What is a non-dom? The controversial tax status involving Infosys Narayana Murthy's daughter Akshata

London, Apr 11: The UK's Indian-origin finance minister Rishi Sunak has been embroiled in a controversy after his Indian wife, daughter of Narayana Murthy, Akshata Murthy was accused of evading tax.

Reportedly, Akshata Murthy, has potentially avoided up to £20 million (around Rs 197 crore) in UK tax. A total estimated fortune of about £690 million (over Rs 6,834 crore), makes Akshata richer than the Queen.

However, Akshata Murthy claimed that is treated as non-domiciled for UK tax purposes. She is exempt from paying taxes on overseas income in the UK due to her status as a non-domiciled citizen.

"Akshata Murthy is a citizen of India, the country of her birth and parents' home," her spokesperson told The Guardian. "India does not allow its citizens to hold the citizenship of another country simultaneously. So, according to British law, Murthy is treated as non-domiciled for UK tax purposes."

What is a non-dom?

Non-domicile, or non-dom status is controversial in Britain as it allows wealthy foreign immigrants to enjoy all the benefits of living in the UK. Accoring to the rules, a person who was born in another country, or if their parent is from another country, to pay tax in the UK only on their UK income. The system is being misused by foreigners, or British citizens, to avoid paying tax altogether.

In simple words, a person who is considered non-dom only pays UK tax on money earned in the UK. He or she need not have to pay any tax to the UK on money made elsewhere in the world.

How do you become a non-dom?

Domicile of origin: If you were born in a another country from the UK, or if your from another country.

Domicile of choice: if you are over 16 and choose to leave the UK and live indefinitely in another country.

Has this system been around for a while?

Yes, for more than 200 years. It was originally introduced in 1799 and allowed people with foreign property to shelter it from wartime taxes.

According to a PTI report, "The system was reformed in 2015 and became more complicated. Non-dom is now restricted to 15 years. The reforms effectively shrunk the number of people claiming non-dom status. Now, only the very wealthy tend to do so. Many move out of the UK after 15 years for five years, and then return and claim another 15 years of non-dom."

Why do people claim non-dom status?

People claiming non-dom status as opposed to being an ordinary British tax resident is if they calculate that they will end up paying less tax on their worldwide income. Either because taxation in their country of origin (or where income is earned) is so much less than in the UK, or because they can avoid paying taxes at all.