Double taxation challenges non-residential Indians globally

"Taxation Challenges"

Double taxation is a prominent issue facing Non-Residential Indians (NRIs) and Overseas Citizens of India (OCIs). This dilemma involves being taxed on the same income in both India and their country of residence. Consequently, the financial stability of around 32 million people worldwide, mostly residing in parts of the Gulf, Singapore, the US, Canada, and the UK, is adversely affected.

Although India has Double Tax Avoidance Agreements (DTAAs) with several countries to alleviate such burdens, their effectiveness varies for every specific case. These tax relief measures are often difficult to utilize due to complexities in regulatory compliance and a general lack of knowledge among NRIs and OCIs.

Despite the burden of double taxation, these individuals still have tax liabilities in India on income generated within the country. They are obligated to comply with Indian tax laws, irrespective of their tax status in the country of their residence.

Taxation complexities for global Indians

However, a Double Tax Avoidance Agreement (DTAA) between India and the NRI’s country of residence can mitigate the impact of double taxation.

A recent survey conducted by SBNRI, an investment platform, unearthed the complexities NRIs and OCIs face regarding their tax obligations. Even with the implementation of numerous reforms, these Indians living abroad still face significant obstacles while managing their taxes. A lack of knowledge and understanding of tax-related regulations often lead to penalties and legal complications, which only add to their financial burdens.

Interestingly, according to the survey, 14.11% of Australian NRIs, 13.10% from the UK, and 8.06% from the US consider double taxation as a main obstacle. Consequently, expert assistance was identified as crucial to simplify the tax filing process for NRIs and combat the persisting challenges.

The survey further found that many NRIs in the US, Australia, Canada, and Singapore fail to declare their India-specific income to the Indian Tax Authorities. This has led to concerns regarding compliance with tax laws and the need for comprehensive tax education for NRIs. However, tax consulting firms can provide guidance and support in managing their tax obligations, which is considered a beneficial investment by many.

The survey results emphasized the need for tax processes to be simplified and for increasing awareness about tax-saving opportunities among NRIs. This can offer considerable financial relief and facilitate smoother integration for this population.