Scanner over rich migrating abroad for tax purposes; CBDT forms group

The instruction talks of migrating high net worth individuals and not escaping or fleeing ones

The government is thinking of stiffer rules on wealthy people who are migrating to lower tax jurisdictions.

The Central Board of Direct Taxes (CBDT) has set up a five-member group on the issue. It is expected to meet on Friday.

The instruction talks of migrating high net worth individuals (HNIs) and not escaping or fleeing ones, such as Vijay Mallya or Nirav Modi. However, agencies say the panel might look at the latter cases, too. 

The group has Pragya Saxena, joint secretary, foreign tax and tax research (FT&TR) and four other revenue officers. 

Amit Maheshwari, partner at the law firm of Ashok Maheswary and Associates said the group “is expected to bring forth a proposal to reduce tax leakage arising due to shifting of residency”. Such a shift could mean reduced tax liabilities in some cases, especially with assets abroad. 

"It would be interesting to see how the Black Money Act could be extended to HNIs who have generated substantial wealth in India and moved abroad,” he added. 

There is no formal definition of HNIs in India. It would be interesting to see if the group considers the surcharge imposed on individuals to term them HNIs. There are two rates — 10 per cent on those with annual income over Rs 5 million to Rs 10 million and 15 per cent on those with over Rs 10 million. 

The group will formulate India's position on various aspects related to taxation of migrating HNIs. It has been created on the direction of CBDT Chairman Sushil Chandra.

The board said there is a recent trend of HNIs migrating from their country of residence to other jurisdictions. Such people, it said, pose a substantial tax risk — they may treat themselves as non-residents for taxation purposes in the first jurisdiction, through they might have strong personal and economic ties there.