Indian expats are still liable for taxes

Some non-resident Indians assume that if they live outside their home country they are not liable to be taxed on investments and income in India.

Arjun Srinivas says many non-resident Indians do not know they have to pay tax. Sarah Dea / The National
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DUBAI // Indian expatriates have been warned they must pay tax on their income and investments in their home country.

Arjun Srinivas, chief executive of Nair and Nelliyatt Chartered Accountants in Dubai, said non-resident Indians (NRIs) could face prosecution if they did not pay these taxes.

He said most NRIs were not “aware of how much income they have earned in India” or how much tax they owed. Some even assumed that as they lived outside India they were not liable.

“This is true for only income earned outside India,” said Mr Srinivas.

The tax payable income includes income from investments in fixed deposits, sale of investments in mutual funds, shares, sale of investments in property, land or income from rented property.

Mr Srinivas, who has been working in the UAE for three years, said many NRIs did not realise they had to pay tax on rental property income or any properties sold.

It was mandatory for Indians to pay 1 per cent of the property value in tax for sales of property worth 50 lakh rupees (Dh280,000) or more.

Many NRIs felt they would not be caught for evading taxes.

“I must remind them that all their transactions are being monitored,” he said.

“The Indian tax department has information about all these transactions and it is just a matter of time before they start sending notices.

“One must understand that all transactions are interconnected like a web and the government has access to all this information.”

Tax officials generally send out a notice asking the NRI why they have not filed a tax return.

“Failure to reply results in the income tax department initiating legal proceedings,” he said.

Proceedings can range from fines, to seizure of property, to criminal prosecution and jail.

A A, an Indian expatriate, said his father was investigated for tax evasion when he returned to his home country last year after living in UAE for 25 years.

His father worked for a private company and bought a house at home, which he rented out.

“He had no idea that he was supposed to pay tax on the rent he was earning,” said A A, a 24-year-old student. “When he returned, he had to face lots of legal complications because of ignorance. He was not a cheater but was caught in a situation that no honest person would like to be in.”

Achal Nandkeolyer, who works for an advertising agency in Dubai, said many NRIs were unaware that they were not from exempt from taxes back home.

“This is perhaps because they are so used to living in a tax-free society that they seem to forget that they have to pay taxes in their home country.”

Mr Nandkeolyer, who has also invested in a property in India, believed Indians on low or medium incomes were not aware of the financial regulations and so fell foul of the law.

“We need to provide as much education to NRIs about the tax system in our home country. Otherwise returning home will not be as pleasant as many of us dream it would be,” he said.