Budget 2020: In areas of ease of compliance, one such amendment proposed by the Finance Minister is to extend exemption to non-residents from filing annual income-tax return in India in additional cases. Budget 2020 was presented by the Hon’ble Finance Minister on 1 February 2020. The Budget is woven around three prominent themes “Aspirational India, Economic Development for All and A Caring Society”. From the tax perspective, apart from the reform measures already taken so far, it is focused on crucial aspects such as ‘stimulate growth, simplify tax structure, bring ease of compliance, and reduce litigations’. The current government has put a lot of thrust on manufacturing in India, promoting start-ups, developing job opportunities, widening and deepening of tax base, tax certainty, reducing litigations and simplifying tax laws. In areas of ease of compliance, one such amendment proposed by the Hon’ble Finance Minister is to extend exemption to non-residents from filing annual income-tax return in India in additional cases. Under the provisions of the Income Tax Act, 1961 (the Act), specific tax rates have been prescribed for different categories of income. Further, a non-resident is currently not required to file his return of income, if his total income consists only of dividend or interest income and TDS on such income has been deducted according to the provisions of the Act. Non-residents earning royalty or fees for technical services (FTS) from India were, however, still required to file their return of income in India. Read More

The Finance Ministry has issued a clarification that clears the air over a contentious anti-tax abuse Budget proposal that had raised the hackles of many non-resident Indians. As per the proposal, “an Indian citizen who is not liable to tax in any other country or territory shall be deemed to be resident in India”. The implication was that such a person may become liable to pay tax in India. This key change could also have had the unintended consequence of bringing into the Indian tax net the incomes earned abroad by bonafide NRI workers in countries that don’t levy income tax. For instance, it could impact NRIs staying in countries such as UAE which do not impose income tax on individuals under local tax laws. This had raised worries among many NRIs who work in such jurisdictions. Thankfully, the Finance Ministry has now clarified that the new provision is not intended to include in the tax net those Indian citizens who are bonafide workers in other countries. It clarifies that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession. Making its intent clear, the clarification says, “In some section of the media, the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there. This interpretation is not correct.” It adds that necessary clarification, if required, shall be incorporated in the relevant provision of the law. Read More

With the passing of the Finance Bill 2019 in Parliament, some changes have been made in the rule regarding the taxation of gifts given by resident individuals to non-resident Indians (NRIs). According to changes made at the time of passing Budget 2019, only money paid by a resident individual to a ‘person outside India without any consideration will be considered as taxable in the hands of the receiver’. Amendments at the time of passing of Budget 2019 have specifically define the ‘person outside India’ as non-resident or foreign company. Read more   

The tax season is back with a bang. This is the time when salaried individuals start getting their Form 16 TDS certificates from employers and business people get reminders from their chartered accountants to prepare for tax filing. As of now, the last day for filing your income tax return (ITR) is July 31 unless there is an extension. Although it is an annual routine, filing ITR remains a stressful task for many of us, and it could be especially so when new mandates come into play. For instance, there were several tax-related proposals in Budget 2018 which will become effective when you file your ITR this year. Whether you opt for professional services or do it on your own, here is a checklist that must not be ignored, as any mismatch in details, calculation errors or slip-ups, may lead to an enquiry or a demand notice asking you to pay your dues. Read More 

A Non- Resident Indian (NRI) who has income, that is earned or accumulated in India, is liable for taxation. Section 195 of the Income Tax Act covers Tax Deducted at Source (TDS) on payments made by NRIs. The rate & conditions for TDS is different for the residents of India and non- residents of India. NRIs who have income in India are liable to pay taxes and should be aware that if the income were tax free in India, then there would be no TDS. In this article from our NRI Knowledge Series, we will look at the various incomes that NRIs could earn in India and what TDS rates would apply to that: 1. Bank deposits The income that is earned on NRE (Non-Resident External) and FCNR (Foreign Currency Non- Resident) accounts are not liable for taxes in India. Hence, there would be no TDS. Whereas, if we talk about the income earned on the NRO (Non-Resident Ordinary) account then, it is liable for taxation and is also subjected for TDS of 30% without any basic exemption limit. 2.Other Investments Investments like corporate deposits and bond investments by NRIs are subjected to TDS at 20%. 3.Dividends There is no tax and therefore no TDS is deducted on dividend earned on equity shares and mutual funds. 4.Capital Gains on Securities If an NRI earns short term capital gains by selling equity shares or equity mutual funds, the gains are subject to 15% TDS. Equity mutual funds are mutual funds schemes that have 50% or more investments in equities. Debt mutual funds, corporate debentures Long term capital gains from debt mutual funds and corporate debentures are subjected to TDS at 10%. Short-term capital gains will be subjected to TDS of 30%. Long-term capital gains on assets like house property or gold is subjected to a TDS of 20%. Short-term capital gains on assets like house property or gold is subjected to a TDS of 30%. 5.Rent There is no separate rate that has been prescribed for TDS on rent paid to NRIs. The rent of the property that is owned by the NRI falls under the category of other income and is subjected to the TDS of 30%. The payer of the rent is responsible for deducting the tax at source. The process of TAN and issuing a TDS certificate applies here. 6.Professional services and royalty If NRIs are receiving any payment from a company in India for providing any kind of professional service, that income is also liable for taxation in India and would be subjected for TDS as well. If NRIs’ agreement with the company is dated between 1st June 1997 and 30th May 2005, the subjected TDS rate is 20% but if the agreement is dated on or after 1st June 2005, the subjected TDS rate is 10%. 7.Any other income Any other income that NRIs have earned which is liable for taxation in India is subjected to a TDS of 30%. If the income exceeds Rs.10 lakh, a surcharge of 10% would be applicable on the TDS. On education cess of 3% would be applicable to all TDS. Tax […]

The taxes collected from the individuals is the foundation of the Indian Economy. Even though, NRIs live in abroad, they still have a source of income in India. So, they are also liable to pay Income Tax in India. NRI Taxation under Income Tax Act, 1961, implies that any NRI who has his/her source of income in India which exceeds Rs.2,50,000, is liable to pay income tax in India. July 31 is the last date to file income tax returns in India for NRIs. Read full article  

Going by the Budget 2019 proposals, a salaried individual with gross total income up to Rs 7.75 lakh can invest in various tax saving avenues and avail of different deductions to reduce taxable income to Rs 5 lakh and consequently pay no tax for FY2019-20. Such a person would be saving tax of Rs 15080 compared to tax payable in current FY 2018-19, according to EY analysis. Here’s how. Say your gross total income for FY 2019-20 is Rs 7.75 lakh. First, you can claim standard deduction .. Read Full Article

Rent free accommodation provided by the employer to an employee is chargeable to tax as a prerequisite under the head salary. Thus, you shall be required to pay tax on the same. The value of such perquisite is determined separately for governmental and non-governmental employees basis the furnished and unfurnished accommodations as specified by the Income-tax Act, 1961. Read Full Article 

The Indian tax authority has exempted NRIs from having to file applications online for deduction of taxes paid at source in a bid to ease hardship cases. In a new circular issued by the Central Board of Direct Taxes (CBDT), manual applications can now be completed in specified forms before designated officials at transaction centers in India by March 31, 2019. The applicable tax laws provide that if total income warrants deduction of income tax at lower or nil rate, the taxpayer may apply to the assessing officer concerned requesting for a lower withholding certificate. Read Full Article