NRI Taxation
Residential Status
Determining Residential status of a person is required to ascertain the tax implication under the Income-tax Act, 1961 (the Act). There are two categories – Residents and Non- residents. Residents are further classified into (a) Resident and Ordinarily Resident and (b) Resident but Not Ordinarily resident. This classification is very crucial to determine extent of compliance, taxability and disclosure requirements will need to be adhered to.
The Act lays down two alternative tests of residency for Individuals. Each of these tests depends on physical presence of an individual in India during the “previous year” which would be twelve months from 1st April to 31st March.
The definition is explained in simple words as under:
If an individual satisfies understated both the conditions of section 6 of the Income-tax Act, then he becomes a Non-Resident:
Conditions
Status
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He is not in India for 182 days or more during the relevant previous year.
If yes, then he is a Non-resident. (check the next condition as well)
2.
He is not in India for 60 days or more during the previous year and he is not in India for 365 days or more during the 4 years prior to the previous year.
If yes, then he is a Non-resident.
If an individual is not satisfying any of the above conditions to become Non-resident, then check whether the following conditions helps to become a Non-resident:
The requirement of stay in India as required in condition 2 above shall not be applicable in the following cases:
- If an individual, being an Indian citizen leaving India for the purpose of employment outside India or as a member of the crew of an Indian ship.
- If an individual, being an Indian citizen or person of Indian origin, is on visit to India.
In other words, the above categorized individuals are Non-resident if they satisfy condition 1 alone.
However, if the above conditions are not satisfied, then a person becomes a Resident.
An individual is given a special residential status of RNOR, if he is Resident of India in the previous year and satisfies one of the following conditions:
Condition
Status
1. He is not a Resident, as per the above conditions, for at least 9 out of 10 previous years prior to the previous year under consideration.
If yes, he is RNOR
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2. His stay in India during the 7 previous year prior to the previous year under consideration should not be 730 days or more
If yes, he is RNOR
Note : Generally, an individual who is returning to India after 9 years or more of stay outside India (and who was Non-resident for each of the 9 years out of 10 years immediately preceding the year of returning to India), may remain RNOR for the period of two years.
These conditions need to be tested every year for every individual as taxability of Income is dependent upon whether he is a Resident or Resident but not Ordinary resident or Non Resident.
We at Intra are of the view that it’s important to plan the residential status efficiently and be very careful about gaining & protecting client’s residential status. We make our clients fully understand the impact of compliance and tax-ability scope attached to their residential status.
We shall be able to assist you as follows:
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1. Understanding the facts and determining your Residential status
2. Explaining the Impact analysis of the residential status
3. Planning and suggesting the way forward to optimize the tax implication.
Intra strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for their Indian tax matters.
Resident but not ordinarily Resident (RNOR)
Permanent Account Number (PAN)
The Permanent Account Number (PAN) is a unique 10-digits alpha numeric number allotted by the Income Tax Department to each individual. This number is unique to each person, and is embossed on a plastic card, commonly known as the PAN card. This card reflects your full name, date of birth, age, father’s name, signatures, Government’s hologram and your photograph. The number is permanent and it will not change with change of address of the PAN holder or change of Income Tax Officer.
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A PAN is mandatory for every person who is required to file a return, and for those who wish to carry out a financial transaction for which the quoting of PAN is compulsory. NRI (non-resident Indian) also needs to obtain a PAN if he falls into either of the above categories. The procedure to obtain a PAN is fairly simple and similar across all categories of individuals. However, NRIs need to provide certain documents while applying for a PAN, which are specific to them.
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Intra’s team specializes in making this PAN process simple and quick with least amount of documents involved. Having helped over 100000 customers from all over the world, we just know how to make the process simple.
How PAN Services are provided at Intra?
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At your request to obtain PAN, we shall E-Mail you the standard format in which you are required to furnish us the details and documents. (List of documents required for PAN Application)
Based on this information,
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We shall prepare and e-mail duly filed in application for obtaining Permanent Account Number.
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The application shall be downloaded, sign and send it to us along with specified documents for submission to the PAN processing Department.
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After submission by us, if no further concerns by the PAN Department, PAN card will be couriered to you directly at the address mentioned in the PAN form.
We at Intra shall be glad to provide you services related to:
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New PAN Application
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Amendment/Changes in PAN Card
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Lost/Damaged PAN Card
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Surrendering of Duplicate PAN Card
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Track PAN card
Income tax Return Preparation
An Income tax return is an individual or entity’s self-assessment of their income for a particular financial year. The Income Tax department leaves it to the individual to declare his or her income for the year by reporting the incomes from all avenues such as Income from Salary, Interest or Fixed Deposit income, Income from Shares, Capital Gains, and income from House Property and Business Income. The individual has to calculate the total of all the incomes and report them in the various sections, along with deductions such as 80C and 80D. You also have to declare the amount of tax that may have been deducted from these incomes so as to get the appropriate tax credit. You then have to calculate your income tax based on the prevalent tax slabs and compare that to the taxes that you have already paid via TDS or Advance taxes and then check if you still owe more tax or if you have a refund. The declaration of your income, deductions and taxes is an Income Tax Return.
Who Should file Return of Income?
You are liable to file Return of Income only if your total taxable income* in India without giving effect to the provisions of section 10A, 10B, 10BA or Chapter VI-A in the relevant Financial Year (April –March) exceeds the basic exemption limit (i.e. Rs. 2,50,000/-for F.Y.2015-16)
*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.
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Income from Short Term Capital Gains on equity shares or units of equity oriented mutual fund.
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Income from Long Term Capital Gains, which are chargeable to tax.
Exception:
It shall not be necessary 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 which the assessee has acquired or purchased with or subscribed to in, convertible foreign exchange;
Thus, if you don’t have any income which is chargeable to tax, you are not required to file Return of Income.
Also, if you have 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 you are not required to file Return of Income.
However if you have short term capital gains on equity shares or units of equity oriented mutual fund (even if less than Rs. 2,50,000/-i.e. the basic exemption limit ) yet you are liable to file Return of Income.
Impact of non-filing of Return of Income:
It may result in to penalty of Rs.5000/- for each year. Also, one may be subject to prosecution u/s 276CC.
However, a person shall not be preceded for penalty or prosecution for failure to furnish Return of Income, if-
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The return is furnished by him before the expiry of the assessment year or
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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.
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Resident but not ordinarily Resident (RNOR)
Notice and Scrutiny Assessment
Banner - One stop solution for any correspondence with Income Tax Department.
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IT Notice assessment – We assist you in reviewing the IT notice, drafting appropriate reply, representing before the IT officer and finally getting assessment order.
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Revise, Rectification and refund processing- we do it all
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Physical visits to IT Department
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Notice under section 143(2) commonly known as Scrutiny Assessment Notice which can be sent to any taxpayer if the tax department has doubts about the income of individual. Any notice from IT-department can invoke panic among taxpayers but really there is no reason to worry if you go by the book. This is a detailed process so you can expect to take some time to complete. During the scrutiny assessment, the concerned Assessing Officer will try to find out whether the reported income, deductions and claims, etc. made by you in your tax return are genuine and correct.
Every year IT-department sends scrutiny notices to several taxpayers where they consider it necessary to ensure that taxes paid by the taxpayer are not less than the actual tax liability or they have not understated the income or overstated the losses. However, merely receiving a notice for scrutiny does not attach a criminal tag with your name.
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Type of Notices issued u/s.143(2)
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Scrutiny notice under this section can be classified in three types as under
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Limited Scrutiny
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Complete Scrutiny
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Manual Scrutiny
What to do?
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Through the notice, the IT-department will ask you to present yourself in front of an officer on a specific day. In case of limited scrutiny you may not have to submit all the bulky records, but in case of manual selection or complete scrutiny you will be asked to bring an exhaustive list of documents related to your income and expenses such as credit card statements, bank account details, documents about gifts sent/received and several other things. If you do not have a good understanding of Income Tax rules and laws, you can avail the services of a tax professional (CA) who can represent you on your behalf and make the whole process seamless for you. In case you do not have access to some of the documents asked, you must convey the information regarding the same properly to the tax department.
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What if I don’t comply?
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If the IT department has chosen your return for scrutiny, then offering your full co-operation is a wise thing to do. Failing to do so allows your jurisdictional Assessing Officer to complete your scrutiny assessment on ‘Best Judgement’ basis which means that the department can confirm the assessment and finalize your income and tax liability thereon as they deem fit, on the basis of information available to them. Even after this, you can be given an opportunity to be heard but in most cases it becomes redundant for not choosing to respond in the first place. Penalty of Rs 10,000 may also be applicable [as per section 271(b)] for failing to comply with the notice. As a result, you will have to face the consequences of the assessment like paying extra tax and penalty. Since this will put you in bad light with the tax department, you may even become a target of much more excruciating form of assessment called a ‘Survey’.