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Latest from our Blog

Supreme Court: Daughters have equal rights in inherited property

20 August 2020 in Other Articles 90 hits

Since ages, the Hindu society has been a patriarchal society. This has also been reflected in the laws of the…

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Are you a Resident or a Non-Resident in India? What changed in FY 2020-2021?

08 June 2020 in NRI taxation 82 hits

Are you a Resident or a Non-Resident in India? What changed in FY 2020-2021? Among the global pandemic, and the…

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DIRECT TAX PROPOSALS – BUDGET 2020

06 February 2020 in Other Articles 186 hits

DIRECT TAX PROPOSALS – BUDGET 2020 Hon’ble Finance Minister Smt Nirmala Sitharaman presented the Budget on Saturday, February 01, 2020.…

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What is Tax Residency Certificate (TRC) and what is its importance?

06 February 2020 in NRI taxation 94 hits

TRC is the certificate issued by the respective country’s tax department that a person is a tax resident of that…

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What do you mean by Double Taxation Avoidance Agreements (DTAA) and what is its importance?

06 February 2020 in NRI taxation 103 hits

DTAA are tax treaties entered by the Government of India with various countries to provide relief from double taxation. Generally…

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FAQ's

  • Is PAN compulsory for all payments to non-residents? +

    > Section 206AA states in absence of PAN tax will be deducted at higher of the following rates:
    a) At the rate specified in the relevant provision of the Act; or
    b) At the rate or rates in force; or
    c) At the rate of 20%
    > Even to apply for lower tax deduction certificate u/s 197, PAN is compulsory.
    > As per Rule 37BC, PAN is not required for the following payments, if specific documents / information are furnished:
    a) Interest on Long-term infrastructure bonds u/s 194LC;
    b) “Specified Incomes”
    c) Interest;
    d) Royalty;
    e) Fess for Technical Services;
    f) For transfer of Capital asset;
    > The specific documents / information required under Rule 37BC are:
    a) Name, email id, contact number;
    b) Address of the deductee outside India;
    c) Tax Residency Certificate – if foreign country’s law provide for TRC;
    d) Tax Identification Number of the deductee in country outside India;
  • What is Tax Residency Certificate (TRC) and what is its importance? +

    TRC is the certificate issued by the respective country’s tax department that a person is a tax resident of that country. TRC is usually issued for a specific period.
    Why is it necessary?
    As per Indian Income Tax Act, in case of payments to non-residents, TRC of the non-resident is compulsory to avail the benefit under DTAA.
    Even if TRC is not available for the specific period during which payment is to be made, DTAA benefit is not available.
    If DTAA provisions are not exercised, it usually results in more tax paid in India. Further in absence of PAN of the non-resident, Section 206AA comes into play and tax is deducted @20%.
  • What do you mean by Double Taxation Avoidance Agreements (DTAA) and what is its importance? +

    DTAA are tax treaties entered by the Government of India with various countries to provide relief from double taxation. Generally all the country tax laws state that:
    a) The global income (income earned from all over the world) earned by a resident of a country be taxed in the resident country;
    b) Income earned / accrued / received in the source country shall be taxed in the source country irrespective of the fact whether the person earning such income is resident of the country or not.
    For eg., If an Indian resident receives dividend income on the shares of USA company listed on NYSE, such dividend shall be taxed in India as he is an Indian resident. Such dividend shall also be taxed in USA as the dividend was accrued in USA. This arises to double taxation of the same income in two different countries.
    To avoid such double taxation, Government of India has signed tax treaties with various countries. The taxation rules differ in all the agreements signed with different countries.
  • Can an NRI / Foreign national open a bank account in India in absence of Permanent residence in India? +

    Bank accounts for NRI / PIO / OCI:
    An NRI / PIO / OCI can open 3 types of accounts in India:
    a) NRE account i.e. Non-resident External account: It is a rupee dominated account and the funds in the said account are freely repatriable. It can be a savings account, recurring deposit or a fixed deposit. The rate of interest on NRE accounts are usually less compared to NRO accounts. However, interest earned on NRE accounts is tax free in India.
    b) NRO i.e. Non-resident Ordinary account: It is also a rupee dominated account but the funds are not freely repatriable. All the incomes earned / accrued in India have to be deposited in this account. It can be a savings account, recurring deposit or a fixed deposit. The rate of interest on NRO accounts is generally at par with the resident accounts. Interest earned on NRO accounts is taxable in India.
    c) FCNR (B) i.e Foreign currency Non-resident (Banks) account: It can only be opened in foreign currency. NRIs invest their funds in FCNR(B) accounts as interest rates are higher in India compared to with an aim to avoid the currency fluctuation risk.Bank accounts for foreign citizens (not an NRI / PIO / OCI):In case of a foreign citizen, if he is a resident in India as per FEMA guidelines, then he can open a resident bank account in India, which on return to his origin country is redesignated as NRO account.If a foreign citizen is on a temporary visit to India (like travel etc.,) he can open a temporary NRO account for expenses here in India, for a maximum period of six months. RBI permission is required to hold such accounts for more than six months.
  • Can an NRI / foreign national start a business in India? +

    >The rules for doing business in India by an NRI / foreign national are governed by the Foreign Exchange Management Act, 1999 (FEMA) and the Foreign Direct Investment (FDI) policy. Except a few cases like acquisition of agricultural land, there is no differentiation in rules for an NRI and a foreign national. Both are treated at par.
    > FEMA and FDI policy in the last decade has opened up to large extent and allows 100% FDI (meaning total ownership of the business by the non-resident) in most of the businesses. Government has also allowed FDI by automatic route (no government permission required) in most of the businesses. In some businesses government allows FDI only after Approval.
    > In some categories of businesses, government restricts FDI upto 74% or 49% or even 24%. Government also has restrictions on the type of entity in which the business operates. For example, limited liability companies and limited liability partnerships are free to repatriate profits earned in India, whereas there are restrictions on repatriation on proprietorship and unlimited liability partnership concerns.
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