Worried over the large number of the super rich migrating to foreign countries to avoid paying taxes in the country, income-tax authorities plan to plug loopholes in the law to ensure that dues are paid.
The Central Board of Direct Taxes (CBDT) has now set up an internal working group to examine the taxation aspects of high net worth individuals (HNWIs).
“In recent times, there has been a trend of HNWIs migrating from their country of residence to other jurisdictions,” said the CBDT in a letter, adding that these individuals pose a substantial tax risk as they may treat themselves as non-residents for taxation purposes even though they may have strong personal and economic ties with India.
The five-member working group of tax officials will propose measures on tax risks arising out of such persons and how to deal with them. It will also take inputs from field officials before finalising its report.
The first meeting of the working group will be held on Friday, April 6.
To ensure equitable taxation, the Centres has, over the past few years, started levying higher taxes on the super rich, or those earning over ₹1 crore a year. But the issue has gained currency in recent years with many HNWIs fleeing the country after defaulting on loans and taxes.
“This has become an urgent matter. While the Income Tax Department has also renegotiated tax treaties with countries to ensure that companies pay their dues in the country of business, individuals including promoters of firms have taken foreign citizenship to claim that they do not need to pay taxes in India,” noted an official.
The working group will also look into global tax practices to find a solution to the challenge. Officials said it is expected to give its recommendations in three-four months.