In a major relief for Non-Resident Indians (NRI), Finance Minister Nirmala Sitharaman, in the Union Budget, proposed quick issuance of Aadhar cards for those holding Indian passports. Now, Aadhaar card for NRIs will be issued after their arrival in India, without waiting for the mandatory 180 days. This will facilitate NRIs in getting KYC done quickly and use the card for expediting financial transactions within the country. Issue of quick Aadhaar to NRIs may allow them to use the card number for filing income tax returns also.
An Aadhaar card allots a unique identification number to each citizen linked with a centralised database and includes demographic, bio metric and other data.
18 new diplomatic missions across Africa
o project its soft power and increase its global footprint, India will open 18 new diplomatic missions in various locations across Africa, Sitharaman announced. "We have decided to open Indian embassies and high commissions where India does not have diplomatic missions yet. We have approved 18 new Indian diplomatic missions in Africa," said the Finance Minister.
"Five embassies have already been opened in Rwanda, Djibouti, Equatorial Guinea, Republic of Guinea and Burkina Faso in 2018-19. The government intends to open 4 more embassies in the year 2019-20. This will not only increase the footprint of India's overseas presence but also enable us to provide better public services to the local Indian communities," Sitharaman said.
FDI norm relaxation
The government proposed relaxation in the FDI norms for sectors such as media, aviation, insurance, and single brand retail with a view to attract more overseas investment. The finance minister in her maiden budget speech said that India’s FDI inflows in 2018-19 grew by 6 per cent to USD 64.37 billion. Besides, it announced a review of the norms to further open up FDI in aviation, insurance and media (animation, visual effects, gaming and comics) to provide a fillip to foreign flows into the country. While the details are yet to be discussed in detail, sources indicated the proposal may include allowing foreign airlines more shareholding power in Indian carriers. This will help sustain domestic players, some of which such as Jet Airways and Kingfisher were forced to shut shop as they could not get global investors.
Foreign investments are considered crucial for India, which needs around billions of dollars for overhauling its infrastructure sector such as ports, airports and highways to boost growth.
FDI helps improve the country’s balance of payments situation and strengthen the rupee value against other global currencies, especially the US dollar.
NRIs can now invest via the FPI route
The budget has proposed several measures to boost overseas fund flows. Finance Minister proposed the merger of investments made thorough NRI portfolio route with the foreign portfolio investment. The move will usher the single regime for foreign investors and regulate investments and funds brought in by the non-resident Indians and person of Indian Origin.
These measures would provide a more conducive regulatory environment to FPIs, especially NRIs, experts said. Currently, NRIs invest in Indian stock markets through portfolio investment schemes (PIS), which are governed by the Reserve Bank of India (RBI). The scheme comes with several restrictions and NRIs aren’t often keen on using the route.
Even though India is the world’s top remittance recipient, NRI investment in Indian capital markets is just around £300 million. NRIs prefer to invest heavily in real estate compared with stocks. The merger of NRI portfolio route with the foreign portfolio investment (FPI) will help funnel more money into the country. This, coupled with removal of 24% statutory limits for FPIs and match it with sectoral limits, will ensure greater NRI participation.
The gifts received by the NRI would now be taxable
A dampener for NRIs is the move by the government to plug the loopholes in gifts tax. Gifts by Indian residents in the form of property or money will be taxable in India. However, the exemption on these gifts from income tax would apply, depending on the treaties between India and respective countries.
Any gift received by a taxpayer in India is taxable under the head, income from other sources, as per their slab. Non-residents, on the other hand, have enjoyed a leeway on the ground that it’s not an income that has accrued or arisen in India and, so, can’t be taxed in India. This latitude has now been done away with. Non-residents who have received gifts from India after July 5 - whether in terms of money (above Rs 50,000) or immovable property (the value of which exceeds Rs 50,000) - will need to take a harder look at the new proposal.
Existing exemptions available to a taxpayer in India will also apply to NRIs. Thus, gifts of a value below Rs 50,000 will continue to be exempt. Similarly, gifts received on certain occasions, such as marriage or by way of inheritance, won’t come under the tax net. Similarly, gifts from relatives in India will continue to be exempt. However, the term relatives is narrowly defined - it covers gifts from parents, spouse, siblings, maternal and paternal aunts and uncles (and their spouses). The move would keep in check benami property transactions too, say experts.
Tax proposals futuristic in nature
The Budget 2019 presented by Sitharaman aims at widening the tax base while ensuring simplified tax administration, anti–abuse measures, incentivising common man, encouraging start-ups and promoting digital economy. The various tax proposals are futuristic in nature and have a far reaching impact.
Under the new tax regime, those with income between £200,000 and 500,000 will pay tax at the rate of 39%, and those earning more than £500,000 will have to pay tax at a whopping 42.74%. This is more than the US, where the maximum rate is 37%, which triggers over an income of $600,000. With this, the government has clarified that a high income earner will have to pay more tax for the development of the economy.
The government did not dole out any bonanza to taxpayers. Income between Rs 500,000 and 10,00,000 will continue to attract tax at 20% and cess of 4%. In the highest tax bracket of 30% for incomes up to Rs 50,00,000, there is no surcharge, but cess at 4%. But when income crosses Rs 50,00,000, a surcharge of 10% will be levied up to income of £100,000. Income between £100,000 and 200,000 will continue to attract a surcharge of 15%.
Aadhaar and PAN interchangeable
Aadhaar and PAN are now interchangeable - this would enable filing of an Income Tax Return (ITR) through Aadhaar, as well. The Aadhaar option is intended to help people who do not hold a PAN, but have an Aadhaar card, for purposes specified in the IT Act. These include sale or purchase of motor vehicles, opening bank accounts and purchase of foreign currency among others.