How NRIs, PIOs & OCIs can apply for PAN Card in India?
A Permanent account number is also known as a PAN. You can use this number as your own personal ID or as a tax id number. This number is given to everyone by the income tax department for you to use as a tax id. This card will look the size of a credit card.
How to Invest in Indian Real Estate or Property Market?
Are you a NRI looking forward to a great investment in Indian properties? There are lots of opportunities waiting for you these days. But you need to make sure that you invest in the right place and at the right time. Have you ever thought about the Indian real estate investment?
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.
What Is a PAN Card and How to Apply a PAN Number Online?
Being a business entity (company), individual or any kind of firm, you need to be familiar with the acronym PAN i.e. Permanent Account Number. This Indian PAN number is basically designed with ten numeric digits and these numbers are printed on the laminated piece of card.
Overview on Withholding taxes in India.
There is a lot of confusion among international companies not registered or having no presence in India when it comes to with holding taxes. Our goal through this literature is to provide useful and resourceful information to all our readers. So what is withholding tax? Well it is nothing but a type of taxation imposed by the Indian govt on the payer where it is mandatory for him to hold tax and pay the same to the govt. This type of tax is quite common and essential while getting paid on invoices..
Why do you have to pay withholding tax in India?
Chapter XVII B of the Income tax Act provide for deduction of tax at source at the time of making payment by any assessee. It also covers all payments made to Non Resident. Section 195 deals with deduction of tax at source at the time of making any payment or at the time of crediting any sum to a Non Resident.
Section 195 of the Income Tax Act, 1961 provides “Any person responsible for paying to the Non Residents, not being a company, or to a foreign company, any Interest or any other sum chargeable under the provisions of this Act (not being Income chargeable under the head salaries) shall, at the time of credit of such Income to the account of the payee or the time of payment thereof in cash or in Cheque or in draft or in any other mode, whichever is earlier, shall deduct Income tax thereon at the rates in force.
There is no threshold limit defined in section 195, even Re. 1 is covered under section 195. All payers are covered irrespective of Legal Character i.e. Individual, HUF etc.
H’ble Supreme Court in the case of EILY LILY 312 ITR 225 views that:
The purpose of TDS provisions in Chapter XVII B is to see that the sum which is chargeable under Section 4 for levy and collection of income-tax, the payer should deduct tax thereon at the rates in force, if the amount is to be paid to a non-resident.
Get a PAN (PERMANENT ACCOUNT NUMBER) – if you want to reduce your withholding tax liability.
The amendment made applicable from 01st April, 2010 requires every recipient of Income to Obtain Permanent Account Number.
PAN is a ten-digit alphanumeric number issued in the form of laminated card by the Income tax department of India.
As per section 206AA of Income tax act, if the recipient of Income fails to provide PAN, then rate of withholding tax shall be at higher of following rates:
- Rate specified in relevant section depending upon nature of payment;
- Rates in force (rate specified in ITA or in tax treaty);
- Rate of 20%.
So it is advise for all to start applying for PAN, if you do not have one.
How to file with-holding taxes via INCOME TAX FILING?
Section 139 of Income tax Act, 1961 speaks about filing taxes in India. As per Section 139(1), every company is required to file taxes in India irrespective of level of Income.
“A body corporate incorporated by or under the laws of country outside India” is also covered within definition of company as defined in Section 2(17) of the Income Tax act.
Section 139(1) comes attracted only when transaction entered into by the assessee is liable to taxes in India. This view is affirmed by Hon’ble AAR in the case of Vanenburg Group B.V., 289 ITR 464.
TAXABILITY OF BUSINESS INCOME
Any profit arising to foreign enterprise from Business in India will be taxed in India only if that foreign enterprise is having Permanent establishment (PE) in India. Only profits attributable to that PE will be taxed in India.
Permanent establishment means:
- A Place of Management;
- A branch;
- An office;
- A factory;
- A workshop;
- Or any other place of effective management.
Business of foreign enterprise should be carried through PE. Existence of PE in India is a must condition for tax-ability of business profits in India of a foreign enterprise.
A foreign enterprise and a PE in India will be considered as a separate entity and transactions between two must be carried on arm’s length price.
TAXABILITY OF FEES FOR TECHNICAL SERVICES AND ROYALTY
In general sense, Fees for Technical service is any consideration for rendering of technical, managerial services. Fees for technical services is defined in section 9(1)(vii) of Income tax Act.
Hon’ble Supreme Court in the case of Ishikawajima-Harima heavy Industries 288 ITR 408 held that in order to be chargeable to tax in the hands of the non-resident, fees for technical services had to be rendered in India as well as utilized in India.
Further above decision is overruled by Finance Act 2010 by adding an explanation to Section 9 which clearly explains that Fees for technical services of a Non Resident shall be deemed to accrue or arise in India and shall be included in total Income whether or not:
- the non-resident has a residence or place of business or business connection in India; or
- the non-resident has rendered services in India.
It is now clear from above explanation that Fees for technical services would attract withholding tax if services are utilized in India.
Royalty is generally a consideration received in respect of transfer of rights, rights to use property and imparting of any information. Royalty is broadly defined in section 9(1)(vi) of Income tax Act.
Taxability of payment made for softwares has always been a subject of litigation. The decisions in Indian courts for software payments have mainly focused their decision on treating this revenue as ‘Royalty’ or ‘Sales’ Income. Income which is characterized as ‘Royalty’ would obviously attract Withholding tax, whereas any Income characterized as
‘sales’ Income would not be subject to tax in absence of Permanent establishment in India.
It was held by Karnataka High court in the case of Samsung Electronics Co. Ltd that payment made for purchase of copy of a computer program for internal business use as well as for resale to end user is taxable as royalty and would attract withholding tax. Further Supreme court by reversing the order of high court, held that withholding provisions would apply only when payments are chargeable to tax in India.
With the Finance Bill 2012, the government would like to tax all payments made for software as ‘Royalty’ as they consider this payment toward ‘license to use’. This amendment is retrospectively made with effect from 01st June, 1976 i.e. AY 1977-78.
Withholding TAX RATES
Withholding tax rate in connection with Income arising in India can be obtained by:
- Determining the tax-ability of Income as per Indian tax laws;
- If Income is taxable as per Income tax Act, then refer to tax treaty between India and Residence country.
- Compare the rates as per Income tax Act and DTAA.
- Apply the rate whichever is beneficial to assessee.
RECENT BUDGET HIGHLIGHTS
Section 9- Major Amendment is proposed in this section which deals with “Income deemed to accrue or arise in India”. An explanation shall be inserted in sub section (1) and shall be restrospectively effective from 01st April, 1962.
Explanation- For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share of the interest derives, directly or indirectly, its value substantially from the assets located in India.”
Supreme Court decides in favor of Vodafone in January, 2012 and held that government has no jurisdiction over vodafone’s purchase as the transaction took place in Cayman Island.
However, the retrospective amendment in Section 9 have now overruled supreme court judgement in Vodafone case, which won Rs. 11000 crore tax dispute case against Indian tax authorities.
Section 115BBA- This section covers taxability of Non Resident sports person, sport association and institutions and they are presently taxed at 10% on their gross earning in India. Now, with the Finance Bill, 2012, this facility is extended to Non Resident entertainers, who earns from their performances in India. Tax rate is also extended from 10% to 20% and revised rate for deduction will be applicable from 01st July, 2012.
Section 90- According to amendment proposed in Section 90 of Income tax act, if an NRI wish to avail DTAA rates for Financial Year 2012-13 will have to submit Tax residency certificate (TRC) to deductor. TRC is issued by the authorities of country in which NRI resides. Rules in this context are still pending with Indian tax authorities.
Posted in Invest in India Investing NRI Taxation by .
The laws and regulations relating to taxation are never easy to understand. You should know that the exact tax rules which are applied to Indians residing in the country are somewhat modified for the non resident Indians or NRIs. Chapter XII – A in the Indian Income Tax Act has been devoted to this question of taxation of the NRI. If you are a non resident Indian, you will have to navigate quite a few tax laws to understand and pay up exactly what your due is.
>> NRIs file tax here – FREE
The most important fact that you, as a NRI should know is that you are required to have a PAN card, even though you are a non resident Indian. Since the process of applying for a PAN card has been made so easy, you can apply for it online and obtain your PAN card.
There is several taxable income of a NRI as well as several exemptions. You need to understand all of them so that you can pay the correct amount of tax on time and avoid any penalty. If you find the information too complicated, you should take the help of an accountant to sort out your tax questions.
Laws and regulations relating to NRI taxation
If you are a NRI, you have to bear the following facts in mind as regards to the filing of your tax:
- You can be taxed only on that income which is earned in India. You do not have to pay tax on the income you earned abroad in India. However, the reverse may not be true and you should check the tax laws of your country of residence to verify it. For example, you do not have to pay tax on dividend income received from Indian companies, but you will have to pay tax on these in the USA.
- If your resident country has a Double Tax Avoidance Agreement with India, you will get tax concessions there. So, you should find out about these details.
- If your total income is less than the prescribed limit, you need not pay tax in India. However, there are a few exceptions to this clause.
- If your income is above the prescribed limit, you will have to pay tax on income from such sources as immovable assets in India, investments, capital gains and any other income obtained from India.
- However, even if your income is below the exemption limit, you still will have to pay tax in certain cases. For example, you will have to pay taxes on short term capital gains like equity shares. In case of long term capital gains, the tax is almost always deducted at source. If it is not so deducted, then you will have to pay tax on it.
- You will not have to pay tax on inheriting property in India, but you will have to pay tax on any income derived from it like rent.
The tax filing process:
The process of filing tax return of a NRI is as follows:
- Obtain your PAN number, either physically or online or with help of specialized brokerage firm.
- Then you will have to select the correct form for filing your return. The categories are :
o ITR 1 for income from salary, interest, agricultural activities or pension.
o ITR 2 for those not earning from profession or business.
o ITR 3 for partners in a firm.
o ITR 4 for those earning from proprietary profession or business.
- Fill up the form and deposit them using either of two methods:
o You can deposit them online after obtaining your digital signature from designated authority.
o You can physically file them. In that case, the form should be accompanied by the acknowledgement of an income tax officer.
- You have to sign the returns yourself or authorize a signatory for the purpose.
Posted in NRI Taxation by .
India Forex trading has always been a bit of a mystery to anyone wanting to know more about it. From being something that has attracted more interest in the recent years, forex trade has grown from being a fundamental concept to an evolved area of investment.
Get a Free Forex Course: Click To Learn More
The subject of forex trade has many misconceptions about it. It was previously thought to be the domain of corporate and financial institutions. But that is hardly a fact. Forex trading is as much an individual enterprise activity as with banks.
Forex trading is not complicated. Even though initially the numbers may look intimidating, the process of investing through foreign exchange trading is simple. So much so that forex trading is one of the simplest ways to make money.
Like any other investment in the markets, forex trading does come with risks. You have to master the basics even before thinking of advancing to more serious forex trading.
The basics of forex trading for beginners
A forex market is a place where trading of currencies takes place. Alternatively, a forex market is known as currency market. The forex market is a place where buying and selling of foreign exchange happens between many currencies. Such buying and selling is the infrastructure of international finance.
The main parties involved in forex trade are the banks. For instance, if India has to import raw materials from the U.S. it has to pay the U.S exporters in dollars. For this it has to convert the Rupee into Dollars.
This conversion is a perennial thing and happens at all times during the day. The U.S. dollar is pegged at four trillion dollars a day worth of transaction conversions.
Now if you are an individual trying to get into forex trade, you are simply an actor in the above-mentioned process of buying and selling currency to facilitate trade. You will not own a trillion of currency, but with whatever money you have, you buy currencies.
You buy through a pairing financial mechanism. In this process, when you purchase a particular currency (For e.g. the Canadian Dollar), it is exchanged with another currency (for e.g. the Japanese Yen). This is known as pairing.
So here you trade with pairs. You buy pairs and sell them. Just like you trade with shares on the stock market, here you trade with pairs. This is the fundamental difference.
Understanding the dissimilarities between forex trading and stock trading
If you are confused between stock trading and forex trading, the following information will help you get more perspective.
- The stock market is a place that has a huge list of companies and their stocks. But with the forex market, you are only concerned with leading currencies. You do not trade with currencies that are not used extensively in the world. This means that you trade in currencies of economically strong countries.
- The stock market does not operate throughout the day. It is active only for a couple of hours during the day. A forex market is active throughout the day.
- Margin trading is high in forex trading. You get significant margins when you sell your pairs. And this exposes you to buying probabilities of more pairs.
- Unlike the stock market, even a small change in the value of currency can affect your pair value in currency market trading.
How to begin
Open an account with any online forex trading agencies. Deposit money to your account and start trading. Before starting to invest, learn the art of trading. Start off with practice accounts to give you more hands-on experience. Most online trading accounts give you access to practice accounts to perfect your art of online forex trading.
Posted in Forex Trading Trade Forex by .
