Survey Reveals Taxation Challenges Faced by NRIs and OCIs Worldwide

A study conducted by SBNRI, a comprehensive investment platform serving NRIs and OCIs, illuminated the complexities encountered by these individuals in tax filing. The issue of double taxation surfaced prominently, with 14.11 percent of NRIs from Australia, 13.10 percent from the UK, and 8.06 percent from the US identifying it as their primary challenge. Moreover, obtaining taxation documents from abroad presented a significant hurdle, with 12.10 percent, 9.05 percent, and 6.02 percent of NRIs from the US, UK, and Australia respectively expressing difficulties in this aspect.

In recent times, India has witnessed a notable increase in its overseas diaspora, comprising roughly 32 million NRIs and OCIs scattered worldwide. Gulf countries hold the highest concentration of Indian expatriates, followed by destinations such as Singapore, the United States, Canada, and the United Kingdom. Nevertheless, despite the expanding diaspora, navigating the tax landscape remains a formidable task for NRIs and OCIs.

The survey also shed light on diverse approaches to tax reporting among NRIs. While some choose to report solely the income earned in India (10 percent of US-based NRIs), others disclose both domestic and foreign income to Indian tax authorities (6 percent from Canada, 4 percent from the US and Singapore respectively). Additionally, a notable percentage of NRIs capitalize on tax-saving options available to them, with 7 percent from the UK and Australia, and 5 percent from Canada and Singapore availing of these opportunities.

Despite the significance of filing tax returns, a minority of NRIs, including 5 percent from Singapore, 4 percent from the UK, and 2 percent from the US, acknowledge not filing returns in India. Among those who do, only a fraction opt to manage the process independently, while the majority enlist the services of tax professionals or advisors for guidance.

The Double Taxation Avoidance Agreement (DTAA) in income tax aims to prevent double taxation, enabling taxpayers to fulfill their tax obligations in a single country. This facilitates increased savings on income and fosters a conducive environment for businesses to prosper. Furthermore, it plays a pivotal role in discouraging tax evasion by providing mechanisms to mitigate the burden of double taxation, thereby enhancing the country’s appeal for investment opportunities.

Beyond taxation concerns, the survey delved into the primary motivations for Indians residing abroad. Better employment prospects emerged as a leading factor, cited by 11 percent from the UK and 9 percent from Canada, while higher education attracted 9 percent, 6 percent, and 5 percent of individuals from Singapore, Canada, and the UK respectively.

As the number of NRIs continues to climb, comprehending and addressing the challenges within the tax landscape remain crucial. SBNRI’s survey underscores the need for ongoing efforts to streamline the tax process for NRIs and OCIs, ensuring smoother financial management for this significant demographic.