The upcoming Direct Tax Code (DTC) 2025 in India is designed to replace the existing Income Tax Act of 1961, aiming to modernize, simplify, and enhance the efficiency of the tax system. Key features include:

1. Residency Simplification: The DTC will reduce residency categories from three (Resident and Ordinarily Resident, Resident but Not Ordinarily Resident, and Non-Resident) to two: Resident and Non-Resident.
2. Unified Financial Year Basis: The concepts of Previous Year and Assessment Year will be removed, with the Financial Year becoming the sole reference point for tax purposes.
3. Integration of Capital Gains: Capital gains may be taxed as regular income, which could increase tax rates for some taxpayers.
4. Updated Income Terminology: “Income from Salary” will be renamed as “Employment Income,” and “Income from Other Sources” will become “Income from Residuary Sources,” though the main income categories remain unchanged.
5. Expanded Audit Eligibility: In addition to Chartered Accountants (CA), Company Secretaries (CS) and Cost and Management Accountants (CMA) may also be authorized to conduct tax audits, enhancing accessibility and competition in tax audit services.
6. Streamlined Sections and Schedules: Fewer sections in the tax code aim to simplify compliance and reduce litigation complexity.
7. Revised TDS and TCS Rules: Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) will apply more broadly across income types, with lower rates but wider applicability.
8. Reduction in Exemptions: Many existing exemptions and deductions are likely to be phased out, broadening the tax base and simplifying filing processes. The goal is to increase the taxpayer base from about 1% to around 7.5% of the population.
9. Corporate Tax Rate Harmonization: A unified tax rate for domestic and foreign companies aims to encourage foreign investment by creating a level playing field.
10. Lowered Tax Burden for Salaried Employees: Salaried employees may see a reduced tax burden, addressing the long-standing issue of a disproportionate tax load on this group.

The DTC 2025 is anticipated to take effect in the fiscal year 2025-26, signaling a major evolution in India’s tax framework that could impact compliance, competitiveness, and transparency across sectors.

When purchasing property from a Non-Resident Indian (NRI) seller, the buyer is required to deduct Tax Deducted at Source (TDS) on the sale amount. The TDS rate and procedures are different compared to transactions involving resident sellers. Here’s a breakdown of the process:

1. TDS Rate for NRI Seller

• Standard Rate: TDS is typically deducted at a rate of 20% plus applicable surcharge and cess on the total sale consideration if the property is classified as a long-term capital asset (held for more than 2 years).
• Short-Term Capital Gains: If the property is held for less than 2 years, the TDS rate is 30% plus applicable surcharge and cess.
• Important Note: These rates are subject to change as per the Finance Act. Ensure you verify the latest rates.

2. Procedure for Deducting TDS

• Obtain TAN: The buyer must obtain a Tax Deduction and Collection Account Number (TAN) before deducting TDS.
• Deduction of TDS: TDS should be deducted at the time of making the payment to the NRI seller, whether in advance or in installments.
• Deposit of TDS: The deducted TDS should be deposited to the government account using Form 26QB within 30 days from the end of the month in which TDS was deducted.
• Issue of TDS Certificate: The buyer must issue Form 16A (TDS Certificate) to the NRI seller within 15 days from the due date of furnishing the challan-cum-statement in Form 26QB.

3. Lower TDS Certificate Process

An NRI seller may apply for a lower or nil deduction certificate under Section 197 of the Income Tax Act if the actual tax liability is expected to be lower than the standard TDS rate.

• Application by NRI Seller: The NRI seller can apply for a lower TDS certificate from the jurisdictional Assessing Officer in India. The application is made using Form 13.
• Processing Time: The issuance of a lower TDS certificate can take a few weeks to a few months, depending on the assessment and verification process.
• Issuance of Certificate: Once approved, the Assessing Officer issues the lower or nil TDS certificate specifying the reduced rate of TDS.
• Furnishing to Buyer: The NRI seller must furnish this certificate to the buyer, who will then deduct TDS at the rate mentioned in the certificate instead of the standard rate.

4. Filing of TDS Return

• The buyer needs to file TDS returns on Form 27Q quarterly.
• The return should include details of the NRI seller, the property transaction, the amount paid, and the TDS deducted.

5. Non-Compliance Penalties

• Failure to deduct or deposit TDS may result in interest and penalties. The buyer may also be deemed an “assessee in default,” making them liable to pay the TDS amount along with interest.

6. Things to Keep in Mind

• Consultation: It is advisable to consult a tax professional or legal expert to ensure compliance with the regulations.
• Documentation: Ensure proper documentation, including the NRI status of the seller, property details, and any certificates related to TDS.
• Payment Consideration: TDS is deducted on the entire sale consideration, not just the capital gain portion.

This process ensures that the transaction is compliant with Indian tax laws, and both the buyer and seller avoid any future complications.

1. NRI Meaning:

• Non-Resident Indian (NRI) refers to an Indian citizen or a person of Indian origin who resides outside India for employment, business, or any other purpose indicating an indefinite stay abroad.

2. NRI Status Calculation Process:

• NRI status is determined based on the individual’s physical presence in India during a financial year (April 1 to March 31).
• If an individual stays in India for less than 182 days in a financial year, they are considered an NRI for that year subject to meet out other conditions of status determination

3. Income Tax Applicable to NRIs:

• NRIs are taxed on income earned or accrued in India, such as income from property, capital gains, interest, dividends, etc.
• Income earned outside India is generally not taxable in India for NRIs.
• The tax rates applicable to NRIs are the same as those for residents of India.

4. Interest in NRE and NRO Accounts:

• NRE (Non-Resident External) accounts: Funds in NRE accounts are freely repatriable (can be transferred abroad) and are exempt from Indian taxes, including interest earned.
• NRO (Non-Resident Ordinary) accounts: Funds in NRO accounts are not freely repatriable, and the interest earned is subject to Indian taxes.

5. Double Taxation Avoidance Agreements (DTAA):

• DTAA aims to prevent double taxation of income in two countries.
• NRIs can benefit from DTAA provisions by claiming tax credits or exemptions in one country for taxes paid in the other country.

6. High-Value Transactions to be Kept in Mind by NRIs:

High-value transactions for NRIs can include various activities or financial transactions that involve significant sums of money or assets. Here are some examples of high-value transactions that NRIs should be mindful of:

Property Transactions:

• Purchase or sale of real estate: NRIs investing in or disposing of property in India should be aware of the high value associated with real estate transactions. This includes buying, selling, or gifting property.
• Rental income: NRIs earning rental income from properties in India should keep track of the high-value transactions associated with rental payments, lease agreements, etc.

Investments:

• Stock Market Investments: NRIs investing in the Indian stock market may engage in high-value transactions through buying or selling shares, mutual funds, or other securities.
• Fixed Deposits and Financial Instruments: Investments in fixed deposits, bonds, debentures, and other financial instruments may involve significant sums of money.

Banking and Remittances:

• Transfer of Funds: NRIs transferring large sums of money to or from India for investment, business, or personal purposes should be aware of the high-value nature of these transactions.
• Foreign Currency Accounts: Opening or closing foreign currency accounts, especially NRE and NRO accounts, involves high-value transactions that NRIs should monitor.

Loans and Borrowings:

• Loans and Mortgages: NRIs obtaining loans or mortgages from Indian banks or financial institutions for property purchase or other purposes may involve high-value transactions.
• Repayment of Loans: NRIs repaying loans or mortgages to Indian lenders also constitutes high-value transactions.

Business Transactions:

• Setting up Business Entities: NRIs establishing businesses or investing in Indian companies may engage in high-value transactions related to company formation, capital infusion, etc.
• Commercial Contracts: Business agreements, contracts, and transactions involving significant monetary values should be carefully documented and monitored.

Tax Payments and Compliance

• Payment of Taxes: NRIs fulfilling their tax obligations in India, including payment of income tax, property tax, or other levies, may involve high-value transactions.
• Compliance Reporting: Meeting reporting requirements for high-value transactions, such as filing tax returns, disclosing foreign assets, and complying with regulatory norms, is essential for NRIs.

7. Tax Filing for NRIs:

• NRIs are required to file income tax returns in India if their total income exceeds the basic exemption limit.
• Even if income is below the taxable threshold, filing a return may be necessary to claim a refund of taxes withheld at source or if certain types of income (like capital gains) are involved.
• Timely filing of tax returns and compliance with reporting requirements are crucial for NRIs to fulfill their tax obligations in India.

For personalized advice and assistance with tax matters, NRIs should consult with qualified tax professionals or chartered accountants familiar with Indian tax laws and regulations pertaining to NRIs.

When U.S. stocks are given to an employee in India, taxation can be complex due to the international nature of the income and the need to consider tax regulations in both the United States and India. Here’s a simplified overview of how taxation generally works for such cases, keeping in mind that tax laws are subject to change and can vary based on specific circumstances. Always consult a tax professional for advice tailored to your situation.

1. At the Time of Granting Stock Options:

In general, if the stock options are granted to the employee but not vested, there is no immediate tax implication in India. The taxation event occurs at the time of exercise.

2. At the Time of Exercise:

When an employee exercises their stock options (i.e., buys the stock), the difference between the exercise price and the fair market value (FMV) of the shares is taxed as a perquisite (a benefit in addition to salary) under the head “Salaries.” This is subject to income tax according to the individual’s income tax slab rates in India.

3. At the Time of Sale:

When the employee eventually sells the stocks, the gain from the sale is subject to capital gains tax. The tax rate depends on whether it’s a short-term or long-term capital gain:

• Short-term Capital Gains (STCG): If the stocks are held for less than 24 months from the date of exercise, the gain is considered short-term and is taxed according to the individual’s income tax slab rates which is applicable.
• Long-term Capital Gains (LTCG): If the stocks are held for more than 24 months, the gain is considered long-term and is taxed at 20% with indexation benefits, which adjust the purchase price for inflation to calculate the gain.

4. Double Taxation Avoidance Agreement (DTAA):

India has a DTAA with the U.S., which means taxpayers can avoid being taxed twice on the same income. If taxes are paid in the U.S. on the income from the sale of stocks, you may be eligible for a credit for those taxes against your tax liability in India. The specifics depend on the DTAA provisions and should be reviewed carefully.

5. Tax Filing in India:

It’s important for the employee to disclose international assets and foreign income in their Indian tax return if they qualify as a resident for tax purposes in India.

If you receive the RSU of a foreign company, you must disclose it under the Foreign Asset Schedule (FAS). If you paid taxes at vesting by selling shares, those shares wouldn’t be mentioned in FAS. While selling your RSU holdings, you pay tax only on the profit made and not the entire value of the shares. This also helps in avoiding double taxation

Non-disclosure can lead to penalties and interest and further Scrutiny by the tax department

6. Documentation:

Maintaining detailed records of the dates of grant, exercise, sale, and the amounts involved is crucial for calculating taxes accurately and for compliance with both U.S. and Indian tax laws.

This overview is a simplification, and the actual tax implications can vary greatly based on individual circumstances, specific types of stock options (e.g., ESOPs, RSUs), and changes in tax laws.

We will recommend to Consult with a tax professional who has expertise in cross-border taxation to navigate these complexities.

Under the Income Tax Act of India, various financial transactions are subject to reporting requirements to the Income Tax Department. These transactions, which exceed specified thresholds, are reported by the respective entities to the Income Tax Department, and the details of these transactions are compiled into the Annual Information Statement (AIS) for individual taxpayers. Here are some common transactions and their respective thresholds that are reported under the AIS:

1. Bank Transactions:

• Cash deposits or withdrawals aggregating to Rs. 10 lakh or more in a financial year in one or more savings account of a person maintained with the same bank.
• Payment made by any mode (other than cash) for credit card bills aggregating to Rs. 10 lakh or more in a financial year.
• Purchase of bank drafts or pay orders with cash aggregating to Rs. 10 lakh or more in a financial year.

1. Mutual Fund Transactions:

• Redemption of units of mutual fund for an amount exceeding Rs. 10 lakh.

1. Stock Transactions:

• Sale or purchase of shares of a company listed on a recognized stock exchange exceeding Rs. 10 lakh in value per transaction.

1. Property Transactions:

• Purchase or sale of immovable property valued at Rs. 30 lakh or more.
• Receipt of rent exceeding Rs. 2.40 lakh per annum.

1. Credit Card Transactions:

• Payment made by any mode (other than cash) for credit card bills aggregating to Rs. 10 lakh or more in a financial year.

1. Foreign Exchange Transactions:

• Purchase of foreign currency or traveler’s cheque exceeding Rs. 10 lakh or more in cash.

1. Fixed Deposit Transactions:

• Fixed deposit with banks or post office aggregating to Rs. 10 lakh or more.

1. Cash Transactions:

• Cash deposits aggregating to Rs. 10 lakh or more in a financial year in one or more saving account of a person maintained with the bank.
• Cash deposits aggregating to Rs. 50 lakh or more in a financial year in one or more accounts (other than current account and time deposit) maintained with the bank.

Reporting and Compliance:

• Annual Information Statement (AIS): The details of these high-value transactions are compiled into the Annual Information Statement (AIS) for individual taxpayers and are made available for download through the Income Tax Department’s e-filing portal.
• Verification and Compliance: Taxpayers are required to verify the accuracy and completeness of the high-value transactions reported in their AIS. Any discrepancies or omissions should be rectified promptly to ensure compliance with tax laws.
• Income Tax Return Filing: Taxpayers must accurately report all high-value transactions in their income tax returns and ensure compliance with tax laws. Failure to disclose these transactions may attract penalties or scrutiny by tax authorities.

The Annual Information Return (AIR) serves as a crucial tool for the Income Tax Department to track high-value financial transactions and ensure tax compliance among taxpayers. When significant discrepancies are identified between the information reported in the AIR and the income tax returns filed by taxpayers, the Income Tax Department may issue a notice to investigate and resolve the discrepancies. Taxpayers are required to respond to such notices promptly and provide the necessary clarification or information to address the discrepancies and ensure compliance with tax laws. It’s essential for taxpayers to accurately report their financial transactions and income to avoid potential penalties or scrutiny by tax authorities

If you are an Indian taxpayer, you may receive a notice under Section 148A of the Income Tax Act. This notice is issued by the Income Tax Department to initiate proceedings for re-assessment of your income. In this article, we will discuss what is a notice under Section 148A, the reasons for its issuance, and the steps you should take if you receive one.

What is a notice under Section 148A of Income Tax?

A notice under Section 148A of the Income Tax Act is issued by the Income Tax Department to initiate proceedings for re-assessment of a taxpayer’s income. It is issued if the Income Tax Department has reason to believe that the taxpayer’s income for a particular year has escaped assessment. The notice requires the taxpayer to file a return of income for the relevant year within 30 days.

Reasons for Issuance of Notice under Section 148A:

The Income Tax Department can issue a notice under Section 148A for various reasons. Some of the common reasons for its issuance are:

1. Failure to file a return of income
2. Non-disclosure of income or assets in the original return
3. Incorrect computation of income
4. Misrepresentation or suppression of facts
5. Non-disclosure of foreign assets or income

Steps to be taken on receipt of notice under Section 148A:

If you receive a notice under Section 148A, you should take the following steps:

1. Verify the details: Verify the details mentioned in the notice, such as the assessment year, the amount of income in question, and the reasons for re-assessment.
2. File a return: If you have not already done so, file a return of income for the relevant assessment year within 30 days of receiving the notice.
3. Seek professional help: Seek professional help from a chartered accountant or a tax lawyer to understand the reasons for re-assessment and to prepare your response.
4. Respond to the notice: Respond to the notice within the stipulated time, providing all relevant details and supporting documents to justify your income and assets.
5. Attend hearings: Attend any hearings scheduled by the Income Tax Department and present your case.

Conclusion:

A notice under Section 148A of the Income Tax Act can be intimidating for taxpayers, but it is essential to understand that it is merely a procedure to ensure that all taxpayers pay their fair share of taxes. If you receive such a notice, it is crucial to respond to it promptly and seek professional help to ensure that the re-assessment is carried out fairly and accurately.