International Taxation—Recent Developments International Taxation—Closing the Gaps on the Field

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The Tax Publishers International Taxation--Recent Developments International Taxation--Closing the Gaps on the Field Srivatsan Ranganathan The article discusses some small but important developments on international taxation that have been implemented either through legislation or through procedural/reporting mechanism so that the gaps on taxation are becoming narrower for non-residents. 1. Need for protecting tax base Each nation is striving hard to protect and grow its share of taxes in the global diaspora. India is no exception to it. There are a number of small but important developments that have happened in the recent times on this dimension to plug gaps in the field play of taxation. Some of these measures at the outset are aimed in fact plugging at a trickier loop hole called double non-taxation. By double taxation we mean the same income is taxed twice once at the source state and again at the state of residency. By double non-taxation we mean an income not getting subject to tax both in source state as well as at the state of residency thus going scot-free from taxation itself. 2. Deemed residency Prima facie the scope of taxation remains that for incomes which are earned outside India those cannot be taxed for a non-resident and incomes which are earned or deemed to accrue or arise in India are taxed for any of the persons be it a resident, non-resident or not ordinarily resident. To put it simply a non-resident is generally taxed only for the Indian source of incomes. Effective on 1-4-2021 the concept of deemed resident was brought in the Income tax Act, 1961 vide - 'Section 6 (1A) Notwithstanding anything contained in clause (1) an individual, being a citizen of India, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year shall be deemed to be resident in India in that previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.' SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

International Taxation--Recent Developments

International Taxation--Closing the Gaps on the Field

Srivatsan Ranganathan

The article discusses some small but important developments on international taxation that have been implemented either through legislation or through procedural/reporting mechanism so that the gaps on taxation are becoming narrower for non-residents.

1. Need for protecting tax base

Each nation is striving hard to protect and grow its share of taxes in the global diaspora. India is no exception to it. There are a number of small but important developments that have happened in the recent times on this dimension to plug gaps in the field play of taxation. Some of these measures at the outset are aimed in fact plugging at a trickier loop hole called double non-taxation. By double taxation we mean the same income is taxed twice once at the source state and again at the state of residency. By double non-taxation we mean an income not getting subject to tax both in source state as well as at the state of residency thus going scot-free from taxation itself.

2. Deemed residency

Prima facie the scope of taxation remains that for incomes which are earned outside India those cannot be taxed for a non-resident and incomes which are earned or deemed to accrue or arise in India are taxed for any of the persons be it a resident, non-resident or not ordinarily resident. To put it simply a non-resident is generally taxed only for the Indian source of incomes. Effective on 1-4-2021 the concept of deemed resident was brought in the Income tax Act, 1961 vide -

'Section 6 (1A) Notwithstanding anything contained in clause (1) an individual, being a citizen of India, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year shall be deemed to be resident in India in that previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.'