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NRI & Foreign Company Tax Compliances

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NRI & FOREIGN COMPANY TAX COMPLIANCES
NON-RESIDENT INDIAN (NRI) TAXATION

Overview: As per the provisions of the Income tax Act, 1961 it applies to the individuals earning income outside the home country who are non residents.

  • A non Resident is a person who does not satisfy any of the following two conditions:
    • When you are in India for a minimum of 6 months for the financial year.
    • When you have been in India for 2 months for the previous financial year and have lived for one whole year(365 days) in the last four financial years
  • Any individual or business whether resident or non resident is required to file an Income Tax return in India if the income exceeds the prescribed minimum as per the tax slab rates.
  • As per the provisions of section 234B and 234C, if the tax liability of an NRI exceeds 10,000 he/she must pay advance tax the failure to pay which leads to payment of interest on advance tax.
  • Various deductions are allowed to an NRI in computation of income such as section 80C, 80D, 80G, 80E and 80TTA.
  • Under the Double Tax Avoidance Agreement (DTAA) the NRI's can claim tax relief under the tax credit method or the exemption method.

International Taxation

Overview: International taxation is concerned with the study of direct and indirect taxes of different countries at an international level. It is the ascertainment of tax relating the laws of taxation of different countries and beyond the national level. The taxes on foreign transactions are governed under regulations of the Income Tax Act, 1961 and provisions relating to domestic law are used for handling such various cross border transactions.

  • Income Tax Act, 1961 contains provisions relating to non residents which states that the income of a non resident which is received or deemed to have been received in India by or on behalf of a non resident or is accrued or deemed to have been accrued in India is taxable in India.
  • The tax slabs which are applicable to non residents are same as are applicable to residents who are below the age of sixty(60) years.
  • As per the new rule 37BB as prescribed by the Central Board Of Direct Taxes (CBDT) in the Income Tax Rule1962, form 15CA and form 15CB are required to be filed in relation to the remittances to non resident Indians.
  • As per transfer pricing regulations, the transactions taking place between two unrelated parties would be deemed to be considered as international transaction between associated enterprises and taken into consideration for taxation purposes.
  • To provide relief to taxpayers Double Taxation Avoidance agreement has been put in place for resolving the issues of taxability of income so as to provide improved transparency of operations.