Simplified Laws Guide to Taxation and Legal Concern This Saturday, I got a call from a gentleman residing in Germany, telling me that he had received a notice from the German tax authorities, mentioning the rental income earned in India and asking why he had not paid the taxes in Germany. He wanted to know the way forward.
This is not a new issue. Today, documents are speaking to each other, facelessly, between countries, much like how neighbours converse in a locality. I was wondering where to use the term “Global village”, now I have found the right context!
Declaring Indian income in your home country is nothing new. If you are residing in the USA, UK, Canada, or similar countries, you must declare the income earned in India, in addition to your local income. Whatever taxes are paid in India can be taken as tax credits when paying taxes on such income in your home country. If you fail to do so, you may attract penalties as applicable in your country
Similarly, Indians residing in India must declare income earned and assets held abroad. If not, the Black Money Act can be invoked by the Indian tax authorities.
Governments across the globe want their pound of flesh from your earnings. That’s it. Don’t cry!
Can we do some tax planning? Yes, some big consulting firms are suggesting moving to tax havens and engineering tax planning, while they take their pound of flesh from your future income! (One step ahead of governments.) Mark my words, even this manufactured consulting advice will fail to pass the test of law in the coming days. If these consultants can create the ideas, won’t the government actively apply their minds? You will end up paying not only taxes but also hefty fees.
What about the UAE? For now, yes, people earning in the UAE are in a sweet spot. Even if the Indian government shares details with the UAE, since you are out of the tax bracket, you can breathe a sigh of relief. However, going forward, even this loophole will be closed—just a matter of time.
Are there any other tax-saving plans? I can think of very few legitimate options to save marginal tax. Other than a few, don’t even try anything innovative. The shelf life of such creativity is short. Today, even the best of movies doesn’t run for 100 days—will your tax planning last? No chance!
What are my suggestions? Instead of becoming overly creative, spend some quality time ascertaining your global income. File tax returns within the due dates, declare the income and pay the taxes. I assume you want a sound sleep wherever you are, whatever your age may be. Follow this prescription, and you’ll be alright.
You can reach me at prasad@balakrishnaandco.com
