Filing of Return of Income - 1.
Filing of Return of Income Index 1. Who should file return of Income Compulsorily? 2. What is the Due date of Filing Return of Income? 3. What if an NRI do not file return of Income with in due date? 4. What are the Implications of non-filing of ROI? 5. Why NRI should file the ROI voluntarily? 6. Whether filing of return of income for a year will compulsory require
NRI to file Return of Income for subsequent years? 7. How to Contact us? 8. List of Services - Annexure I a. Taxation Services b. FEMA Related Services c. Specialized Services
FILING OF RETURN OF INCOME (ROI) 1. Who should file return of Income Compulsorily? An Individual is liable to file Return of Income compulsorily only if its taxable income* in India in the relevant Financial Year (April –March) exceeds the basic exemption limit Financial Year Basic exemption limit in Rupees 2007-08 110,000/2008-09 150,000/*Non Resident Indian (NRI) earning below mentioned income shall be liable to file returns in India, irrespective of their Total Income being less than the Basic Exemption limit. • Income from Short Term Capital Gains on equity shares or units of equity oriented mutual fund. • Income from Long Term Capital Gains, which are chargeable to tax. • Incomes those are chargeable to tax irrespective of Basic exemption limit. Exception: It shall not be compulsory for a Non-Resident Indian to furnish a return of income if:(a) his total income in respect of which he is assessable under this Act during the relevant financial year consisted only of investment income** or income by way of long –term capital gains **or both; and (b) The tax deductible at source has been deducted from such income. **
“Investment income ” means any income derived [other than dividends from Domestic Company] from a foreign exchange asset;
“Long –term capital gains” means income chargeable under the head “Capital gains” relating to capital asset, being a foreign exchange asset which is not a short - term capital asset; “Foreign exchange asset” means any specified asset (Shares of Indian Co, Bank Deposits and other deposits etc.), which the assessee has acquired or purchased with or subscribed to in, convertible foreign exchange (NRE A/c. or Inward remittance from outside India); “specified asset” means any of the following assets, namely :— i. shares in an Indian company; ii. debentures issued by an Indian company which is not a private company25 as defined in the Companies Act, 1956 (1 of 1956); iii. deposits with an Indian company which is not a private company25 as defined in the Companies Act, 1956 (1 of 1956); iv. any security of the Central Government as defined in clause (2) of section 226 of the Public Debt Act, 1944 (18 of 1944); v. such other assets as the Central Government may specify in this behalf by notification in the Official Gazette. Thus, if an NRI don’t have any income, which is chargeable to tax, he is not required to file return of income.
Also, if he has only Investment Income or Income from Long Term capital gains or both (as explained above) and the tax has also been deducted at source from such income, then he is not required to file Return of income. However if he has short term capital gains on equity shares or units of equity oriented mutual fund even if less than the basic exemption limit, yet he is liable to file ROI. 2. What is the Due date of Filing Return of Income? Every person whose accounts are not requiring Audit under any Indian law are required to submit return of income by 31st July every year for the income earned during the prior year ending 31st MarchFor Example Income for the ending 31st March 2007 31st March 2008 31st March 2009
year Actual Income Earned More than Rs1,00,000 More than Rs1,10,000 More than Rs.1,50,000
File the ROI by 31st July 2007 31st July 2008 31st July 2009
3. What if an NRI do not file return of Income with in due date? If NRI had not file the ROI by the prescribed date, He can file the ROI within subsequent 20 months He shall be liable to pay interest at 1 % p.m. on the tax payable. As of today, an NRI can file return of Income for the year 2007-08 and 2008-09 4. What are the Implications of non-filing of ROI? It may result in to penalty of Rs.5000 for each failure. Also, one may be subject to prosecution u/s 276CC. Provided that a person shall not be proceeded for penalty or prosecution for failure to furnish return of income, if--a) the return is furnished by him before the expiry of the assessment year; or b) the tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source (TDS), does not exceed three thousand rupees i.e. his balance tax liability after considering TDS and Advance Tax does not exceed three thousand rupees. 5. Why NRI should file the ROI Voluntarily? Although, the due date of filing return of Income i.e. 31 st July, has passed and even NRI is not compulsorily liable, he can file return of Income for following reasons:-
1. The tax deduction at source for NRI is prescribed at maximum rate in the Income –tax Act (ranging 11% to 34%). However, the actual liability to tax for the year computed in accordance with the provisions of the Act is generally lower for following reasons – i. Income up to the basic exemption limit (other than capital gains) earned by NRI is not liable to taxation. However, the tax is deducted at source at 33.99% from such income eg. NRO Interest. ii. The income earned may not be liable to tax but the Payer in following cases deducts the tax. a) In case of sale of Capital Assets, the Capital losses can be set off against Capital Gains but tax is deducted at source from capital gains without setting off the losses. E.g. Date
Particular
Short term Capital Gain
Reliance Industries
+Rs. 15,00,000/-
Satyam Computers
-Rs. 12,00,000/-
16/04/09
Reliance Petro
17/04/09 18/04/09
Net Gain/Loss
Rs. 3,00,000/- x 16.995% = 50,985/-
Rs. 3,00,000/-
-Rs. 12,00,000/-
Nil
(Rs. 12,00,000/-)
ICICI Bank Ltd.
-Rs. 15,00,000/-
Nil
(Rs. 15,00,000/-)
SBI Bank Ltd.
+Rs. 30,00,000/-
Rs. 30,00,000/.x 16.995% = 5,09,850/-
Rs. 30,00,000/-
+Rs. 6,00,000/-
Rs. 5,60,835/-
Rs. 6,00,000/-
01/04/09
Total
TDS shall be Deducted on and amount of TDS
Actual tax liability in above example shall be Rs. 92,700/- [6,00,000/-x15.45%] and Rs. 4,68,135/-[Rs. 5,60,835 – Rs. 92,700/-] can be claimed as refund from Income Tax Department.
b) The rate of TDS on NRO Account is 33.99 % (for Financial Year 2007-08) but tax chargeable on Income as per Double Taxation Avoidance Agreements (DTAA) with the country where NRI resides, may be lower. E.g. A B C D E F
Particulars Interest Income from NRO FD A/c. Tax Deducted at source @ 33.99% of A Tax Liability as per slab rate Tax liability as per DTAA @ 12.5% of A Actual Tax liability (lower of C and D) Claim of Refund while filing return of Income (B-E)
Case 1 (Rs.) 1,50,000/50,985/Nil 18,750/Nil 50,985/-
Case 2 (Rs.) 15,00,000/5,09,850/4,02,215/1,87,500/1,87,500/3,22,350/-
c) The reinvestments of capital gains, as prescribed may exempt it from tax but the tax may have been deducted from the capital gain received.
In view of above, NRI should file Return of Income if his tax deducted at source is more than his actual tax liability. He is entitled to claim refund of Tax along with interest at 6 %p.a. 2. The updated tax information / records helps NRI to comply with the procedural documentations for repatriation of Income and Assets held in India. It also helps him to have ready records as & when he returns to India. 6. Whether filing of return of income for a year will compulsory require NRI to file Return of Income for subsequent years? NRI may file Return of Income in some years and may not file in some years. But if he receives a notice from the Tax Department to file the Return of Income, he must respond by filing return of Income. 7. How to Contact us? In case you need any further assistance for filing return of Income, our communication details are as under
SANGANI & CO., Chartered Accountants Office Address:
Communication Detals:
No: 501, 5th Floor,
P.O. Box: 13403,
Rocky Building,
DUBAI – U.A.E.
Khalid Bin Waleed Street,
Tel.:04-3931998 (4Lines)
Opp. Royal Ascot Hotel,
Fax: 04-3935574
Next to Kwality Restaurant,
Mobile: +971 50 7275518
Blue Bell Computer Building,
Email:
Bur - Dubai, U.A.E
[email protected]
We are also engaged in providing various FEMA and Taxation related services to NRIs. For list of services you can refer “Annexure I” Thanks and Regards For Sangani & Co. Juzer Sadikot FEMA – Income Tax Department
Annexure I
TAXATION SERVICES
Claim Refund of excess Tax Deducted at Source by Filing Return of Income: 1
To comply with requirement of Income Tax Act. To claim refund of excess tax deducted at source from interest, capital gains and dividend, wherever possible.
Avoid tax deduction at source by obtaining Tax Exemption Certificate: 2
For receiving the benefit of tax deduction at NIL or lower rate, from interest income from NRO A/c. For claiming tax deduction at appropriate rate on Sale of Immovable property viz. after considering benefit of deductions, indexation, etc. available under the Income Tax Act, 1961. To obtain benefit of set-off of capital losses on sale of Investments against income of subsequent period.
Obtaining PAN Number: 3
PAN is mandatory for transacting in financial markets in India. (viz., Opening NRO Bank A/c., Investment in shares, Mutual Funds, filing Return of Income etc.)
Plan Residential Status to ensure maximum tax benefits: 4
Planning Residential Status in order to minimize tax liability in India.
Shopping with DTAA and save taxes: 5
Advising on claming DTAA Benefit for minimizing the tax liability. Assistance in preparing and furnishing required set of documents to the Bank/Payer
6
Advising on Tax planning
7
Attending Assessment proceeding and representing Income Tax Authorities
1
FEMA RELATED SERVICES
Repatriation of (a) Non-repatriable Assets/funds:
(b)
To repatriate Rupee Assets without RBI approval upto USD 1 million per financial year. Current Income:
To repatriate entire Current Income, earned on or after year 1995-96. Organizing for Returning Indians: 2
Advising on FEMA issues in relation to assets in India and outside India. Advising & Planning on Taxation of Income before/while returning to India. Advising & Planning on Taxation of Wealth before/while returning to India. Formalities for Recent Immigrant:
3
Advising on FEMA issues in relation to assets in India and outside India. Advising & Planning on Taxation of Income of Income while leaving India. Advising on Taxation of Wealth and Wealth planning while leaving India. Advising on Borrowing and Lending in India and giving and receiving Gift in India:
4
Advising on giving and receiving loans in rupees and forex and also gifts. Advising on complying with all the condition and preparation of relevant documents.
SPECIALIZED SERVICES
Advising and Planning for Business Set Up in India / Outside India. 1.
2.
3.
Assistance in Opening Liaison Office / Branch in India and completing procedures for the compliance with all the statues in India. Assistance for investment in Firm and Proprietary Concern in India. Assistance for incorporating company in India as well as outside India. Dealing in Mutual Funds / Shares etc:
Formation of Tax Efficient Entities:
4.
Assistance in opening PIS Account, Advising on the taxability of the gains and repatriation of funds from the same.
Assistance for Investment in Special Purpose Vehicle.
Executing Power of Attorney: Drafting and registering Power of Attorney in India. Executing wills and other legal documents:
5.
Drafting and registration of wills Drafting and registering of Sale/purchase deeds for Properties in India. Creation of HUF outside India.
NRI to file Return of Income for subsequent years? 7. How to Contact us? 8. List of Services - Annexure I a. Taxation Services b. FEMA Related Services c. Specialized Services
FILING OF RETURN OF INCOME (ROI) 1. Who should file return of Income Compulsorily? An Individual is liable to file Return of Income compulsorily only if its taxable income* in India in the relevant Financial Year (April –March) exceeds the basic exemption limit Financial Year Basic exemption limit in Rupees 2007-08 110,000/2008-09 150,000/*Non Resident Indian (NRI) earning below mentioned income shall be liable to file returns in India, irrespective of their Total Income being less than the Basic Exemption limit. • Income from Short Term Capital Gains on equity shares or units of equity oriented mutual fund. • Income from Long Term Capital Gains, which are chargeable to tax. • Incomes those are chargeable to tax irrespective of Basic exemption limit. Exception: It shall not be compulsory for a Non-Resident Indian to furnish a return of income if:(a) his total income in respect of which he is assessable under this Act during the relevant financial year consisted only of investment income** or income by way of long –term capital gains **or both; and (b) The tax deductible at source has been deducted from such income. **
“Investment income ” means any income derived [other than dividends from Domestic Company] from a foreign exchange asset;
“Long –term capital gains” means income chargeable under the head “Capital gains” relating to capital asset, being a foreign exchange asset which is not a short - term capital asset; “Foreign exchange asset” means any specified asset (Shares of Indian Co, Bank Deposits and other deposits etc.), which the assessee has acquired or purchased with or subscribed to in, convertible foreign exchange (NRE A/c. or Inward remittance from outside India); “specified asset” means any of the following assets, namely :— i. shares in an Indian company; ii. debentures issued by an Indian company which is not a private company25 as defined in the Companies Act, 1956 (1 of 1956); iii. deposits with an Indian company which is not a private company25 as defined in the Companies Act, 1956 (1 of 1956); iv. any security of the Central Government as defined in clause (2) of section 226 of the Public Debt Act, 1944 (18 of 1944); v. such other assets as the Central Government may specify in this behalf by notification in the Official Gazette. Thus, if an NRI don’t have any income, which is chargeable to tax, he is not required to file return of income.
Also, if he has only Investment Income or Income from Long Term capital gains or both (as explained above) and the tax has also been deducted at source from such income, then he is not required to file Return of income. However if he has short term capital gains on equity shares or units of equity oriented mutual fund even if less than the basic exemption limit, yet he is liable to file ROI. 2. What is the Due date of Filing Return of Income? Every person whose accounts are not requiring Audit under any Indian law are required to submit return of income by 31st July every year for the income earned during the prior year ending 31st MarchFor Example Income for the ending 31st March 2007 31st March 2008 31st March 2009
year Actual Income Earned More than Rs1,00,000 More than Rs1,10,000 More than Rs.1,50,000
File the ROI by 31st July 2007 31st July 2008 31st July 2009
3. What if an NRI do not file return of Income with in due date? If NRI had not file the ROI by the prescribed date, He can file the ROI within subsequent 20 months He shall be liable to pay interest at 1 % p.m. on the tax payable. As of today, an NRI can file return of Income for the year 2007-08 and 2008-09 4. What are the Implications of non-filing of ROI? It may result in to penalty of Rs.5000 for each failure. Also, one may be subject to prosecution u/s 276CC. Provided that a person shall not be proceeded for penalty or prosecution for failure to furnish return of income, if--a) the return is furnished by him before the expiry of the assessment year; or b) the tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source (TDS), does not exceed three thousand rupees i.e. his balance tax liability after considering TDS and Advance Tax does not exceed three thousand rupees. 5. Why NRI should file the ROI Voluntarily? Although, the due date of filing return of Income i.e. 31 st July, has passed and even NRI is not compulsorily liable, he can file return of Income for following reasons:-
1. The tax deduction at source for NRI is prescribed at maximum rate in the Income –tax Act (ranging 11% to 34%). However, the actual liability to tax for the year computed in accordance with the provisions of the Act is generally lower for following reasons – i. Income up to the basic exemption limit (other than capital gains) earned by NRI is not liable to taxation. However, the tax is deducted at source at 33.99% from such income eg. NRO Interest. ii. The income earned may not be liable to tax but the Payer in following cases deducts the tax. a) In case of sale of Capital Assets, the Capital losses can be set off against Capital Gains but tax is deducted at source from capital gains without setting off the losses. E.g. Date
Particular
Short term Capital Gain
Reliance Industries
+Rs. 15,00,000/-
Satyam Computers
-Rs. 12,00,000/-
16/04/09
Reliance Petro
17/04/09 18/04/09
Net Gain/Loss
Rs. 3,00,000/- x 16.995% = 50,985/-
Rs. 3,00,000/-
-Rs. 12,00,000/-
Nil
(Rs. 12,00,000/-)
ICICI Bank Ltd.
-Rs. 15,00,000/-
Nil
(Rs. 15,00,000/-)
SBI Bank Ltd.
+Rs. 30,00,000/-
Rs. 30,00,000/.x 16.995% = 5,09,850/-
Rs. 30,00,000/-
+Rs. 6,00,000/-
Rs. 5,60,835/-
Rs. 6,00,000/-
01/04/09
Total
TDS shall be Deducted on and amount of TDS
Actual tax liability in above example shall be Rs. 92,700/- [6,00,000/-x15.45%] and Rs. 4,68,135/-[Rs. 5,60,835 – Rs. 92,700/-] can be claimed as refund from Income Tax Department.
b) The rate of TDS on NRO Account is 33.99 % (for Financial Year 2007-08) but tax chargeable on Income as per Double Taxation Avoidance Agreements (DTAA) with the country where NRI resides, may be lower. E.g. A B C D E F
Particulars Interest Income from NRO FD A/c. Tax Deducted at source @ 33.99% of A Tax Liability as per slab rate Tax liability as per DTAA @ 12.5% of A Actual Tax liability (lower of C and D) Claim of Refund while filing return of Income (B-E)
Case 1 (Rs.) 1,50,000/50,985/Nil 18,750/Nil 50,985/-
Case 2 (Rs.) 15,00,000/5,09,850/4,02,215/1,87,500/1,87,500/3,22,350/-
c) The reinvestments of capital gains, as prescribed may exempt it from tax but the tax may have been deducted from the capital gain received.
In view of above, NRI should file Return of Income if his tax deducted at source is more than his actual tax liability. He is entitled to claim refund of Tax along with interest at 6 %p.a. 2. The updated tax information / records helps NRI to comply with the procedural documentations for repatriation of Income and Assets held in India. It also helps him to have ready records as & when he returns to India. 6. Whether filing of return of income for a year will compulsory require NRI to file Return of Income for subsequent years? NRI may file Return of Income in some years and may not file in some years. But if he receives a notice from the Tax Department to file the Return of Income, he must respond by filing return of Income. 7. How to Contact us? In case you need any further assistance for filing return of Income, our communication details are as under
SANGANI & CO., Chartered Accountants Office Address:
Communication Detals:
No: 501, 5th Floor,
P.O. Box: 13403,
Rocky Building,
DUBAI – U.A.E.
Khalid Bin Waleed Street,
Tel.:04-3931998 (4Lines)
Opp. Royal Ascot Hotel,
Fax: 04-3935574
Next to Kwality Restaurant,
Mobile: +971 50 7275518
Blue Bell Computer Building,
Email:
Bur - Dubai, U.A.E
[email protected]
We are also engaged in providing various FEMA and Taxation related services to NRIs. For list of services you can refer “Annexure I” Thanks and Regards For Sangani & Co. Juzer Sadikot FEMA – Income Tax Department
Annexure I
TAXATION SERVICES
Claim Refund of excess Tax Deducted at Source by Filing Return of Income: 1
To comply with requirement of Income Tax Act. To claim refund of excess tax deducted at source from interest, capital gains and dividend, wherever possible.
Avoid tax deduction at source by obtaining Tax Exemption Certificate: 2
For receiving the benefit of tax deduction at NIL or lower rate, from interest income from NRO A/c. For claiming tax deduction at appropriate rate on Sale of Immovable property viz. after considering benefit of deductions, indexation, etc. available under the Income Tax Act, 1961. To obtain benefit of set-off of capital losses on sale of Investments against income of subsequent period.
Obtaining PAN Number: 3
PAN is mandatory for transacting in financial markets in India. (viz., Opening NRO Bank A/c., Investment in shares, Mutual Funds, filing Return of Income etc.)
Plan Residential Status to ensure maximum tax benefits: 4
Planning Residential Status in order to minimize tax liability in India.
Shopping with DTAA and save taxes: 5
Advising on claming DTAA Benefit for minimizing the tax liability. Assistance in preparing and furnishing required set of documents to the Bank/Payer
6
Advising on Tax planning
7
Attending Assessment proceeding and representing Income Tax Authorities
1
FEMA RELATED SERVICES
Repatriation of (a) Non-repatriable Assets/funds:
(b)
To repatriate Rupee Assets without RBI approval upto USD 1 million per financial year. Current Income:
To repatriate entire Current Income, earned on or after year 1995-96. Organizing for Returning Indians: 2
Advising on FEMA issues in relation to assets in India and outside India. Advising & Planning on Taxation of Income before/while returning to India. Advising & Planning on Taxation of Wealth before/while returning to India. Formalities for Recent Immigrant:
3
Advising on FEMA issues in relation to assets in India and outside India. Advising & Planning on Taxation of Income of Income while leaving India. Advising on Taxation of Wealth and Wealth planning while leaving India. Advising on Borrowing and Lending in India and giving and receiving Gift in India:
4
Advising on giving and receiving loans in rupees and forex and also gifts. Advising on complying with all the condition and preparation of relevant documents.
SPECIALIZED SERVICES
Advising and Planning for Business Set Up in India / Outside India. 1.
2.
3.
Assistance in Opening Liaison Office / Branch in India and completing procedures for the compliance with all the statues in India. Assistance for investment in Firm and Proprietary Concern in India. Assistance for incorporating company in India as well as outside India. Dealing in Mutual Funds / Shares etc:
Formation of Tax Efficient Entities:
4.
Assistance in opening PIS Account, Advising on the taxability of the gains and repatriation of funds from the same.
Assistance for Investment in Special Purpose Vehicle.
Executing Power of Attorney: Drafting and registering Power of Attorney in India. Executing wills and other legal documents:
5.
Drafting and registration of wills Drafting and registering of Sale/purchase deeds for Properties in India. Creation of HUF outside India.
