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Tax Relief For NRIs, India's Overseas Students In Amended Finance Bill

Olga Robert

On Monday, the Finance Bill 2020 was passed in the Parliament without any discussion as the session was ended ahead of schedule on account of the coronavirus pandemic lockdown.

However, some amendments were made to the finance bill moved by Finance Minister Nirmala Sitharaman.

TCS on education-related remittances

An amendment has lowered the rate of tax collected at source (TCS) for education-related remittances to 0.5 percent, from the earlier proposed 5 percent.

On 1 February, in her Budget speech, FM Sitharman had proposed a 5 percent TCS on remittances exceeding Rs 7 lakh a year, under the Reserve Bank of India's liberalised remittance scheme (LRS).

It was pointed out by tax experts that the TCS on remittances related to overseas education would not only increase the costs of studying abroad, it would also mean extra paperwork as a credit on tax paid can only be claimed at the time of filing tax returns.

NRIs

The finance ministry has also amended the bill to relax proposed residency rules and tax implications. The new proposed tax rules will only be applicable to individuals that have over Rs 15 lakh annual India sourced income. It was also clarified that the total income calculation will exclude income from foreign sources, effectively ruling out the salary income of non-residents.

According to the proposals at the Budget presentation, there were doubts on whether NRIs, especially those work in tax havens like the UAE, will be subject to tax on their income not taxed outside India.

It was also proposed in the Budget to tax global income of NRIs who are not taxed in any jurisdiction but later clarified that only incomes of NRIs derived from doing business in India or undertaking a profession in the country will be taxed.

Further, the tax deducted at source (TDS) rate on payment of dividend to non-residents and foreign companies has been set at 20 percent.

Excise duty on fuel

The Finance Bill 2020 was also amended to raise special additional excise duty on petrol and diesel. It was increased from Rs 10 to Rs 18 per litre of petrol and from Rs 4 to Rs 12 per litre of diesel. The increased duty will help the government generate revenue and take advantage of the slump in global oil prices.

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