Tag: Indian tax


How To Bring Money from India to the US ?

Sanjiv Gupta CPA - 4 years ago
Many American Indians, non-resident Indians (NRIs) and persons of Indian origin (PIOs) have immovable assets like a house that they have left behind in their country. They may also have inherited assets like house or money from their dearly departed.  Most of the time, these people plan to liquidate these assets and bring them to the US. This is particularly true if they don’t have plans of going back to India, or they rarely visit their motherland.American Indians, non-resident Indians (NRIs) and persons of Indian origin (PIOs) who want to bring money from India to the United States will have different processes to go through.The processes may depend on the method by which the money was acquired, like selling a property in India, getting an inheritance, or investing in financial instruments. This article will look at the different ways of bringing money from India to the United States.Selling of propertyAny NRI can sell a commercial or residential property in India to another NRI, PIO, or a person who resides in the said country. But NRIs cannot sell agricultural land or farmhouse to another NRI, as they are only allowed to do so to an Indian citizen who also resides in the Asian country.NRIs are also allowed to repatriate or bring money from India from the sale of a maximum of two residential properties.Sale proceeds should be credited to a non-resident ordinary (NRO) account. This is a savings account where the NRI or PIO can maintain and manage their income earned in India like dividends, pension, and rent, among others.If the property was sold at least three years after the date of purchase, the individual will be levied a long-term capital gains tax of 20 percent. This is calculated by subtracting the sale value from the indexed cost of purchase, or the cost of purchase as adjusted for inflation.NRIs are allowed to repatriate or bring their sale proceeds of property sold in India to the US. However, the limit to the amount brought from India is $1 million per the calendar year, including all other capital account transactions. NRIs, though, can petition to the RBI for an increase in the repatriation limit as long as they can prove that there is a genuine need for it.However, NRIs who were able to purchase a property in India while they were still a non-resident can still repatriate the proceeds from the sale. But they should have bought the property by foreign exchange laws during the time of the purchase.The amount to be transferred must also not be more than the amount remitted through a foreign exchange to India through banking channels. If the NRI purchased the property using funds in a Foreign Currency NonResident account, then the repatriated amount or proceed from the sale must not be more than the amount paid through the said account.  Also, if the NRI purchased the property via a home loan, then the amount to be brought from India should not be more than the amount of loan repayment.To bring the proceeds of the sale of property from India to another country, NRIs or POIs should course it through legal banking channels. This would give them the peace of mind knowing that their money will be safe.  NRIs are cautioned against relying on private money transfer or “Hawala” as this is considered illegal. There’s a risk that they may not get their money out of India if they opt for the said process.To begin the transfer of money from India to the US, the NRI should get a certificate from a chartered accountant (CA) in India.  The CA will issue certificate information or “Form 15CB” which is also downloadable from the Indian government tax website. This is the link to the download page.The form is basically a certificate that the money to be sent abroad has been acquired from legal means like the sale of a property. It also vouches that all taxes due have been paid. The CA must fill in the form and sign it.Once the Form 15CB has been completed, the NRI must fill another form called Form 15CA.  This is a form that is to be filed online with the Indian tax department. It can be downloaded from this link. Some of the information needed in Form 15CA can be found on Form 15CB.The form is to be submitted online, with the NRI receiving a system-generated acknowledgment receipt or number. The filled form 15CA along with the acknowledgment number must be printed out and signed.Then the NRI will have to bring the signed undertaking along with the CA certificate on Form 15CB to the bank where he/she has an NRO account.Aside from Forms 15CA and 15CB (in duplicate copy signed by the CA), the bank will also request the NRI to fill up Form A2 as well as an application for foreign exchange form. The latter is used to vouch that the person who will be sending the money to another country did acquire the money through legal means; in this case through the selling of a property.Some banks may also require the NRI to provide documents like a copy of the sale document of the property. If the NRI inherited the property, then he will have to present a copy of the will, death certificate of the original owner of the property, and legal heir certificate.The bank will then process the transfer of the money abroad.Getting an Inheritance or GiftIn India, the property inherited is fully exempted from gift tax. However, the amount on the sale of the asset is taxable under capital gains. Calculation of capital gains from an inherited property is the sales proceed less than the original cost of purchase of the bequeathed.It may be short term or long term, depending much on the period for which the property or asset was held.In the US, there is an inheritance or estate tax levied at the time of inheritance. But this is only levied if the bequeathed or the deceased individual was a US citizen, resident, or Green Cardholder.NRIs, PIOs, or American Indians will have to report the money that they are bringing in to the US from India. They are to do this by filing Form 3520, an information return and not a tax return. Significant penalties are awaiting those who cannot file the said information return.Form 3520 is an annual return to report transactions with foreign trusts and receipt of certain foreign gifts. It can be downloaded from here. It must be filed along with the tax return of the NRI, PIO, or American Indians who inherit a property in India. This not only applies to property but also other financial assets such as cash and investments.There are two reasons why Form 3520 has to be filed by those who want to bring money from India to the US. One is that it proves a trail of the individual’s receipts. For example, an American India who inherited $100,000 or more and wishes to repatriate that amount to his US bank account will be able to establish the source of that money by filing Form 3520. The same goes for an NRI who sold a property in New Delhi and wants to transfer the proceeds to his US bank account.It also establishes the basis of the inheritance of the individual. The basis here pertains to the fair market value of the inheritance during the death of the person who bequeathed the property to the individual filing the Form.The IRS requires the filing of Form 3520 during cases wherein the individual receives an inheritance of $100,000 or more. But tax experts suggest report inheritance even if the value is lower than $100,000 because it can establish a trail of receipts.If the individual received separate gifts from related parties, the amount should be aggregated. For instance, the individual received $70,000 from an uncle in India and another $50,000 from another aunt. Because the aggregate amount of the cash gifts is $120,000, then he or she should file the Form. This must be particularly reported in Part IV of the said form.The due date for filing the Form 3520 is the same as the due date for annual income tax return filling.There is another form that American Indians have to file if they inherited financial assets in India and wish to bring those assets to the US.Form 8938 is a requirement for all US residents, citizens, and Green Card holders to report foreign financial assets like bank balances, mutual funds, shares of stocks, government securities, and others if the aggregate of these assets is more than $50,000 for single taxpayers and $100,000 for couples.Investments in Financial Instruments Another way for NRIs or PIOs to bring money from India to the US is to invest in financial instruments like debt investment and equity investment.For debt instrument investment, NRIs and PIOs can invest in a non-resident ordinary (NRO) fixed deposit or a non-resident external (NRE) fixed deposit. Many NRIs and PIOs are attracted to these financial instruments, with the relatively high rates of 8-9 percent.American Indians can remit proceeds from their NRE accounts freely or without the cap. But for NRO accounts, they are limited to a ceiling of $1 million in a year.Also, the interest earned in NRE accounts is not to be levied with tax. On the other hand, interest earned in NRO accounts is subject to tax.Other financial instruments that NRIs can invest in are foreign currency non-resident or FCNR deposits where the investment is in dollar, yen, and the euro. These are term deposit with the interest dependent on the LIBOR rate for the particular currency. Interest income from FNCR deposits is not levied with tax.However, NRIs are not allowed to invest in the Public Provident Fund and National Savings Certificates debt instruments issued by post offices.For equity investment, NRIs can invest in direct equities or equity mutual funds.Whenever interest or proceeds of financial instrument investments is remitted or repatriated by an NRI, he or she has to submit Form 15CA at the Indian income tax department’s website.Most of the time, a certificate coming from a chartered accountant as provided in Form 15CB is also needed before the NRI can upload Form 15CA online. In Form 15CB the CA vouches for the details of the payment, Tax Deduction at Source (TDS) rate and TDS deduction, as well as other details of the remittance.This certificate is very important because banks won’t remit the money until this certificate has been provided.But Form15CB won’t need to be filed when a single remittance is less than 50,000 rupees, and the total remittance in the year is not more than 250,000 rupees. In this case, the individual only has to file Form 15CA.  Exemptions to Form 15CB filing also include the deduction of lower TDS, as well as the receipt of a certificate from the assessing officer under section 197.Also, any remittance of funds to an NRI will require the remitter to present a certificate from a chartered accountant that Form 15CB ad Form 15CA has been filed at the Indian tax department’s website.Finance Bill 2015 imposed this requirement starting June 1, 2015, stating that all forms have to be filed for all remittances whether it is taxable or non-taxable. Central Board of Direct Taxes had earlier required the said forms to be filed for taxable transfers, while most banks asked for said forms even for non-taxable transfers.While repatriation of funds from India to the US is not as complicated as it appears to be, it would still be recommended that NRIs, PIOs, or American Indians work with a chartered accountant in India and a professional CPA familiar with Indian laws in the United States. The professionals can counsel them in the intricacies of the Indian tax code, particularly those that affect their assets that they would want to be repatriated to another country.  The CA can also help in the filing of appropriate forms as required by the IRS for people who will be bringing their assets from India to the United States.   Our office specializes in these kinds of cases, so feel free to contact us with any questions.

Understanding the Complexities of Capital Gains Tax in India

Sanjiv Gupta CPA - 4 years ago
A few years ago, Aarav inherited a parcel of land from his parents.  Since he lives in the city and has no plans of going back to his hometown, he decides to sell the land. He then uses the money to buy an apartment right in the heart of the city.  It took almost three years for Aarav to buy the apartment after selling his inherited property. He falsely assumes that there is no tax liability in his reinvestment. After some time, he finds out from a tax consultant or worse, from the tax authorities, that he will have to pay tax on the capital gained from the sale of his inherited property.It may have occurred to Aarav that the property he received is not subject to tax. This is true. In India, any asset that is received as an inheritance is fully exempt from gift tax. So he’s not obligated to pay any tax upon receipt of the parcel of land from his folks.But the sale of the asset is not exempted from tax. This is taxable under capital gains.In India, it is not uncommon for taxpaying individuals like Aarav to inherit properties such as land or house from their families.  And just like what Aarav did, these individuals would sell the property and invest in another property at some point in time.However, it is also common for many people in India to be unaware of tax laws regarding inherited properties like land and house, as well as the tax stemming from the sale of those properties. They would only know of the tax liabilities they have when notified by the tax authorities, or as in the case of Aarav when informed by his tax consultant or a chartered accountant.It is thus very important for individual taxpayers in India to know of these laws especially if they are to inherit property from their families.What is Capital Gains?In the case of Aarav, he failed to realize that he had to pay the capital gains tax from the sale of the parcel of land that he disposed of.  By definition, capital gains are the profit that Aarav got when he sold the capital asset (in his case, the parcel of land) for a price higher than the purchase price.Capital assets are property held in any kind by the taxpayer. It may be a parcel of land, a building, a house, or a vehicle. Leasehold rights, trademarks, patents, and even jewelry may be considered as capital assets as well.  In certain cases, capital assets may include the rights of management to any Indian company.Thus, capital gains tax not only applies to the sale of an inherited house or parcel of land. It can also apply to the sale of a vehicle, patent, and jewelry.Capital assets are classified into two – short-term capital assets and long term capital assets.In Aarav’s case, the sale of the inherited land took him 35 months after the date of the transfer into his name. As such, it is considered a short-term capital asset.If he had disposed of the property a month or so longer, it would have been treated as a long-term capital asset.Under the Indian tax laws, the following aren’t considered capital assets:Stock in tradeConsumable stores or raw materialsPersonal effects5 percent gold bondsGold deposit bondsSpecial Bearer Bonds 1991Agricultural land in a rural area. As of AY 2014-15, rural area is defined as any area outside the jurisdiction of a municipality having a population of 10,000 or more.Calculating Capital GainsShort-term capital gains and long-term capital gains are computed differently.Long term capital gain is computed as the full value of consideration fewer expenditures incurred wholly in connection with the transfer of the capital asset. This includes brokerage, commission, and advertisement expenses, among others.  The indexed cost of acquisition and indexed cost of the improvement, if any, may also be deducted.Full value consideration pertains to the amount that the seller agrees to get in exchange for his or her capital assets. It should be noted that capital gains is chargeable to tax in the year of the transfer.t of acquisition pertains to the amount for which the capital asset was acquired by the seller. The cost of improvement, on the other hand, pertains to the expenses incurred to make improvements to the capital asset. However, all, improvements made before April 1, 1981, won’t be taken into consideration. On the other hand,  short term capital gains are computed as the sales value of the asset fewer expenses incurred related to the transfer of the capital asset.  The cost of acquisition, or the purchase price of the capital asset, as well as the cost of improvement, may also be deducted from the sales value of the asset. The cost of acquisition pertains to the amount that any of the previous owners have paid to acquire for the property. Going back to Aarav’s case, let’s say that his grandfather was the original owner of the parcel of land. He had purchased it for Rs 20,000. This will be the cost of acquisition that Aarav can deduct to arrive at the short-term capital gains tax. It can be said that the calculation of long term and short term capital gains is basically the same. The only difference is that in calculating long-term capital gains, the cost of acquisition and improvement is indexed, or adjusted for inflation.Short term capital gains on the sale of a property are taxable per slabs rates as applicable to the individual taxpayer. This means that the capital gains tax is payable at the same rate as the income tax of the taxpayer.   In Aarav’s case, the capital gains would have been taxed at a rate of 25 percent if he falls under the 25 percent bracket.On the other hand, long-term capital gains are taxable at a uniform rate of 20% plus surcharge and education cess.Exemptions Under Income Tax ActHowever, there are exemptions on capital gains that can be applied as specified under certain sections of the Income Tax Act of 1961.Going back to Aarav’s case, if he had used the proceeds arising from the sale of his inherited property, then he could have been exempt from paying capital gains tax.Section 54, for instance, exempts the sale of house property on the purchase of another house property. In this case, the capital gains arising from the sale of a house property is used in buying another house property.The new property should have been purchased a year before the sale of the inherited property or two years after the sale of the property.Going back to Aarav’s case, if he had bought the property he now has in the city within two years after he sold his inherited land, then he would have been able to apply for this exemption. Or, if he had bought the house a year before he was able to dispose of the parcel of land he inherited from his family.Also, he could have been exempt from capital gains if he used the gains in the construction of the property that was completed within three years from the date of the sale of the inherited property.It should be noted that under this section, only one house property can be bought or constructed using the capital gains to claim the exemption. The exemption can be nullified if the new property is sold within three years of its purchase or construction.Investing in BondsUnder Section 54EC, the exemption is available when the capital gains from the sale of the first property are reinvested into specific bonds. These bonds are issued by the Rural Electrification Corporation and the National Highway Authority of India. Investment in these bonds should be up to Rs.50 lakhs.The money that Aarav invested in bonds should be redeemed after three years. However, it cannot be sold before the lapse of three years from the date of sale. April should have invested the money he gained from the sale of his inherited land within six months after the sale of the property to have been able to claim this exemption.The tax exemption is equal to the capital gain or to the investment, whichever is lower.  Transferring the bonds or taking a loan against them within three years is forbidden, though. It can result in capital gain becoming taxable.Investing in these bonds would yield a return of 5.5 percent interest in a year.Capital Gains AccountAarav could have also invested the money that he had gained from the sale of his inherited property in a Capital Gains Account. This is specified under the Capital Gains Account Scheme. Aarav could have deposited the money in any public sector bank. The deposit can then be claimed by Aarav as exempted from capital gains. Moreover, he won’t have to pay any tax on it.However, Aarav should have done this before the deadline for filing tax returns which usually is on July 1. The money deposited in the account should only be used in buying or constructing a residential house within the prescribed period.There are two kinds of capital gains deposits in the market. One is a savings type account while the other is a terms deposit. Any individual taxpayer can transfer money from one account to another by paying fixed penalties or charges in a bid to exempt his or her capital gains against tax.In the savings deposit type of capital gains deposit, the money can be withdrawn as long as there is a declaration that the money will be for the construction or purchase of a house. The money will have to be used for the declared purposes within 60 days. Any unutilized amount will have to be re-deposited into the capital gains account as well.As far as interest rates are concerned, capital gains deposit will have the same rates as those on regular savings and term deposits. There’s also a tax for the interest earned. Proof of deposit has to be attached to the taxpayer’s income tax return.In the event that the deposited amount is not fully used to buy and construct a new house at the end of the three-year period from the sale of the asset, the money in the account will be treated as capital gains.Opting to open a capital gains account should be considered only as a stop-gap measure.  The individual taxpayer will eventually have to use the money to buy or build a house within a specified period.Other ExemptionsThere’s also an exemption specified under Section 54B of the 1961 Act. This specifies that short term or long term capital gains are tax-exempt when the proceeds are used to purchase new agricultural land. The purchase should have been consummated within two years after the sale of the inherited property. Also, the agricultural land should not be sold within 3 years from the date of its acquisition.Under Section 54G, the exemption is also allowed if the gain is reinvested in acquiring a building or machinery in a rural area. There’s also exemption allowed if the gain is used in acquiring land, building, or machine in a Special Economic Zone as specified under Section 54GA.ConclusionThe truth is that computing capital gains tax on the sale of a property, whether it is inherited or not, can be very tricky.  It is thus highly recommended that taxpayers who acquire a property and then sell it, later on, consult a tax expert or chartered accountant.As shown in the case of Aarav, he would not have been caught surprised and unaware of his tax obligations had he consulted a tax expert or accountant before he sold his property and bought a new house. This only underscores the need to get professional advice, especially when dealing with real estate.

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

Sanjiv Gupta CPA - 3 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 - 2 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.

Indian Taxation and Investing

Sanjiv Gupta CPA - 1 year ago
Existing laws outline the taxation both for residents and non-residents in India. An individual must settle its obligations to the government depending on his residential status. However, rules governing their taxes create confusion among Indian citizens and foreigners in the country.The Income Tax Act was ratified in 1961 outlining the manner of levying, administering, collecting, and recovering income tax for the Indian government according to income (individual) or profit (companies). All collected taxes from people and companies are utilized by the government to implement the necessary programs and projects primarily intended for boosting the economy’s growth. Since its inception, the law has undergone revisions to take into consideration current inflation and other related developments or situations.Enacted in 1999, the Foreign Exchange Management Act (FEMA) consolidated and amended the law relative to foreign exchange in a bid to facilitate external payments and trade as well as oversee India’s currency market. This regulatory law covers all branches, offices, and agencies outside the country as long as it is owned or controlled by a resident of India. It replaced the Foreign Exchange Regulation Act.These two pieces of legislation have always caused confusion among clients, regardless if they are based in India or domiciling outside the country for the longest time. Both laws distinguish those residents from non-residents and the amount of tax that must be paid to the government. Income Tax ActAn income tax is defined as the tax levied by governments on earnings of people and businesses. Proceeds from income tax serve as revenues for these governments. In most cases, the higher the income (or profit), the higher their tax rate is. In India, the Income Tax Act dictates whether a person is a resident or non-resident Indian (NRI) based on the number of days spent in the country. It also governs the income that can be generated from a non-resident external (NRE) account or non-resident ordinary account (NRO). Conversely, the FEMA determines if he is allowed to make an investment, say, mutual funds, as a resident or non-resident. It also takes into account the intent in deciding on one’s residential status.Under the Income Tax Act, a person’s residential status is a resident, non-resident, or resident but not an ordinary resident. For non-residents, they can be considered a non-resident Indian or outright foreigners.One who has been residing in India for 182 days in a year, or has been in the country for four preceding years and 60 days in the current year is considered a resident. In the case of the second qualification, a person cannot obtain the non-resident status if this would be his first time to travel outside India. This requirement excludes person of Indian origin living abroad but is visiting India as well as crew members of an Indian ship who are/will be based outside the country.A resident but not an ordinary resident pertains to a non-resident returning to India if he has been staying in the country for not more than 729 days in the last seven years before the fiscal year in consideration or a non-resident for at least nine out of the years before the year under evaluation. It also accounts the number of years a person holds the non-resident status.Non-residents, meanwhile, pertains to a person of Indian origin if one of his parents or grandparents were born in the country.Foreign Exchange Management ActFEMA states that an individual is a resident, non-resident, or not permanently living in India. If non-resident, it is sub-categorized as non-resident Indian, a person of Indian origin (has an Indian passport), or outright foreigners.Under FEMA, those who have settled in India for over 182 days in the past year is classified as a resident. But the prerequisite does not apply to people who visits or works in a nation other than India, goes to another country and intends to remain there for an indefinite period, and establishes a business outside the country.Non-residents, according to FEMA, are those individuals who have been living outside the country for 182 days (or less). It does not apply to people who go and remains in India to work, lives in the nation for an indefinite period, and comes to take up a business or vocation.As mentioned earlier, FEMA regulates investments (mutual funds in particular). This law gives any person or entity to acquire a land or open a public provident fund (PPF) account. It also allows non-residents to have an NRE, NRO, or FCNR(B) account. They can also invest in any mutual fund using their NRE or NRO account.NRE vs. NROFEMA enables non-residents to open an NRE or NRO account in India. They can open an NRE account (savings, current, recurring, or fixed deposit) to keep all earned interests from overseas investments. Aside from being a tax-free account, NRE holders can deposit foreign currency, and withdraw Indian rupees.With NRO, non-residents can manage their hard-earned money in India through this savings or current account. Although NRO is taxable, it allows account holders to deposit Indian rupees and/or foreign currencies and withdraw rupees.Both accounts allow account owners to enjoy full repatriability.Key to Investing in IndiaThe very first step to thriving in India through investment(s) is determining the residential status. It depicts the type of venture one can enter into and the total amount of tax that needs to be paid to the government. Both the Income Tax Act and FEMA provide the guidelines for knowing whether or not an individual or corporation is resident. Despite being a developing country, India offers different investment options such as equity, mutual funds (debt and/or equity), real estate, bonds, and bank fixed deposit that residents and foreigners can look at to achieve their short- and long-term financial goals. It all boils down to playing the cards right, waiting, and taking the risk to succeed.
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