Income Tax Filing Rules & Laws in India for NRIs
As the economy of India continues to grow, there is a surge of NRI’s wanting to invest or even return to India. For them, the primary worry is the Indian tax system and structure as they do not want to lose too much of the money they made abroad. But over the years the Indian government has simplified tax rates and as a non resident Indian you can avail of several benefits upfront, including a lot of tax exemptions for NRIs that can be found online..
There are many categories for tax payments required by NRI’s, but on the whole, they have to pay tax to the Indian income tax authorities if their income, allowance or salary originates in Indian soil. It is nearly the same as those living in India and is known to be permanent residents. But all NRI’s have to pay tax if the income was earned from any business dealing with India or from any buying and selling of real estate.
Indian income tax authorities will consider generation of income for NRI’s if they had earned profits from any source or asset in India and also on salaries received for any services rendered in India. If the NRI receives any dividend from shares of Indian companies whether in India or abroad, he or she would be liable to pay tax. The shares have to be held in a demat account as is customary in India these days. It does not matter whether the dividends have been paid outside India.
If the government pays any interest or royalty, tax is to be paid on that as well as on income from fees earned from technical services. According to the income tax law in India, a NRI is not liable to pay tax if he or she runs a news agency or magazine and income is earned form news and views collection with the sole aim of relaying them outside India. If a film is not shot in partnership and does not have an affiliate as an Indian citizen, tax is not liable.
But non resident Indians can benefit from loads of provisions like joint holdings, exemptions from investments income and their remittances are more simplified than that of others. For many types of incomes, NRI’s are allowed concessions for their tax calculation.
To understand the income tax liability clearly, a difference has been made between overseas citizens if India and peoples of Indian origin and you can check out the websites of the NRI investment sites for more details.
Concession for Bonds
The streamlining of tax liabilities for different classes of people and those living abroad has made it more simple and easy for NRI’s to earn income from India for services rendered or for business activities. NRI’s can invest in the Indian share market and benefit from the money making opportunity it offers.
Many investors from overseas are coming in to take part in the boom that India has witnessed in recent years with stock prices shooting up to the roof. If you earn income from NRI bonds 1988 and the second series as a NRI, you can get preferential treatment as the tax concessions can be availed by you even after you become a resident of India. The certificates have to be bought in convertible foreign currency that is remitted from abroad.
The remittances have to be in accordance with the Foreign Exchange Regulation Act prevalent in India. For long term capital gains in regard to transfer of assets, NRI’s are taxed at 10 percent while for income form share trading and a foreign exchange asset, it is 20 percent. If the tax of a NRI has been deducted at source, he or she will not be liable to file returns.
Permanent Account Number (PAN)
What is PAN | How to apply for PAN | Tips for filling form 49A | Usefulness of PAN | Where PAN is required | Section 139A(5)]
What is P.A.N ?
Permanent Account Number is a number by which the Assessing Officer can identify any person. Presently the Income Tax Department is allotting PAN under the New Series to all assessees which consists of ten alphanumeric character and is issued in the form of a laminated card. The PAN is ultimately meant to supplant the General Index Register Number which is currently in use. The General Index Register Number is a number given an Assessing Officer to the assessees in the General Index Register maintained by him which also contains the designation and the particulars of the Assessing Officer. As per section 139A of the Act obtaining PAN is a must for the following persons:-
1. Any person whose total income or the total income of any other person in respect of which he is assessable under the Act exceeds the maximum amount which is not chargeable to tax.
2. Any person who is carry on any business or profession whose total sales, turnover or gross receipts are or is likely to exceed Rs. 5 lacs in any previous year.
3. Any person who is required to furnish a return of income under section 139(4) of the Act.
The requirement for applying for allotment of PAN under the New Series has now been extended to the whole of India.
PAN is required to be quoted in all the transactions mentioned below:-
In all returns and in all correspondence with the department.
In all challans for payment of any tax or sum due to the department.
In certain notified transaction. (see the sub module on notified transactions where PAN has to be quoted)
How to apply for PAN
Application for allotment of PAN is to be made in Form 49A.
Following points must be noted while filling the above form:-
Application from must be typewritten or handwritten in black ink in BLOCK LETTERS.
Two black & white photographs are to be annexed.
While selecting the "Address for Communication", due care should be exercised as all communications thereafter would be sent ate indicated address.
In the space given for " Father's Name" , only the father's name should be given. Married ladies may note that husband's name is not required and should not be given.
Due care should be exercised to fill the correct date of birth. The form should be signed in English or any of the Indian Languages in the 2 specified places. In case of thumb impressions attestation by a Gazetted Officer is necessary.
Tips for filling form 49A
The form should be filled in carefully and completely since it may not be possible for the Department to allot PAN if all the details are not filled in. In any case the following information must necessarily be given:-
In the case of companies, the information that is necessarily required is as under:
Date of Incorporation
Date of commencement of the business
Full and complete names of atleast two directors of the company
Branch addresses and branch names of the company.
Unless the form no.49A contains all the above informations it would not be possible to allot the PAN to a company assessee.
In the case of individuals, the information that is necessarily required is as under:
Full and complete name of the assessee
Full and complete name of his/her Father.
Date of birth
Sources of income
Unless the form no.49A contains all the above information's it would not be possible to allot the PAN to an individual assessee.
Usefulness of Permanent Account Number
If PAN is quoted in all documents, it would be very convenient to locate the assessing officer holding jurisdiction over the person concerned.
If PAN is quoted in all challans, the credit for payment of taxes can be quickly granted to the taxpayer.
If PAN is quoted in all specified transactions, the Department can excercise greater control over unregulated and undiscl
Quoting of Permanent Account Number be quoted
[Provisions of Section 139A(5)]
Every person shall quote his permanent account number or General Index Register Number in all documents pertaining to the transactions specified below :-
Sale or purchase of any immovable property valued at Rupees five lakh or more.
Sale or purchase of a motor vehicle or vehicles, which requires registration by a registering authority.
A time deposit, exceeding fifty thousand rupees, with a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act)
A deposit, exceeding fifty thousand rupees, in any account with Post Office Saving Bank
A contract of a value exceeding ten lakh rupees, for sale or purchase of securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956)
Opening an account with a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act,)
Making an application for installation of a telephone connection (including a cellular telephone connection)
Payment to hotels and restaurants against their bills for an amount exceeding twenty five thousand rupees at any one time.
A person shall quote General Index Register Number in the documents pertaining to transactions specified in above clauses (a) to (h) till such time the permanent account number is allotted to him;
A person, being a minor and who does not have any income chargeable to income tax, making an application for opening an account referred to in the clause (f) of this rule, shall quote the permanent account number or General Index Register Number of his father or mother or guardian, as the case may be.
Any person, who has not been allotted a permanent account number or who does not have a General Index Register Number and who makes payment in cash or otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft in respect of any transaction specified in clauses (a) to (h) , shall have to make a declaration in Form No. 60 giving therein the particulars of such transaction.
In simple terms :
IT IS MANDATORY TO QUOTE PAN in
application for opening an account with a bank
application for installation of a telephone connection (including a cellular telephone)
documents pertaining to sale or purchase of a motor vehicle
documents pertaining to sale or purchase of immovable property valued at Rs. 5 lakh or more
documents pertaining to deposits exceeding Rs. 50,000 in any account with a Post Office Savings Bank
documents pertaining to a contract of a value exceeding Rs. 10 lakhs for sale or purchase of securities (Shares, Debentures etc.)
payment to hotels & restaurants against their bills for an amount exceeding Rs. 25,000 at any one time
Returns of income
Challans for payment of direct taxes
All correspondence with Income-Tax Department
Persons to whom provisions of section 139A shall not apply
The provisions of section 139A shall not apply to following class or classes of persons, namely:-
The persons who have agricultural income and are not in receipt of any other income chargeable to income-tax. Such persons shall instead be required to make a declaration in Form No. 61 in respect of transactions referred to in clauses (a) to (h) of rule 114B of Income Tax Rules.
Non-residents referred to in clause (30) of section 2 of Income tax Act, 1961
A non resident, who enters into any transaction referred to in clauses (a) to (h) of rule 114B, shall have to furnish a copy of his passport