affairs are complex, sometimes ambiguous and procedure oriented. It is quite difficult and cumbersome to attend to complex laws, regulations and procedures.
For NRI any income earned or accrued from the following sources in India is taxable in India and they are obliged to file tax returns.
- Salary received in India or salary for service provided in India, income from a house property situated in India, capital gains on transfer of asset situated in India, dividends from the company, income from fixed deposits or interest on a savings bank account.
- Income which is earned outside India is not taxable in India.
- Interest earned on an NRE account and FCNR account is tax-free. Interest on NRO accounts is taxable in the hands of an NRI.
Non-Resident Taxation services include:
- Determination of Residential status
- Professional support for obtaining PAN card
- Preparation and computation of Income Tax and e-filing of Income tax returns
- Obtaining income tax clearance from tax authorities
- Assistance in providing opinion for withholding tax from different countries
- Assistance in repatriation of capital and income from India
- Assisting them in setting up office in India either by way of Liaison office, branch office, company or LLP(Limited liability Partnership)
- Providing Capital gains tax planning during sale of movable and immovable assets
- Assisting NRI to operate Bank Accounts, to invest in shares, debentures, mutual funds, government securities and bank deposits.
- Representation before judicial authorities to any queries on Indian Taxation, DTAA/Tax Treaty benefits, FEMA and RBI procedures and approvals.
Repatriation of Funds:
Remittance of income like rent, dividend, pension, interest, sale proceeds on sale of the property, etc. of NRIs/PIO is freely allowed, on the basis of appropriate certification by a Chartered Accountant certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid / provided for. The Chartered Accountant issues a certificate in form 15CB and the remitter is required to submit details of such certificate in form 15 CA and produce the copies of form 15CB and form 15CA to the bank effecting the remittance. This requirement is applicable even if remittance is to a person's own account held abroad.
Lower Tax Deduction on sale of Property by NRI
As per Section 195 of the Income Tax Act, payment to a Non resident, be it sale consideration towards the sale of property, Rent, Interest, Professional fees, commission, royalty, etc., is subject to Tax Deduction at Source (TDS).
The rate of TDS on sale of property differs basis the residential status of the seller, viz.:
- For an Indian Resident seller, TDS rate is 1% for the sale consideration exceeding Rs.50 lakh.
- For a Non-Resident seller, TDS rate is 20% plus cess of the sale consideration irrespective of the transaction value.
In order to reduce the TDS burden, the seller of the property can apply to the department to issue a certificate for deduction of lower rates or no deduction of tax. At times the seller may be required to pay higher amount of tax in form of TDS even after not having any taxable income for the year, thereby ending up claiming huge refunds. In order to eliminate this issue, the Income Tax Department allows the NRI seller to obtain a Lower Deduction Certificate as per the provisions of section 197, providing either a reduce rate of TDS or a NIL rate of TDS, on a case to case basis.
To obtain LDC, the non-resident seller must file an application in Form 13 online on Income Tax Traces Portal. The application should be supported by following relevant details / documents:
- Agreement of sale & purchase of the property
- TAN number of the buyer. In case the buyer does not have TAN, he can apply for it and get it within a week by filing Form 49B with the Income Tax Department.
- Copy of ITR & Computation of NRI Income for last 3 yrs.
- Copy of Tax Statement / Form 26AS of NRI for last 3 yrs.
- Copy of Bank statement reflecting payment for the purchase of property.
- Proof of NRI (Passport or any other document signifying the residence of the applicant abroad).
- Documents to support deduction under section 54, if any.
The Assessing Officer (AO) will review the application and supporting documents and if satisfied will issue an online LDC specifying the reduced TDS rate, which the taxpayer can download from the Income Tax Traces portal. The LDC will also mention its validity period.