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

Tax Savy Tips for #Equity Investors

Your Investment is a Short Term if a period of holding is up to 12 Month otherwise it will be treated as Long Term

Short Term Capital Gain is Taxable @ 15%

Long Term Capital Gain is exempt up to Rs.1 lakh after that taxable @ 10 % (No Indexation)

Long Term Capital Loss can be set off against Long Term Capital Gain only

Short Term or Long Term losses can be carried forward up to 8 years if you have filed ITR on or before the due date u/s 139(1)

💡Tips💡
1:Book Long Term Capital Gain up to Rs.1 lakh during the year as it was exempt from tax

2:If you have already booked a short term capital gain then to save taxes book short term capital losses and repurchase the shares on next day so that such short term losses can get set off against your taxable short term capital gains and no effect to your portfolio

3:If you have already booked a long term gain of more then 1 lakh then to save taxes book short term capital losses or long term capital losses and repurchase the shares on next day so that such short term/long term losses can get set off against your taxable long term capital gains and no effect to your portfolio.

Basic of HUF:-

A Hindu Undivided Family (HUF) is a specific family unit recognized under Hindu law, primarily in India. It represents a unique legal entity distinct from its members, primarily for taxation purposes under the Income Tax Act, 1961. The concept of an HUF stems from Hindu customary law, which encompasses not just Hindus by religion but also those who are followers of Jainism, Sikhism, and Buddhism in India, as these religions are considered part of the Hindu legal framework in certain contexts

Definition and Characteristics

Legal Entity: An HUF is treated as a separate legal entity for the purpose of assessment under the Income Tax Act. This means it has a separate legal identity from its members and can hold property, enter into contracts, and sue or be sued in its own name.

Formation: An HUF is automatically formed by a Hindu family. A common misconception is that it requires a special ceremony or registration to be constituted, but in reality, it comes into existence the moment a Hindu individual gets married and starts a family. It includes all members of a family, including wives and unmarried daughters.

Karta: The head of an HUF is called the ‘Karta’, who manages the affairs of the family and the joint family property. Traditionally, the Karta is the eldest male member of the family, but recent legal judgments have allowed for women to become Kartas under certain circumstances.

Members: The members of an HUF include all persons lineally descended from a common ancestor, including their wives and unmarried daughters. Membership in an HUF is by birth, and in the case of females, through marriage into the family.

Legal Rights and Obligations

• Property Ownership: An HUF can own property in its name. The property owned by an HUF is deemed to be owned jointly by all members of the family.
• Bank Accounts and Financial Transactions: An HUF can operate bank accounts, invest in securities, and engage in other financial activities in its name.
• Liability: The liability of the Karta is unlimited, whereas the liability of other members is limited to their share in the HUF.
• Taxation: An HUF has its own PAN (Permanent Account Number) and is required to file tax returns separately from its members. It enjoys certain tax benefits under the Income Tax Act, which can lead to tax efficiency and savings for the family.

Formation

• Automatic Creation: An HUF is automatically created at the time of a Hindu marriage. The family, including spouses and children, become members of the HUF. The creation of an HUF does not necessarily require a specific ceremonial process. The essential requirement is that there should be a family that can come under the umbrella of HUF.
• Legal Recognition: For legal and tax purposes, however, it’s important to formalize the existence of the HUF. This begins with creating it formally with the help of a Tax professional

Saving tax through a Hindu Undivided Family (HUF) involves strategic planning and understanding of the income tax laws applicable to HUFs in India. An HUF is treated as a separate entity for taxation purposes, which means it enjoys its own set of exemptions and deductions, similar to an individual taxpayer. Here are several ways through which you can save tax by forming an HUF:

1. Tax Saving through HUF- Claiming Separate Tax Exemption

• Basic Exemption Limit: Just like any individual taxpayer, an HUF is entitled to a basic exemption limit (which is ₹2,50,000 for FY 2022-23; this may change with new financial budgets). This is beneficial if the family members individually fall into higher tax brackets.

2. Income Splitting

• By channeling income through an HUF, the overall tax liability can be reduced. For example, rental income from property owned by the HUF or business income that is attributed to the HUF can be taxed in the hands of the HUF, potentially at a lower rate due to the basic exemption limit and the slab rate applicable.

3. Investment in Tax-saving Instruments

• An HUF can invest in tax-saving instruments under Section 80C of the Income Tax Act, such as ELSS, PPF, NSC, life insurance premiums, and more. The limit for deduction under Section 80C is ₹1,50,000, which is over and above the deductions claimed by the individual members.

4. Deductions under Other Sections

• Health Insurance Premiums: Premiums paid for the health insurance of HUF members can be claimed as a deduction under Section 80D.
• Education Loan: Interest paid on an education loan taken for any member of the HUF can be claimed under Section 80E.
• Home Loan Interest: If the HUF has taken a home loan, the interest component can be claimed as a deduction under Section 24.

5. Paying Salary to Members

• If any HUF member is actively involved in the operations or management of the HUF’s business, a reasonable salary paid to them for their services can be claimed as an expense by the HUF. This reduces the HUF’s taxable income.

6. Creation of a Trust

• An HUF can also create a trust for a specific purpose, and the amount given to the trust can be claimed as a deduction under the applicable sections of the Income Tax Act.

7. Gifts Received

• Gifts received by an HUF from its members can sometimes be a tax-efficient way to increase the capital of the HUF without attracting gift tax, subject to the provisions and limits under the Income Tax Act.

Planning and Documentation

To effectively save tax through an HUF, proper planning and documentation are crucial. All transactions must be legal and justified, with clear demarcation of income and investment in the name of the HUF. It’s important to maintain transparent records and comply with all tax laws to avoid scrutiny and penalties from tax authorities.

Conclusion

The Hindu Undivided Family system offers a viable tax-saving mechanism within the framework of Indian tax laws. By leveraging the benefits available to an HUF, families can significantly reduce their tax liabilities while ensuring the efficient management and transfer of wealth across generations. However, it’s crucial to adhere to the legal stipulations and ensure proper documentation and compliance to fully benefit from the HUF structure. As with all tax-related strategies, consulting with a tax professional or financial advisor to understand the implications and benefits specific to one’s situation is advisable

Income tax plays a crucial role in a country’s revenue generation and is an important aspect of financial planning for individuals. In recent years, the Indian income tax system has undergone significant changes, with the introduction of the new tax regime. This article aims to provide an overview of the income tax structure under the old and new regimes, compare the tax slabs, and discuss factors to consider when determining which regime is better suited for an individual taxpayer.

The Old Tax Regime: Under the old tax regime, the income tax structure consists of multiple tax slabs with progressive rates. The tax rates for individual taxpayers for the financial year 2021-22 are as follows:

• Up to INR 2.5 lakh: Nil
• INR 2.5 lakh to INR 5 lakh: 5%
• INR 5 lakh to INR 10 lakh: 20%
• Above INR 10 lakh: 30%

Additionally, a cess of 4% called the Health and Education Cess is levied on the total tax liability. Taxpayers can avail various deductions and exemptions under different sections of the Income Tax Act to reduce their taxable income and lower their tax liability.

The New Tax Regime: The new tax regime, introduced in the Union Budget 2020, offers reduced tax rates with fewer deductions and exemptions. It aims to simplify the income tax structure and provide taxpayers with the option to choose between the old and new regimes based on their individual circumstances. The tax rates for individual taxpayers for the financial year 2021-22 under the new regime are as follows:

• Up to INR 2.5 lakh: Nil
• INR 2.5 lakh to INR 5 lakh: 5%
• INR 5 lakh to INR 7.5 lakh: 10%
• INR 7.5 lakh to INR 10 lakh: 15%
• INR 10 lakh to INR 12.5 lakh: 20%
• INR 12.5 lakh to INR 15 lakh: 25%
• Above INR 15 lakh: 30%

It is important to note that under the new regime, taxpayers cannot claim various deductions and exemptions, including the standard deduction, house rent allowance (HRA), deductions under Section 80C, 80D, etc.

Determining the Better Option: Deciding which tax regime is better for an individual depends on several factors, including the taxpayer’s income, age, investments, and financial goals. Here are some key considerations:

1. Income Level: For individuals with lower income levels and limited investments, the new tax regime may be beneficial, as it offers lower tax rates without the need to claim deductions. However, individuals with higher incomes who can avail substantial deductions under the old regime may find it more advantageous.
2. Deductions and Exemptions: Under the old regime, taxpayers can claim deductions and exemptions, such as those available under Section 80C for investments in instruments like provident fund, National Savings Certificate, etc. If a taxpayer has significant deductions that substantially reduce their taxable income, the old regime might be more beneficial.
3. Investment Preferences: Individuals with specific investment preferences may find the old regime more advantageous. For example, taxpayers who invest in life insurance policies, health insurance, or have home loan interest payments can claim deductions under the old regime, reducing their tax liability.
4. Simplicity: The new tax regime offers a simpler structure with lower tax rates and eliminates the need to track and claim various deductions. For individuals who prefer simplicity and do not have significant deductions, the new regime

Conclusion:

Choosing between the old and new income tax regimes depends on various factors and requires a careful assessment of one’s income, investments, and financial goals. While the new regime offers lower tax rates, it comes with reduced deductions and exemptions. The old regime provides the benefit of claiming deductions but involves a more complex structure. It is advisable for taxpayers to consult with tax professionals, such as chartered accountants or tax advisors, to analyze their specific circumstances and make an informed decision that optimizes their tax liability and aligns with their financial objectives.

There are many Taxpayers who has escaped the income intentionally or unintentionally by not declaring the Saving Interest, Fixed Deposit Interest, Capital gain transactions, Purchase or sale of immovable properties and other as specified by the department under high value transactions. Taxpayers are getting the email/sms alert from the department about these high transactions value.

However, since the date of revision of income tax returns i.e. 31st march 2022 is over so taxpayers was in dilemma that how to revise or deposit the tax amount.

Now the government has come with a solution to file the Updated Tax Return in Form ITR-U along with applicable ITR Forms (I.e. ITR-1,2,3,4,5,6,7 as applicable)

Income Tax department has notified a new form for filing updated I-T returns in which taxpayers will have to give the exact reason for filing it along with the amount of income to be offered to tax. The new form (ITR-U) will be available to taxpayers for filing updated income tax returns for 2019-20 and 2020-21 fiscals.

Updated Income Tax Return can be filed from the AY 2020-21-ITR-U along with applicable ITR-1 to ITR-7 on account of Below

• Return not filed
• Income not reported correctly
• wrong heads of income
• Reduction of c/f Loss
• Reduction of Unabsorbed Dep.
• Reduction of Tax Credit
• Wrong tax

People can now deposit the tax can relax by reducing the chances of any further notices.

Applicability & Analysis Section 206AB and 206CCA of Income Tax Act, 1961

The Finance Bill 2021, has inserted two new sections in Income Tax Act 1961, which are related to TDS which are Section 206AB and Section 206 CCA which are applicable from 1^st July 2021.

Brief about Section 206AB

According to these provisions of the income tax act, TDS will be required to be deducted at higher of the following: –

1. At Twice rate of the TDS as specified in the relevant provision of the act; or
2. Twice the rate in force; or
3. At the rate of 5%

Applicability of the Section 206AB

This provision applicable on “Specified Persons”. Specified Persons means: –

• Person who has not filed the Income Tax Return (ITR) for 2 previous years immediately before the previous year in which tax is required to be deducted;
• The time limit of ITR filing under sub-section (1) of Section 139 is expired; and
• The aggregate tax deducted at source (TDS) or tax collected at source (TCS), is Rs. 50,000 or more in each of the 2 previous years.

What is the person does not have PAN not filed Income Tax Return

Sub-section (2) of Section 206AB states that if both Section 206AA and 206AB are applicable i.e. the “specified person” has not submitted the PAN and not filed the return; TDS is deducted at the higher rates amongst Section 206AA and 206AB.

Non-Applicability of 206AB of the TDS: –

1. The section 206AB is not applicable in case of TDS on Salary (192), TDS on Premature withdrawal from EPF (192A), TDS on Lottery(194B), TDS on cash withdrawal in excess of 1 crore (194N), TDS on Income in respect of investment in securitization trust (194LBC), TDS on Horse Riding (194BB)
2. Both Section 206AB/206CCA are not applicable to a non-resident who does not have a permanent establishment in India.

Example: –

M/s GEM Delhi LTD made a contract payment of Rs.80 lakhs to Mr. Akhsay Sinha for 3 consecutive years i.e. FY 2018-19, FY 2019-20 and FY 2020-21 and tax under Section 194C was deducted (Rs.90,000 every year) and remitted by GEM Delhi Ltd. Mr. Akshay Sinha however, did not file his Income Tax Return (ITR) for any of the years. Then, in the financial year 2021-22, From July Onwards GEM Delhi LTD, (the payer) must deduct tax at source (TDS) at the higher rates given above.

How can Tax Deductor/ Collector can identify such persons: –

Since tax deductor/collector is responsible for deducting/collecting TDS/TCS, it becomes their responsibility to identify the specified person of whom TDS at the higher rate is required to be deducted. In the absence of proper mechanism, CBDT has issued Circular No. 11 of 2021 F. No. 370133172021-TPL dated 21st June 2021  Wherein a new functionality “Compliance Check for Section 206AB and 206CCA” is made available through reporting portal of Income Tax department.

Additionally, Deductee/Collectee can give self-declaration to their respective tax deductor/collector about the non-applicability of Section 206AB/206CCA upon them. Format of the same is given below: –

 

Undertaking pursuant to Section 206AB and Section 206CCA of the Income Tax Act, 1961

TO WHOMSOEVER IT MAY CONCERN

Dear Sir/Madam,

Subject: Declaration confirming filing of the Income Tax Return for immediate two preceding years.

I,                                                                           (Authorized person name)in capacity of

Authorized Signatory of                                         (Company Name) having                                     PAN

And turnover or Rs.10 cr. or more _______________________(YES/NO)                 

Registered office at                                                                                                                             _ do

hereby declare, we have filed Income Tax Returns for Two previous years immediately prior to the previous year in which tax is required to be deducted for which due date filing of return of income under sub section(1) of section 139 of the Income Tax Act, 1961 has expired, the details of which are givenunder:

Financial for which Income Tax Return was due u/s 139(1)	Date of Filing	ITR Acknowledgement No.	TDS + TCS is greater than           Rs. 50000/- (Yes/No)
F.Y.2020-21 (If applicable on this date of declaration)
F.Y. 2019-20
F.Y. 2018-19

I hereby undertake to indemnify the entity for any loss/liability fully including any Tax, interest, penalty, etc. that may arise due to incorrect reporting of above information.

                                                                                                  For   (CompanyName)

Signature (Including Companyroundstamp)       :                                                       _________

Place                                                                    :                                          _______________

Date                                                                     :                                          _______________