In May 2010, the Ministry of External Affairs had passed rules regarding surrender of Indian passports upon acquisition of US citizenship. This was to be accompanied by a fee of $175. The Global Organisation of People of Indian Origin, or GOPIO, has expressed strong objection to this rule. The Ministry of External Affairs has now accepted recommendations of GOPIO and agreed to eliminate the requirement for surrendering the Indian passport. However, this will apply to those who became naturalised citizens of the US more than ten years ago. Furthermore, the fee has been reduced to $20. It is also proposed that, for making an OCI application, it need not be accompanied by the original US passport. GOPIO has expressed satisfaction at the announcement of these relaxations. It is expected that Indian missions in western countries will have a lower work load which will help them to clear the backlog and make the process of issuing an OCI card and entry visa to India much easier for persons of Indian origin.

Fees are taxable in India either under the Double Tax Avoidance Agreement or under section 9 of the Income-tax Act, 1961, if such fees fall within the definition of the expression “fees for technical services.” This expression is defined to mean payments of any kind to any person in consideration for the rendering of any technical or consultancy services, or in consideration for making available technical knowledge, experience, skill, know-how or processes, or pertain to the development and transfer of a technical plan or technical design.
Consequently, the services which are described in your question, namely, data entry, application sorting, document handling, etc, would not fall within the definition of “fees for technical services.”
This view is supported by a ruling of the Authority for Advance Rulings which was given on similar facts wherein it was held that such activities do not amount to rendering of managerial, technical or consultancy services. Therefore, the amount payable to the Malaysian company would not be taxable in India and no tax would need to be deducted at source. Since the AAR ruling is binding only on the applicant and not on any other assessee, it would be advisable to take a ruling by each assessee on the facts of its own case. This would avoid litigation as the ruling is binding on the tax department.

India has made a request to the Mauritian Government for re-negotiating the tax treaty primarily with a view to tax capital gains on sale of shares of Indian companies. The Indian Government would be insisting on source-based taxation of capital gains. However, the process of negotiation will take time as meetings between officials of the two countries may take place in August or thereafter. After the treaty is re-negotiated, it will have to be approved by the authorities of both the countries and notifications would have to be issued stipulating the date from which the amended treaty would come into force. The Indian Government is also keen on re-negotiating the agreement for exchange of information and would seek powers to freeze and attach properties of tax evaders.