New Tax Code – More pain than gain for NRIs

The existing tax law, which has been around for more than 47 years, may have the dubious distinction of being one of the most amended laws.

Repeated amendments, whether for providing benefits or for plugging loopholes, made it very complex, beyond the comprehension of an ordinary taxpayer.

The Direct Taxes Code Bill, 2009 seeks to simplify the language to enable better comprehension.

While releasing the Code for public comments the Finance Minister underlined that “the thrust of the Code is to improve the efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base”.

The Code introduces several provisions causing paradigm shifts in taxation of foreign companies.

Residency rule

In the area of international taxation, there are several provisions in the Code which provide tremendous powers in the hands of tax authorities. Possibly intended for combating tax evasion/avoidance, these may cause unintended hardships for genuine taxpayers. The first one concerns definition of “residence” of a company.

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