Income Tax Return filing for NRIs

Budget 2020 proposes amending section 115A of the Income Tax Act.The Finance Minister has introduced major changes to the existing provisions of the Income Tax Act, 1961 (the Act), to promote foreign investment into India

Significant proposals TO BOOST NRI’s within Income tax framework include

  • Abolishing the Dividend Distribution Tax (DDT) and
  • Switching to the classic shareholder tax system,
  • Expanding the lower withholding tax rate of 5% for defined interest income,
  • Lower withholding tax rate of 4% for interest income from long-term bonds / rupee-denominated bonds, etc.

Another welcome move introduced in Budget 2020 is an exemption in certain situations for non-residents to file tax returns in India. It subscribes to the position of not filing income returns to non-residents whose total income includes income through royalty or Fees for Technical Service (FTS).

income tax filing bangalore

Any non-resident receiving taxable income from India is currently under an obligation to file income returns in India (except in certain specified cases).

  • The said condition of compliance places undue hardship upon non-residents.
  • In addition, there are serious criminal and prosecutorial implications for non-residents who fail to file tax returns in India.
  • There have been a large number of litigations and disputes over the filing of non-resident income returns.

Below are some practical scenarios in which tax treaty provisions provide for tax relief for non-residents on different income streams earned in India. Thus, in such cases, non-residents would still be required to file returns of income in India.

A. Non-resident earning income in the nature of FTS

Here are some of the illustrative cases where a non-resident may have to explore whether the exemptions are available under the tax treaty:

1. Availability of “make available clause” in the tax treaty (for example Australia, Singapore, Canada, the United Kingdom, the United States, Portugal, etc.)
2. Non-taxable management service in the tax treaty (for example the United States, Spain, the United Kingdom, Portugal, Canada).
3. Absence of the FTS provisions of the tax treaty (for example Philippines, Thailand, United Arab Emirates, Pakistan, Turkey, Libya, Mozambique, Myanmar, Nepal, etc.)
4. Most Favored Nation (MFN) clause in the tax treaty (for example Finland, Nepal, Sweden, France, Netherlands, Spain, Belgium, Hungary, Kazakhstan, Israel, etc.)

B. Non-residents earning income in the nature of royalty
charterred accountant bangalore,income tax filing bangalore

Similarly, non-residents receiving royalty income may need to investigate whether the exemptions available under the tax treaty, as mentioned below, could be opted for:

  1. Shrink-wrapped/off-the-shelf software (copyright vs. copyrighted article) – In most of India’s tax treaties, software profits will not be considered as “royalty” if the charge is for the usage of ‘copyrighted article’ rather than ‘copyright.’
  2.  The royalty of equipment will not be taxable for tax treaties entered into with Greece, Israel, Sweden, the Netherlands, etc.
  3.  The concept of royalty under the tax treaties may not include transmission by satellite, cable, optic fiber or similar technology.
C. Non-resident earning income from dividend

With the announced abolition of DDT, income from dividends would be taxable in the hands of non-resident shareholders and the Indian corporation would be liable to withhold tax on that income. The dividend is taxed at 20 percent (plus additional surcharge and cessation) under the Act. Moreover, some tax treaties entered into by India provide a much lower tax rate for income from dividends (i.e., 5%, 10%, 15%).

D. Non-resident earning income from interest

Current provisions of section 115A(1) of the Act provide for a 20 percent tax rate (plus applicable surcharge and cessation) on interest income earned by non-residents (except for certain specified interest income2). However, Some tax treaties signed by India,  provide a much lower interest income tax rate (i.e. 10 percent).

In addition to the above, it would also be worth considering the tax return filing in India in the following scenarios for the non-residents:

1. To Claim Refund in the return of income

2. Revenue from capital gains or income attributable to a permanent establishment (PE) in India

Latest Updates

  • Understanding Tax Deduction at Source (TDS)
    Understanding Tax Deduction at Source (TDS) Tax Deduction at Source (TDS) is a mechanism where income tax is automatically deducted from payments made to a person during specified transactions. This process ensures timely tax collection by the government by collecting the tax upfront. TDS is typically deducted on incomes such as […]
  • Filing your income tax return early this year? Understanding these 5 essential points is crucial.
    Filing your income tax return early this year? Understanding these 5 essential points is crucial. It is precisely 45 days since the end of the 2023–24 fiscal year, and there are 75 days remaining before the July 31 deadline for filing income tax returns (ITRs). This is a great moment for an individual […]
  • CBDT Introduces Enhanced Feature in Income Tax AIS: Track Your Correction Request Status Now
    CBDT Introduces Enhanced Feature in Income Tax AIS: Track Your Correction Request Status Now Many taxpayers who identified inaccuracies in their Annual Information Statement (AIS) had provided feedback but were unsure if the reporting entities, like banks, addressed their concerns. However, the Central Board of Direct Taxes (CBDT) has updated the […]
  • Understanding the Consequences of Incorrect HRA Declarations
    Understanding the Consequences of Incorrect HRA Declarations The income-tax department has discovered between 8,000 and 10,000 high-value cases, each containing false House Rent Allowance (HRA) claims totaling more over Rs 10 lakh. Rather than the original property owners, taxpayers are claimed to have given PANs of acquaintances, lower-class relatives, and themselves […]
  • Understanding HUF in Income Tax: Benefits, Exemptions, and Rules
    Understanding HUF in Income Tax: Benefits, Exemptions, and Rules The time is almost here to file returns and pay income tax. By July 31st, all taxpayers must file their taxes. Every taxpayer attempts to save taxes when filing their ITR. Is there a separate tax exemption for Hindu families? This exemption […]

Major Changes in CARO 2020 Comapred to CARO 2016

As you would Know, MCA has notified Companies (Auditor’s Report) Order 2020 or CARO 2020, with effect from February 25th, 2020. Notice that it was 16 Clauses earlier and there are 21 Clauses now. It added 5 Additional Clauses.

Below are 10 major changes in CARO 2020

1) Fixed Asset Rejig

a. Before words Fixed Assets, Now it is replaced with land, plant, equipment and intangible assets (PPEIA).

b.When Title Deed is not in the company’s name (except in the case of Lease) then all these instances disclose with justification in the tabular format.

c.Any Revaluation to be recorded in PPEIA.

d.Any Benami proceedings started to be reported.

2) Inventory Physical Verification & Bank Limit Rejig

a. Coverage of inventory verification and the procedure to be disclosed.

b. Any dis.crepancy to be closed above 10 percent

c. Any Working Capital Limit beyond 5 Cr on Current Assets Collateral to be reported and returns filed with Bank in compliance with Records

3) Loans & Advances Rejig

a. Earlier payments settled by extension, renewal or new loans to be reported.

b. Any loans on a request basis to be reported separately.

4) Default in Loan Repayment Rejigs 

a. Specified Default Reporting table

b. Disclosure of Financial Institutions found willful defaulter.

c. Terms of loan used for the right purpose or not

d. Whether Short term loans are applied for long term purposes.

e. Funds received under the service obligation of Subsy, JV or Associate Companies

f. Funds received for the commitment of shares of Subsy, JV or Associate Companies

5) Fraud Reporting Rejig

a. ADT-4 Filed by the Auditor, if any, to be reported.

b. Any complaint made to the whistleblower during the audit

6) Managerial Remuneration Clause Deletion

a. Payment of management remuneration in accordance with Sch V has been withdrawn

7) Five New Clauses

a. 17 – Cash Losses – Cash losses need to be reported to the FY if any

b. 18 – Resignation of Auditor – Issues raised by him whether they were considered or not if any.

c. 19 –The willingness of the Company to meet its current liabilities in the auditor’s view on the basis of ratios results and aging.

d. 20 – CSR Compliance – Ongoing project whether the unused amount was transferred to the fund within 6 months / Special account

e. 21 – Companies in Consolidation –All negative comments of CARO, whether of any grant, JV or Associate company as consolidated, must be reported in Holding Company Clause 21 of CARO.

8) NBFC Companies Compliance Reporting Rejig

a.  Whether NBFC is having a valid Certificate from RBI

b. Whether it’s CIC, whether there is more than 1 CIC and compliance in the community.

9) Internal Audit Rejig

a. Whether the Internal Audit System exists as per the Company Size or not?

b.Whether any internal audit report was considered by the auditors

10) Income Tax Transactions not in Books

a. Whether any transactions offered for income tax purposes, but not recorded in Books.

Conclusion:-

Welcome Changes, these will improve the reporting especially after ILFS, DHFL Fiasco

Latest Updates

  • Understanding Tax Deduction at Source (TDS)
    Understanding Tax Deduction at Source (TDS) Tax Deduction at Source (TDS) is a mechanism where income tax is automatically deducted from payments made to a person during specified transactions. This process ensures timely tax collection by the government by collecting the tax upfront. TDS is typically deducted on incomes such as […]
  • Filing your income tax return early this year? Understanding these 5 essential points is crucial.
    Filing your income tax return early this year? Understanding these 5 essential points is crucial. It is precisely 45 days since the end of the 2023–24 fiscal year, and there are 75 days remaining before the July 31 deadline for filing income tax returns (ITRs). This is a great moment for an individual […]
  • CBDT Introduces Enhanced Feature in Income Tax AIS: Track Your Correction Request Status Now
    CBDT Introduces Enhanced Feature in Income Tax AIS: Track Your Correction Request Status Now Many taxpayers who identified inaccuracies in their Annual Information Statement (AIS) had provided feedback but were unsure if the reporting entities, like banks, addressed their concerns. However, the Central Board of Direct Taxes (CBDT) has updated the […]
  • Understanding the Consequences of Incorrect HRA Declarations
    Understanding the Consequences of Incorrect HRA Declarations The income-tax department has discovered between 8,000 and 10,000 high-value cases, each containing false House Rent Allowance (HRA) claims totaling more over Rs 10 lakh. Rather than the original property owners, taxpayers are claimed to have given PANs of acquaintances, lower-class relatives, and themselves […]
  • Understanding HUF in Income Tax: Benefits, Exemptions, and Rules
    Understanding HUF in Income Tax: Benefits, Exemptions, and Rules The time is almost here to file returns and pay income tax. By July 31st, all taxpayers must file their taxes. Every taxpayer attempts to save taxes when filing their ITR. Is there a separate tax exemption for Hindu families? This exemption […]

E-Verification of ITR – Electronic Verification Code Generation

Welcome. In this post, we will see the procedure of e-confirmation of ITR or Income Tax Returns i.e., how to check your e-documenting without sending the ITR-V to Income Tax Department.

What is e-verification of ITR?

By and large, ITR check was finished by downloading the ITR-V, marking and sending in to the CPC. In any case, in an exertion towards paperless e-documenting, the Govt has thought of these new e-check forms.

When you effectively entire e-recording at Income Tax Department account, you can confirm your ITR utilizing on the web in 6 diverse ways.

Distinctive methods for e-confirmation of ITR include:

  • Versatile Number and Email Id
  • Aadhar Card
  • Netbanking Login
  • ATM Card (Specified Banks)
  • Financial balance subtleties
  • Demat Account

Utilizing any of these procedures, you can produce an Electronic Verification Code (EVC).

What is EVC or Electronic Verification Code?

The EVC is a 10-digit alphanumeric number which you can use to e-check your Income Tax Return. EVC extraordinary for each PAN and is legitimate for just 72 hours from the season of age.

Vital focuses to note about the electronic check code are:

  • The motivation behind EVC is to check the personality of the individual documenting the salary government form.
  • You can utilize EVC for confirmation of ITR-1, ITR-2, ITR-3, ITR-4.
  • In the event that you are e-checking through your portable number and email ID, qualification criteria are:
    i. your aggregate salary is under 5 lakhs
    ii. you have no discount ask
  • EVC is special to the PAN of the individual outfitting the ITR. This implies one EVC per PAN.
  • Proceeding with the above point, you can utilize one EVC to approve just a single ITR whether it is unique or amended return.

System for e-confirmation of ITR

Step-1: Login to Income Tax Department e-recording Account

Step-2: Select “e-recorded Returns/Forms” from “My Account” drop-down

Step-3: Click on “Snap here to see your profits pending for e-check”

Step-4: For whichever ITR you need to check, tap on “e-confirm”

Step-5: Choose any one choice recorded on the showed screen.

1. E-confirmation of ITR through Mobile number and email ID

  • Enter your portable number and email ID
  • EVC will be sent to your enlisted Mobile Number and Email Id
  • Enter the EVC and Submit

It would be ideal if you take note of: This check is material just if your Income is underneath Rs. 5 Lakh and you don’t have any discount in your arrival.

2. E-verification of ITR through Aadhar OTP

You can create an EVC utilizing Aadhar subtleties. You can utilize this EVC for e-check. Yet, for this, you probably connected your Aadhar number with e-documenting account. In the event that you have not connected Aadhar, you can interface the equivalent under profile settings in e-Filing account. On connecting Aadhar to e-recording account, an EVC will be sent to the Aadhar enrolled portable number. You can utilize this for e-check.

3. E-Verification of ITR through E-banking login

Login to the financial balance from the e-documenting entryway. Present any of the things appeared and e-check will be consequently entire.

Note: For e-confirmation with netbanking login, PAN must be connected with the ledger and PAN must be enlisted in the e-recording entryway.

4. E-confirmation of ITR through ATM

You can likewise create an EVC through ATM. You can utilize “Stick FOR INCOME TAX FILING” in the ATM to create the EVC. For this, you more likely than not connected your PAN with the particular financial balance and the PAN ought to be enrolled with e-Filing. After utilizing the alternative, you will get the EVC on the enrolled versatile number (Primary portable number enlisted with explicit Bank). As of now, this alternative is accessible for explicit banks as it were.

The banks are:

  1. Pivot Bank Ltd
  2. Canara Bank
  3. National Bank of India
  4. ICICI Bank
  5. IDBI Bank
  6. SBI

5. E-check of ITR through a pre-approved ledger

You can produce an EVC utilizing Pre-approved ledger subtleties. You more likely than not connected your ledger with e-Filing account. Alternative to interface the equivalent is accessible under Profile Settings – > Pre-approve financial balance after login to e-Filing entrance. Right now, this alternative is accessible for explicit banks as it were.

The banks are:

  1. Andhra Bank
  2. Bank of Baroda
  3. Canara Bank
  4. Central Bank of India
  5. HDFC Bank
  6. ICICI Bank
  7. IDBI Bank
  8. Karur Vysya Bank
  9. Kotak Mahindra Bank
  10. Oriental Bank of Commerce
  11. Punjab National Bank
  12. SARASWAT Bank
  13. State Bank of India
  14. Syndicate Bank
  15. Union Bank of India
  16. United Bank of India

6. E-confirmation of ITR through pre-approved DEMAT account

You can create an EVC utilizing Pre-approved DEMAT account subtleties. You more likely than not connected your DEMAT account with e-Filing account. Choice to interface the equivalent is accessible under Profile Settings – > Prevalidate DEMAT account after login to e-recording gateway. [Note: National Securities Depository Limited (NSDL) and Central Depository Services (India) Ltd (CDSL) gave the choice to pre-approve the DEMAT account].

What is the due date for e-verification of ITR?

The due date for e-confirmation of ITR is 120 days from the date of documenting of your profits. e.g. In the event that you record your arrival on first May, the due date will 29th August.

In the event that you are confirming following 120 days of documenting the arrival, you need to physically send ITR-V shape to CPC Bangalore.

What to do after e-verification of ITR?

Nothing. When the e-check is finished , you will get an affirmation to your enrolled mail ID and that is it.

[frontpage_news widget=”879″ name=”Certicom – A Group of Chartered Accountants – Articles”]