purchasing power.

Indian taxpayers are allowed to claim exemptions for a range of expenses, from medical insurance to vacation spending, under a labyrinthine tax regime that the minister has vowed to simplify during her tenure.

She also announced that companies would no longer have to pay dividend distribution tax, terming it a "bold move meant to attract foreign investors".

"Wealth creators will be respected in this country ... and this government assures taxpayers they will not be harassed," she said in her second budget speech since Modi won a landslide re-election last May.