Indian businessmen living in the UAE are rethinking investment plans at home after a proposal by New Delhi to reduce the number of days they are allowed to stay in India.
They said the government plan was “unjust and irrational”, and that it jeopardised their classification as Non-Resident Indians.
Under the proposed changes to the Income Tax Act, Indian citizens will be taxed on their global income if they spend more than 120 days at home, down two months from the 180 days allowed previously.
Business leaders met in Dubai on Tuesday to draft an appeal to India’s Finance Ministry and parliamentarians urging them to re-examine the proposal they say causes uncertainty.
They said Indian residents in the UAE can spend more than four months of a financial year handling business interests, caring for elderly parents, visiting children studying in India and attending weddings.
“This is very unsettling and will affect sentiment because it will impact NRI investments into India,” said Sudesh Aggarwal, chairman of the India Trade and Exhibition Centre and co-ordinator of the Business Leaders Forum on Tuesday.
“Why should I be penalised if I stay more than 120 days? Then it’s more beneficial for me either not to invest in India or I change my passport.”
As chairman of the Giant Group, a leading maker of polyester products, Mr Aggarwal said his company had informed Indian state governments that they would be stepping back from projects including a senior citizens' resort because of the change in residency laws.
“I know friends who have taken a similar decision to suspend investments into India at this time,” he said.
“The government of India needs to understand that people living in Gulf countries spend extended time with our children, for weddings, when people get sick. Sometimes 120 days will not be enough.”
The government proposal has created widespread confusion among Indians living overseas.
One change in the tax provision suggested that Indian citizens who did not pay taxes overseas and lived in several countries would be deemed Indian residents and their global income would be taxable.
But the government clarified on Sunday that Indians living in other countries would not be taxed on income earned abroad.
During the meeting on Tuesday, a committee of industry heads, lawyers and chartered accountants was formed to draft a letter to convey the reservations of NRIs and spell out the negative implications of the new proposals.
Meanwhile, Indian expatriates are urging their government not to punish them in their effort to catch tax evaders.
“The confidence of NRIs has been dented big time without any consultation,” said Ashish Mehta, managing partner of law firm Ashish Mehta and Associates.
“Genuine non-resident Indians will get hit by this redefinition.”
He said NRIs often returned home for medical treatment and mothers spent time in India to look after children studying there.
“Every time they will have to count the number of days or they will be taxed on their worldwide income," Mr Mehta sauid.
"They will always live under constant fear and check the calendar so they don’t exceed 120 days.
“NRIs have passionately supported the government every time the government has made an appeal for inflow of foreign funds. But the government has not put enough thought behind the effect this will have."
India receives the highest remittances, with residents sending home $79 billion (Dh290.18bn) in 2018, World Bank figures show, followed by China, Mexico and the Philippines.
Gulf countries are the source of most Indian remittances. The UAE leads with $13.8 million, followed by the US at $11.7m and Saudi Arabia at $11.2m.
Dr Azad Moopen, founding chairman of the Aster DM Healthcare group, said NRIs with more than one business visited India frequently to stay in control of their investments.
The group runs 13 hospitals, employing 11,000 people in India and 12 hospitals with 9,000 staff in the GCC.
“This has created a lot of anxiety and confusion," Dr Moopen said. "We go to India every month or every 15 days and stay there for one or two weeks but now that can become an issue."