Tag: Indian Tax Return


Filing Your Indian Tax Return When You Are Residing in the U.S.

Sanjiv Gupta CPA - 4 years ago
It has often been a question for many Indian citizens living in the U.S. whether they should file their Indian Income Tax Return or not. Actually, taxability in India is predominantly based on your residence, not on your citizenship. Hence, you have to identify your residential status first before you determine if you are liable to file your Indian ITR.So how do you determine your residential status?Basically, your residential status depends on the length of time of your physical stay in India within a given financial year. It helps if you check your passport and take note of the immigration stamp dates, including the dates of departure and arrival.If you meet any of these two criteria, then you are considered an Indian resident for a financial year:You reside in India for at least six (6) months, or 182 days, during the financial yearYou have stayed in India for at least 60 days or 2 months in the previous financial yearIf you do not meet any of the above-mentioned criteria, then you are considered an NRI (non-resident Indian). As such, your Indian income tax largely depends on the income that you earn in India for the entire financial year. On the other hand, if your status is “resident,” then your global income is taxable in India.If I am living in the U.S., do I still need to file my Indian income tax return?Yes, but on certain conditions.Just because you are an NRI does not necessarily mean that your obligation to file your tax returns in India is no longer there. In fact, as July 31st of every year–which is the deadline for filing returns–looms, you must already be gearing up to file your returns if your income in India goes above the basic exemption limit.Any salary you receive or earn in India, including income from a residential property located in India, the income coming from fixed deposits or interest on a savings bank account, as well as capital earnings on the transfer of properties in India, are just some of the many examples of income accrued within India. Such incomes are taxable for an NRI. It follows then that any income earned outside the bounds of India is not taxable in India.It is also important to note that any interest you earn on an NRE account and FCNR account is free of tax, while interest on an NRO account is taxable for an NRI. Simply put, if you are an NRI and you have performed your job in India, your salary income will be taxable in India, regardless of where your salary is credited to your account. On the other hand, if you have worked abroad but have received your salary in India, then your salary will be included in your taxable income in India. When does filing my Indian income tax return become mandatory?The question of whether you should file your Indian income tax return or not is irrespective of you being an NRI or not. If you have lived in the U.S. long enough to be considered an NRI but still have income coming from India, you are required to file your Indian income tax return when your income exceeds the basic exemption limit. As an NRI, filing your income tax return in India is mandatory in the following cases:The total of your taxable income from all sources goes above the basic exemption limit of Rs 2.5 lakh.You have either long term capital gain (LTCG) or short term capital gain (STCG) from selling your investments or assets in India, even if your income goes below the exemption limit.You wish to claim a tax refund, in cases when TDS has already been deducted.Are there tax deductions available to NRIs?NRIs are also entitled to tax deductions, just like ordinary Indian residents. Most of the common deductions under the Chapter VIA of the Income Tax Act of India are available whether you are a resident or not, except for those that have to do with maintenance, treatment of disabled dependent, medical treatment of certain diseases for both self and dependents, as well as specified investments like five-year post office deposit, senior citizen savings scheme and investment in Rajiv Gandhi Equity Savings Scheme.If I am in the U.S., can I also enjoy the benefits of the Double Tax Avoidance Agreement (DTAA)? Currently, India has a DTAA with around 90 countries around the world, and one of them is the U.S. As an NRI, one of the first things that you need to determine is whether your income is taxable in India. Then, if you are living in the U.S., you must furnish a tax residency certificate (TRC) issued by the tax authorities in the U.S. Aside from that, you may also have to provide a self-declaration by filling out Form 10F.Getting relieved under DTAA depends on your type of income. In fact, under the DTAA, certain incomes may be entirely exempted or may be taxed at a lower rate. If under this agreement your income is taxable, then you are required to pay your tax in India and claim credit for your paid tax in the U.S. against the tax liability in your home country.For you to claim a lower tax rate under the agreement, being an NRI, you must have provided your PAN number earlier on to avoid being charged with a higher withholding tax of 20 percent, as stipulated in Section 206AA. Under rule 37BC issued by the Central Board of Direct Taxes (CBDT), NRIs like you are allowed to furnish alternative information or documents instead of PAN so as to avoid high withholding tax. These include your name, email, address, contact number, TIN and TRC.But how do I file my Indian income tax return if I reside here in the U.S.? If based on the abovementioned standards you have figured that it is mandatory for you to file your Indian income tax return, then make sure to do it in advance to avoid penalties. Just because you reside in the U.S. does not mean you have to go back to India to file your Indian income tax return. Today, there exists a process of electronically filing your returns, allowing you to do your job without having to physically go to India.Now, take a look at the following tax filing process for NRIs like you. Step 1: Choose your method.NRIs have different methods to choose from when filing tax returns. You may do it yourself online, avail of assisted services, or follow the traditional route of a chartered accountant.Do it online (E-filing)Today, filing tax returns online is the easiest and most convenient method for NRIs. In fact, the Indian Income Tax office is now making strides towards making this method the most viable option for Indians filing their returns from anywhere around the globe.You have certain options when it comes to e-filing. First, log on to the income tax website and file your returns there. While this option is free, the whole process may be cumbersome for you and really need to have some technical know-how to go about the process. Under this option, you need to download certain software to get hold of the appropriate form, fill it out and upload an XML file on the website. If you have a digital signature, affix it on the form and that’s it. Your return is filed. In case, however, that you do not have a digital signature, then you will have to send a signed copy of your ITR-V.Here are the steps:Log on to IncomeTaxIndiaeFiling.gov.in and register.Your user ID is your PAN.View your Form 26AS. This is your tax credit statement.Select the financial year.Download the ITR form that applies to you.Open the excel utility and fill out Form 16.Click the “Calculate Tax” tab and check your tax payable amount.Fill in the details and pay your tax.Click the “Validate” tab to confirm all the information you have provided.Generate an XML file and save it to your computer.Upload the same XML file by clicking on “Upload Return” on the panel.Sign the file digitally by selecting “Yes” on the pop-up.Download the acknowledgment form or ITR-V that will be generated by the site. Print it and sign it in blue ink.Send the form either by ordinary or speed post to the Income Tax Department office in Bangalore, 560 100, Karnataka, India within 120 days of your e-filing.Your other option for e-filing is logging on to tax-filing service websites. The web is teeming with sites that offer tax filing services, the most popular of which include taxspanner.com and elagaan.com. Compared with the income tax website, such online tax filing service providers offer a more user-friendly experience to NRIs like you, though you have to pay a certain amount of fee for their services. Some of them even have support offices in certain countries.Tax filing service websites offer various packages, and the one you should choose should depend on the complexity of your Indian income tax return. The first thing to do is to register on the website and follow the process of filing, which is pretty much like the process for Indian residents. For overseas filers like you, you can send your payment via your international credit card. Usually, the regular packages of these sites range between Rs 250 and Rs 750.Assisted Return PreparationIf you do not want the do-it-yourself method in filing your tax returns online, you may opt for certain websites that offer a mix of offline and online filing services. If you want this method, you can search for websites that offer such services, choose one, and call the nearest office of the service provider of your choice. Once you decide to avail of their services, they will do the entire tax filing process through email. All you have to do is just send them scanned copies of all the required documents and they will do the filing for you. They will also send you a copy of the ITR-V, which you need to sign and send back to their office. They will then be the one to forward the document to the income tax office in Bangalore. Rates of such service providers depend on the complexity of your tax returns.The best thing about this option is that you have the benefit of getting professional advice from tax consultants. However, not all service providers of this kind offer complete online assistance, so you really have to be careful in choosing your provider. As a rule, the one you should choose must heavily depend on your needs.Talk to a Tax Consultant in IndiaOf the three options you have, this one is the most traditional one. If you take this route, you depend on your chartered accountant or tax advisor in India to file your tax return on your behalf. The advantage of choosing this method is that since you already share a long-term tax advisor-client relationship with each other, he has all your necessary tax information and will certainly be able to guide you through the entire process. The only problem you may have if you choose this method is that you have to make sure that the tax advisor of your choice is accessible and tech-savvy enough to be relied on.Step 2: File your tax returns.To file your tax returns, make sure that you are able to complete the entire process of filing. Should you wish to do it online, choose a website that offers e-filing services and fill in the details on that website. If you opt for assisted services, send your documents to the service provider who will then complete the filing process on your behalf.Step 3: Sign your returns.When it comes to this, you have two options. First, you may purchase a digital signature, although that is not a popular option since it is cumbersome for both the filer and the Indian Government. The other potion is to print out the ITR-V, also known as the acknowledgment, sign it and send it to India’s income tax office in Bangalore. Take note, however, that this acknowledgment document can only be sent via regular or speed post. So if you are sending it from the U.S., then it is best to avail of the regular postal service or courier it to anyone you know in India who can send it via post to the tax office.

What is an Aadhaar Card?

Sanjiv Gupta CPA - 3 years ago
Aadhaar is a 12-digit identity number that is issued to Indian residents. This is based on their demographic and biometric data. The data is collected by the UIDAI or the Unique Identification Authority of India. It is a statutory authority that is established in January 2009 by the Indian government. This is also under the jurisdiction of the Ministry of Electronics and Information Technology. It follows the provisions that have been set by the Aadhaar Act of 2016. This is the Targeted Delivery of Financial and other Subsidies.Aadhaar is the world’s largest biometric ID system. It has over 1.19 billion individuals enrolled and represents 99% of Indians. It has been described as the most sophisticated ID program in the whole world. Aadhaar is not proof of residence or citizenship. In fact, it does not even grant the rights to domicile in the country. It has been clarified by the Home Ministry in June 2017 that the Aadhaar is not a legal identification document for Indians to use when traveling to Bhutan and Nepal.Overview of the AadhaarThe UIDAI or the Unique Identification Authority of India is required to assign the UID number to all the residents of India. Implementing this UID scheme requires the generation of the assigned UIDs so that they can define the mechanisms and processes for linking UIDs with partner databases. This makes operation and management of any stage of the life cycle of the UID easier. Policies and procedures are also framed to update the mechanism and then define the applicability and usage of UIDs for delivering various services, among others. The number that is linked to the basic demographics and biometric information like fingerprints, photographs, and two iris scans. This is then stored in the central database.The UIDAI was initially set up by the Indian Government under the aegis of the Planning Commission. Therefore, they have been given the responsibility to come up with the policies and plans that will be implemented in the UID scheme. It also owns and operates the UID database and is made responsible for updating and maintaining this on an ongoing basis.The data center of the UIDAI is located at the IMT or the Industrial Model Township in Manesar. It started issuing UIDs in September 2012. Its aim was to issue Aadhaar numbers to every resident so that it can eliminate fake and duplicate identities. This number can also be used to verify and authenticate information in a cost-effective and easy way that can be done online or anywhere at any time. The Government of India also indicated that it recognizes a letter from the UIDAI containing information such as name, address and Aadhaar number and regard this a valid and official document. It is important to note that Aadhaar is not there to replace identity cards. It also does not constitute proof for citizenship or residency. Aadhaar does not confer guaranteed rights, entitlements or benefits. It is simply a number that is random and does not start with a 0 or 1. It is also not loaded for intelligence or profiling because this would make it prone to theft or fraud. Therefore, there is a measure of privacy with this information. The unique ID qualifies as valid ID when citizens are making use of government services such as a subsidized ration, benefits under NSAP, e-sign, a digital locker, pension schemes, kerosene from the PDS or LPG connection.UAN or Universal Account Number under EPFO and other services such as opening a bank account or acquiring a SIM card can be done with the Aadhaar number as well.According to the official website of the UIDAI, any individual who has an Aadhaar can verify how unique his or her number is through the Aadhaar Verification Service or AVS that is quite user-friendly and is already on the website. A resident that is enrolled under the National Population Register does not need to be enrolled again.Direct Benefit TransferThe Aadhaar project is linked to public subsidy and unemployment benefit schemes like MGNREGA and LPG scheme. These Direct Benefit Transfer schemes have the subsidy money directly transferred and carried out by the NEFT or the National Electronics Fund Transfer system. This does not depend on the Aadhaar.Aadhaar-enabled biometric systemIn July 2014, Aadhaar enabled the biometric attendance system by introducing this in the office. It was then checked by government employees. The public could see the attendance of the employees from the website. However, three months later, in October 2014, the website was closed to the public. It was then made active again and opened to public access in March 2016. Employees use the last four digits of the Aadhaar number as well as their fingerprints for authentication. There are technological glitches on the system so it was still a work in progress.Aadhaar as a Digital IdentityA number of features that the Aadhaar card allows it to serve as a digital identity and one that facilitates digital identity. This is because the document of the card is electronic when setting in PDF format. There is a QR code that provides the digital XML representation of the core details of the card. The number and some of the limited details that are validated online along with the notable exclusion of the name allows the details to be updated online. It can also be done via the user’s mobile because the phone number and/or email serves as the second factor of authentication. The system can also collect a photo, eye scan, and 10 finger scans.Impediments and other concernsFeasibility concernsThe Aadhaar project was being implemented without any cost-benefit or feasibility studies so that it can ensure whether the project can still meet the goals that it has stipulated. It has also been pointed out that the government was somehow obscuring the security aspects of Aadhaar and it focuses on the social benefit schemes.The debate on its feasibility and ability to sustain the project of this size is settled one 1.19 billion Indians have been enrolled in the program. This pretty much represents 99% of the total population. The quality of the data that has been collected is the most advanced in the world. This complements the other initiatives that have been taken by the government which benefits people and gives them easy access to public services.Lack of Legislation and Concerns on PrivacyOn February 2, 2015, the Supreme Court asked the new government to clarify to the public where they stand on the project. This was in relation to the criticism that it has been ignoring the previous orders and pushes ahead with the project as well as the project that they find unconstitutional because it allows the profiling of the citizens. On July 16, 2015, the Indian government requested that the Supreme Court revoke the order. They suggested that the Aadhaar be just used for various services. In fact, some states insisted that the Aadhaar be used for benefits.On August 11, 2015, the Supreme Court directed the government to actually publicized this in electronic and print media that Aadhaar was not required for any welfare scheme. The Court also referred that the petitions that are claiming for Aadhaar be unconstitutional.On July 19, 2017, the Supreme Court started hearing the arguments that have been presented and figured out whether this was, in fact, fundamental to provide privacy. The nine judges unanimously upheld the right for privacy and regarded this as the fundamental right under the Constitution.This constitutional bench of the Supreme Court is also hearing various cases that are related to how valid the Aadhaar is on the various grounds that include surveillance, exclusion, and privacy solely for the benefit of welfare.The Legality of Sharing Aadhaar Data with Those Who Enforce the LawIn 2013, there was the case of the CBI attempting to solve the rape of a schoolgirl. They managed to acquire fingerprints from the crime scene that was a match with the UIDAI database. The court then asked the UIDAI to hand the data to the people in GOA and submit this to the CBI.The UIDAI appealed in the Bombay High Court and accepted that the request could actually set the needed precedent for future requests. However, the High Court rejected the argument by placing an interim order that was directed to the CFSL or the Central Forensic Science Laboratory. This was the study of the technological capability of the database to also see if it was possible to solve the crime. The UIDAI eventually appealed to the Supreme Court. It argued that the chance for 600 million people recorded on the database would eventually result in hundreds of thousands of false results because of the high false-positive rate of 0.057%.On March 24, 2014, the Supreme Court has restrained the central government from sharing UIDAI data with the third party or agency, whether these be private or government, without the Aadhaar-holder’s content in writing. Therefore, there was another interim order that was dated on March 16, 2015. The Supreme Court of India directed that the States and Union of India, as well as all their functionaries, adhere to the said order. It pretty much observed some of the government agencies that were also still treating Aadhaar as a requirement. They asked every agency to issue the notifications to clarify that it was not.Security ConcernsAadhaar was originally intended to flush out the illegal immigrants but these social security benefits were eventually added so that privacy concerns can be avoided. It also expressed objections for Aadhaar numbers to be issued to illegal immigrants. The Committee said that these projects were implemented in a manner that is so unplanned that it bypassed the Parliament.In May 2013, there have been some errors that were admitted to the registration process. There were people who received their Aadhaar cards but complained because these had wrong fingerprints or photographs. According to some officials that work at the Intelligence Bureau, the UIDAI project is criticized because the Aadhaar number was not considered as a proof of residence that is credible enough. As for how it was stated in the liberal pilot phase, a person could claim to live and accept the address.Overlaps with the National Population RegisterThe Aadhaar along with projects from the National Population Register has been reported to be conflicting, it was also reported that the UIDAI share data with the NPR. NPR eventually collected its own data. However, the government insisted that the Aadhaar was not some kind of identity card, but a number and the NPR was not really a requirement for national security purposes. The order of the Supreme Court in 2013 did not affect the project that was spearheaded by the NPR because it was not actually linked to the subsidy.In July 2014, a meeting that was held in relation to discussing the possibility of merging both projects, NPR and Aadhaar, concluded that these were complementary. The meeting was attended by people in Law and Justice and Telecom industries. Later in that month, there was no more plan to merge the two projects.FraudIn order for Aadhaar to be accessible and undocumented poor citizens, setting an Aadhaar card does not really require specific documentation. There are multiple options that are made available. This is when the use of biometric facilities is reduced so that it can eliminate duplication. In theory, it is also possible to obtain the card under a fake name. It is less likely that the individual could maintain another Aadhaar card under another name.The Aadhaar card is not a secured document according to the agency that has not been treated as some kind of identity card because it was often treated as such. However, because there was no practical way to validate the card, there were lots of questions to utilize this as an ID card. There were also five main components in the Aadhaar app transaction – the vendor, the back-end validation software, the customer, the app and the Aadhaar system itself. There were also two main external concerns. This was to secure the data that was often at rest on the phone and the kind of data in transit that is secure. At every seven points, the data of the customer is vulnerable to any kind of attack. This is because the validation software and the app are quires insecure. The Aadhaar system can be found insecure as well as the network infrastructure. The laws are inadequate and therefore does not work in that sense.
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