India’s economy is expected to contract 7.7 per cent in the current financial year ending on March 31.
The Indian government’s aim to make the nation a $5 trillion economy did encounter loads of challenges in 2020, despite multiple stimulus and sops to pare the impact of the novel coronavirus disease (Covid-19) outbreak to propel the economy towards growth.
Non-resident Indians (NRIs) globally have moved back home for multiple reasons and are now trying to find some foot in their bid to rehabilitate themselves. The trend did impact the real estate sector positively. Timely government intervention to keep lending rates at lowest, coupled with reduction in stamp duty, encouraged many developers to offer flexible payment plans.
Dr Azad Moopen, founder chairman and managing director (CMD), Aster DM Healthcare, said: “Large numbers of NRIs have been rendered jobless and returned to India due to the pandemic. There is a requirement for a scheme for rehabilitation of the returning NRIs by providing them with jobs and seed capital for starting businesses. Initiatives to provide skill development for them must begin.”
India’s economy is expected to contract 7.7 per cent in the current financial year ending on March 31, the worst performance in four decades, which is likely to prompt the finance minister to make a push for growth in the budget next month, said a Reuters report recently.
In the aftermath of the Covid-19 pandemic, Indian economy is grappling with the challenges of recovery, expectations from the upcoming union budget are high. Real estate sector, as a generator of jobs (14 per cent) and major contributor to the gross domestic product, or GDP (7 per cent), is optimistic to seek major reforms with timely policy interventions by the government in order to mitigate the negative impact and stimulate the growth engine.
Dr Niranjan Hiranandani, national president, Naredco, said: “The on-going Covid-19 pandemic has impacted global economies and Indian real estate is not spared from the depths of despair. The fiscal impetus announced under Aatmanirbhar Bharat has led to renewed consumer demand that led to the emergence of green shoots in Indian economy and real estate sectors. The laudable measures like tax rationalisation, additional stress fund, ample liquidity tools will keep the momentum going and propel India towards a $5t economy. Towards this goal, Naredco seeks to work hand-in-glove with the government to achieve this ambitious goal.”
Currently Section 80 C tax deduction on home loan principal repayment does not provide for a focused benefit on housing. A separate annual deduction of Rs150,000 (Dh75,000) will provide the much-needed fillip to opt for house purchase, said Shishir Baijal, CMD, Knight Frank India.
Vijay Valecha, chief investment officer, Century Financial, said: “NRIs expect the TDS (tax deducted at source) rate on rental payments made to them to have a similar treatment as residents enjoy. Currently, section 194 IB of the Act provides for deduction of tax on rental payments made to residents at the rate of five per cent, as against a TDS rate of 30 per cent under Section 195.”
NRIs had remitted around $80 billion (Dh293.84b) in 2019. It was one of the key pillars of the Indian economy. Not only do they support money transfers and inward remittances, indirectly and internally they also are responsible for generating employment by way of capital accumulation, savings and investment. Although this diaspora accounts for roughly only one per cent of the current India population, they are one of the major sources of foreign currency inflow.
Prime Minister Narendra Modi’s vision of making India a $5trillion economy over the coming years critically hinges on this segment One of the key demands of NRIs from this year’s budget is ease of compliance under the IT Act,1961 and reduction in withholding tax rates. NRI’s who were on a visit to India during the end of last fiscal year and who had to extend their stay in India due to Covid 19 lockdown or job loss or other reasons are in state of worry owing to their residential status and the associated impact on their taxation. Although the Indian CBDT has already issued a circular to this effect relaxing the calculation for number of days calculation, NRI’s keenly expect the government to provide similar exemptions for FY 2020 – 2021 also, points out Valecha.
Extending benefits of Section 10(6)(vi) to NRIs as well. Currently, the section provides benefits to NRI (not being Indian citizens/people of Indian origin, PIO) who are on short business visits. NRIs want this exemption to be extended to them as well. Clear definition of the term “Visit” under section 6(1) b, as currently, tax residency norms permit NRIs to stay in India for longer duration when compared to foreign citizens without losing their NRI status, provided they are on ‘visit’ to India. This term is not currently clearly defined in the act.
Dhaval Jasani, Founder and CEO at ZTI, said: “India, as a nation, has a long journey to pursue growth opportunities and it is vital that the government seeks support from Indian diaspora outside India. The amount of optimism that Indian markets have built post the downfall as a result of pandemic is remarkable. This is a testimony that the journey of growth has begun and let this journey be unstoppable. Whilst Indian government has been vibrant in pursuing a number of initiatives, Indian diaspora outside India is equally enthusiastic to participate in this journey of growth and contribute to the vision of $5 trillion economy.”
Currently all taxes are paid only on income generated in India like, interest on NRO savings and deposits, capital gains from sale of shares or mutual funds, rental income in India, dividend income in India.
Dixit Jain, managing director at The Tax Experts DMCC, said: “India is still a developing country and wants NRIs to invest more and more in India to increase foreign exchange reserves and other opportunities. It may not be the right time to adopt the western tax culture of taxing the world incomes for citizens, it will highly affect the investments inflow from NRIs and that is the main reason NRIs won’t be taxed at least this time.”
Krishnan Ramachandran, the chief executive officer (CEO) of Barjeel Geojit Financial Services, said: “There are no specific benefits that are available to NRIs in comparison to resident Indians. Some of the specific relief that NRIs expect in the forthcoming budget include a hike in interest paid on housing loans to Rs1 million from the present limit of Rs200,000, this will give a much-needed fillip to the residential housing market.