While an Indian residing overseas is popularly referred to as a non-resident Indian (NRI), the nomenclature is completely different below tax legal guidelines. It will not be the nation of origin, however the variety of days keep in India, which determines whether or not an individual will probably be a resident or non-resident for tax functions.
Resident people are taxable in India on their international revenue, regardless of the place it was earned. In easy phrases, within the case of non-residents solely revenue that accrues or arises in India (say, financial institution curiosity from a financial savings account in India, or rental revenue from a home in Mumbai), is handled as taxable in India. Thus, wage obtained by non-residents in a checking account abroad, for providers carried out exterior India, will not be topic to tax in India.
According to tax consultants, there are a number of measures that may be launched on this price range to make compliance simpler for the non-resident taxpayer.
Set thresholds for acquiring a tax residency certificates, A non-resident taxpayer can benefit from the relevant tax treaty provisions, which regularly provide a decrease tax fee, say for dividend revenue arising from shares held in India. Under part 90 (2) of the Income-tax (IT) Act, in respect of a non-resident tax payer (lined by a tax treaty), the provisions of the IT Act apply to the extent they’re extra useful. So if the tax treaty supplies a decrease fee, it is that this decrease fee that may apply and never the home tax fee.
However, below part 90 (4) a ‘Tax Residency Certificate’ (TRC) is required to be furnished by the taxpayer to get the tax treaty profit – that is required to be furnished regardless of the character of revenue or the quantum of revenue.
The Bombay Chamber of Commerce and Industry (BCCI) in its pre-price range memorandum means that when the quantities concerned are very small, this provision for acquiring the TRC creates unintended hardship to each non-resident recipients and the resident payer as it includes value/ time value to get hold of such TRCs. The affiliation means that there have to be some threshold restrict for acquiring the TRC.
Relax norms within the submitting of Form 10F for claiming tax treaty advantages: Currently, non-resident taxpayers are required to electronically file Form 10F on the e-Filing portal to avail any tax treaty advantages. Along with Form 10F, non-resident taxpayers are required to present a replica of the TRC from the abroad tax authorities for your entire monetary yr to affirm their residency standing within the different nation.
According to Rohinton Sidhwa, tax associate at Deloitte-India, “No overseas tax authorities provide a TRC certifying that the taxpayer is a tax resident for the future period. Hence, suitable amendments can be made along with Form 10F, where the taxpayer can furnish TRCs from the previous period (say, for the last 1–2 years) and a copy of the TRC for the current financial year may be provided later (say at the time of filing of its tax return in India).”
Easing procedural challenges: Non-resident taxpayers want to have a checking account in India, to facilitate tax funds. Divya Baweja, tax associate at Deloitte-India explains that tax funds in India are accepted by varied modes, similar to web banking, debit playing cards, NEFT/RTGS and over-the-financial institution counter. The bandwidth has been broadened to embrace many Indian banks and NEFT/RTGS funds and UPI funds. “However, these are possible with an Indian bank only, which makes it difficult for an NRI to make tax payments. NR taxpayers residing overseas would benefit if they were allowed to make tax payments from their overseas bank accounts,” explains Baweja.
He provides that the introduction of e-submitting of tax returns has improved the method, saving each effort and time. The final mile step of e-submitting is the e-verification course of, which is restricted to having accounts with web banking/demat services with specified banks, Aadhaar OTP to India cellular numbers, digital signature certificates, and so forth.
“Non-resident taxpayers who need to complete the tax return filing process could benefit if the e-verification process can be extended via OTP to foreign mobile numbers or have two-factor authentication (different OTPs for foreign mobile numbers and email addresses). This would reduce paperwork and administrative tasks, such as tracking the ITR-V receipt by the tax office and applying for condonation of delays. Further, the time limit of 30 days should be extended to facilitate verification through physical mode,” he provides.
Lastly, non-resident people, particularly international nations, who depart India after closing their financial institution accounts in India might get a refund for varied causes. The tax refund is payable solely to pre-validated Indian financial institution accounts. Any delay in refund processing might trigger financial institution accounts (even when open below the NRO standing) to go into dormant mode. This would stop the refund from being credited to the account. “To alleviate the difficulty, foreign bank accounts should be considered for tax refunds for PAN-holders registered as Non-residents/foreign nationals,” states Baweja.
