KNOW THE BASICS
TAXES & Non Residents| In-Short
The residential status
One the journey of NR Tax starts with understanding your Tax Residency Status. In India there are 2 relevant laws to govern your residential status for taxation & finance purpose. It may happen that you are resident in one law and non resident in other.
FEMA & IT
It may seem a bit confusing but hold on for a second and trust me, I will make it easier.
FEMA: As a non resident you should be aware about your status as per FEMA since once you become a NR as per FEMA all the money game will be governed by FEMA's residential status except Taxation. A few issues to be governed by FEMA are:
- Maintaining NR Accounts like NRO, NRE, FCNR etc.
- Eligibility to repatriate the sum
- Eligibility to invest in India & all other money matters.
IT: You have to also determine your status as per Income tax act and that will have implications on taxes like.
- The Rate of Taxes & Income tax for NR
- TDS & Withholding taxes
- Tax planning
Repatriation of funds
There are different rules and reaquirements to repatriate the funds from India to Abroad. Right from dedcution of TDS, claiming refund of the same to rules pertaining to filing of different forms to Bank and Tax Department before you repatriate the funds.
Filing of Tax Return in India
The concept of filing tax return in India is mostly misunderstood by majority of NRIs. Though if the income does not exceed the exemption limit there is no need to file tax return in India, by the rules but it lacks practicality.
Many people who are living abroad have plan to ultimately come down to India and though they do not have right now major source of Income in India but what they miss is once they are back in India they will not have Indian papers to show IT Authorities about the income and sources what they have.
(The tax returns filed back in abroad is not understood by Department in India and creates hassles unnecessarily )
TDS
On the income what you earn the payer may deduct TDS at different rates depending upon the Nature of the transaction. If you are Non resident and are struglling with high TDS being dedcuted by payer despite of the low tax liabilities, let me tell you there are ways by which TDS can be significantly reduced.
Also if you have TDS deducted make sure that you file the Tax Returns on time.
What to Take care of:
Residential Status
TDS Refunds & Tracking
Residential Status
NRI starts with determining your residential status under IT & FEMA Both laws separately.
Also one needs to understand that both laws have different implications on you as an NRI.
Once you become NR you should change your regular bank accounts to NR Accounts so as to avoid penalties by authorities.
Income Tax
TDS Refunds & Tracking
Residential Status
You have to discharge the taxes on income earned or deeemed to be earned in India.
The tax rates vary depending upon the income, nature etc.
Filing of tax returns for Non resident needs much better analysis and understanding as compared to filing tax returns for Residents.
It is always advisable to file to your tax returns in India irrespective of the income what you have.
TDS Refunds & Tracking
TDS Refunds & Tracking
As a Non resident for the transactions and income to you in India, there are high chances that the TDS/ With-holding taxes have been dedcuted by the payer while making the payment to you.
By filing your tax returns and appropriate planning, TDS Refund can be obtained.
Do you know?
There are many cases where you can save Lakhs in TDS Amount.
Repatration of Funds
As an NRI you may need to take funds earned in India from differenct sources like Sale of Immovable properties, shares, retirements funds, business profits etc. back to abroad.
While repatriating the funds FEMA and IT Rules both have to be taken care of.
Before taking the funds abroad its eligibility has to be checked as per FEMA and forms such as 15CA/CB etc. needs to be compllied with.
DTAA
Business in India
Globally countries have double taxation avoidance agreements with each other which bascially strives to provide taxation relief to the person earning the income. The intent is to tax the income in one country and not in both the countries where the income is earned and where the person resides. With proper analysis and guidance you can save hefty taxes by use of DTAAs.
Business in India
Business in India
As an NRI Starting business in India you should first see the requirements as per FEMA and FDIs rules. Once it is established based on the nature of the business that such business is allowed that nature of entity has to be selected and then further compliances has to be done.
India has several entity strcuture options like Private Limited Company, One person company, LLP, Partnership firm Registered or Un-registered and Sole Proprietorship.