BLOG on Income Tax Management for - AY 2022-23 & 2023-24

Procedure for the Filing of Income Tax and Wealth Tax Returns, Assessment, and Refunds in case of NRI

1. Income Tax Return To Be Voluntarily Filed And Tax Paid On Self-Assessment If An NRI has Taxable Income In India

As stated earlier, no income tax return is to be filed by a non-resident Indian in circumstances. Similarly, where a non-resident Indian has in India, a total income below the taxable limit of Rs. 5,00,000 for the financial year 2019-2020, he is not required voluntarily to file an income tax return. However, an NRI may, of his own will and choice file an I.T. Return, even where the total income in India does not exceed Rs. 5,00,000. In other cases, namely, where a non-resident Indian has income exceeding the exemption limit and is not governed by the special procedure of assessment of income tax at the uniform rate of 20% he would be required to file an income tax return voluntarily. Under Section 139(1) a non-resident Indian, like any other tax payer, is required to voluntarily file his income tax return in Form No. I or 2 or Form No. 3, or Form No. 4, as the case may be, on or before 31St July of the assessment year concerned if he has a taxable Indian income. If the NRI is subject to tax audit, the last date for filing of I.T. Return is 30th September. For example, if a non-resident Indian has earned some business income in India for the financial year ending 31 March 2019 he can voluntarily file his return in Form No. 2 on or before 31 July 2019. Self-assessment tax under the provisions of Section 140A must be paid before filing the return of income and a copy of the challan for the self-assessment tax must be enclosed with the return. All necessary statements, challans, certificates, etc. regarding the details of the income of the non-resident must be filed along with the return of income. In case of belated return, penal interest at 1% p.m. is payable.

2. The Assessing Officer Can Also Require The Non-Resident To File Income Tax Return

Under the provisions of Section 139(2) an Assessing Officer may also require any assessee, including a non-resident Indian who, in his opinion had taxable income during the relevant previous year, to submit a return of income within 30 days of the receipt of such notice. Penal interest @ 12% p.a. is to be charged by the Assessing Officer for belated submission of return. The return under Section 139(1) or 139(2) can be signed by the non-resident Indian himself or by some person duly authorised by him on this behalf where the non-resident Indian is absent from India. In certain cases the return can also be filed by the agent of the non-resident Indian who is known as a representative assessee,

3. NRls Can Apply For Refund Of Income Tax By Filing Income Tax Return

Where the amount of income tax deductible from the income of a nonresident Indian or the amount of advance tax or any other tax paid by him or treated as paid by him or on his behalf for any assessment year exceeds the amount by which he is properly chargeable under the Income Tax Act for that year, he would be entitled to a refund of the excess income tax. Every claim for refund has to be made in the prescribed Form No. 30 obtainable from any Income tax Officer. The return of income must accompany such form. Such a claim for refund must be made within one year from the last day of the assessment year in which the income in respect of which the claim is made was assessable. Interest 1/2% p.m. from 1 April of the assessment year till the date the refund is granted

4. Income Of NRIs Is Generally Accepted Without Scrutiny

On the receipt of an income tax return, the Assessing Officer sends an intimation, if any modification is made to the income returned. Under the new procedure the income of an individual taxpayer in about 97% of cases is normally to be accepted without scrutiny and without calling for examination of the books of accounts, etc. Hence, a nonresident Indian must exercise utmost care in filing the return of income so that it can be accepted by the Assessing Officer under Section 143(1). Thus in about 97% of the cases the acknowledgment slip serves the purpose of an assessment order under Section 143(1). In very selected cases there is a procedure of detailed scrutiny . The Finance Act, 1999 had from 1.6.1999 taken away the power of the Assessing Officer to make adjustment while making a provisional assessment under Section 143(1). The Finance Act, 2001 has taken away the power of A.O. to withhold refund under Section 241.

5. Regular Assessment After Personal Hearing, And Examination Of Papers, Etc. By The Assessing Officer

Where the Assessing Officer considers it necessary to verify the correctness and completeness of the income tax return, by requiring the presence of the assessee or the production of evidence for this purpose, the Assessing Officer must serve on the assessee (including a nonresident Indian) a notice for personal hearing or the production of evidence in support of the return under Section 143(2). This is normally done when a case is selected for detailed scrutiny on a random sampling basis. In such a case after taking into account all relevant material which the Assessing Officer has gathered and after hearing such evidence as the assessee may produce, the Assessing Officer has to make an assessment under Section 143(3). There is also a procedure for compulsory audit of accounts u/s 44AB where the turnover, etc. exceeds `. 40,00,000. Most non-resident Indians may not be required to have a tax audit of their accounts, hence the provisions in this regard have not been discussed here.

6. Ex Parte Assessment By The Assessing Officer

Where the non-resident Indian fails to file the income tax return which he may be required to submit as per notice given by the Assessing Officer under Section 139(2) or where he fails to comply with all the terms of the notice issued under Section 142(1) regarding the production of accounts or a notice under Section 143(2) regarding production of evidence in support of the return of income made, the Assessing Officer is empowered to make an assessment of the- total income of the non-resident Indian to the best of his judgement and determine the sum payable or refundable to him on the basis of such assessment. Of course, the Assessing Officer must not act dishonestly in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment. An appeal against such an order and also against intimation under Section 143(1) lies with the appellate authority.

7. Re-Assessment Or Additional Assessment In Case Of Income Escaping Assessment

Where the income tax chargeable has been under-assessed or where such income has been assessed at too low a rate or where excessive relief is granted to the non-resident Indian, the Assessing Officer may reassess such income or re-compute the loss for the assessment year concerned. Where the Assessing Officer believes that such assessment or re-assessment is due to the omission or failure on the part of the Non-Resident Indian to disclose fully and truly all facts in the return, the Assessing Officer can issue a notice under Section 148/147(a) within 4, or 6 years, depending on the quantum of income concerned.

8. Completion Of Assessment And Payment Of Tax

The time limit of an assessment under Section 143(1) is a period of one year from 1 June, 2001, as per the Finance Act, 2001, and for a regular assessment under Section 143/144 it is 2 years (reduced to 21 months from the A.Y. 2004-05 by the Finance Act, 2006) from the end of the assessment year in which the income was first assessable. For example, for the assessment year 2019-2020, the Assessing Officer must complete the assessment on or before 31 December 2020. Income tax and other dues, if any, as per the notice of demand, must be paid within the time mentioned in the demand notice. Normally, a period of 30 days is allowed to an assessee for making the payment of income tax and other dues as mentioned in the notice of demand. Where it is not possible for the non-resident Indian to pay the entire tax at one time, he may make an application to the Assessing Officer to permit him to make payment of the tax in suitable instalments. Interest at 1% per month is normally required to be paid for the period of belated tax payment.

9.Provision Regarding Penal Interest And Penalty For Delay In Filing Income Tax Return Or Payment Of Tax

As stated earlier, penal interest under Section 234A at 1% per month is payable by the non-resident Indian on the belated submission of the income tax return, if he is required to voluntarily submit it under the provisions of Section 139(1). Likewise, where the non-resident Indian does not furnish the return of income within 30 days, when he is required to do so through an individual notice from the Assessing Officer, penal interest at 1% p.m. is also required to be paid. Similarly, in matters of delay in payment of income tax or where the income tax is allowed to be paid by instalments, interest at 1% p.m. is normally charged from the taxpayer. Likewise, on the refund of income tax, interest at 1/2% p.m. is paid by the Central Government under Section 244A. Where there is concealment of income, the minimum penalty leviable under Section 271(1)(c) is equal to the income tax and the maximum is equal to three time the income tax sought to be evaded. For non-payment of regular income tax a penalty can be levied by the Assessing Officer under Section 221 which may be increased from time, but not as to exceed 100% of the arrear income tax.

10. Deduction Of Tax At Source And Payment Of Advance Tax By NRIs

The income of a non-resident Indian in India in most cases is subject either to tax at source or payment of advance tax. Income by way of dividends, interest, winnings from lottery and other sums payable to non-resident Indians are subject to deduction of tax at source. Another method by which income tax payable by a non-resident Indian is collected in advance of the regular assessment is payment of advance tax. Advance tax is payable by the non-resident Indian in respect of his total income. Advance tax is payable in a financial year and is treated as a payment of tax in respect of the income of the previous year for an assessment year immediately following the financial year in which it was payable. Credit for such advance tax is given to the non-resident Indian in the regular assessment. A non-resident Indian who has been previously assessed by way of regular assessment is required to pay advance tax. Where the total income of the non-resident Indian taxable in India does not exceed Rs. 5,00,000, during the financial year 2019- 2020 he is not required to pay any advance tax. Further, where the tax payable on the basis of the total income as reduced by the income tax deductible at source exceeds Rs.. 10,000 the non-resident Indian would be required to pay advance tax.

Where advance tax is payable, the assessee shall himself compute the advance tax payable on his current income at the rate in force in the financial year and deposit the same whether or not he has been earlier assessed. He need not file any estimate. The Assessing Officer can also serve an order for enhanced tax based on the total income of the latest previous year for which the assessment has been made or the returned income in the latest return, whichever is higher. In such a case also the assessee shall have the right to file his own estimate for advance tax and pay tax accordingly. He may submit a revised estimate of advance tax to reduce the amount determined by the Assessing Officer. The assessee is also entitled to revise the instalment of advance tax according to his estimate of current income without the requirement of filing a revised estimate of advance tax.
Under Section 211, up to 30%, 60%, and 100% of the advance tax payable shall be paid by 15 September, 15 December, and 15 March respectively. Any payment for advance tax before 31 March will be treated as advance tax. For companies, 15%, 45%, 75% and 100% of the advance tax shall be payable by 15 June, 15 September, 15 December and 15 March.

The provisions for interest are now contained in Sections 234B and 243C. The rate of interest under Section 234B for default in payment of advance tax is 1% p.m. for the period starting from 1 April of the following financial year to the date of regular assessment on the assessed tax less advance tax, if the advance tax paid falls short of 90% of the assessed tax. Under Section 234C, the rate of interest is 1% per month in case of deferment of instalments of advance tax or at 1% on the shortfall in the payment of tax till 15 March.

The Finance Act, 2003 has, w.e.f. 1.6.2003 inserted a new Section 234D to charge simple interest on excess refund granted at the time of summary assessment at the rate of one-half per unit p.m. for the months comprised in the period from the date of grant of refund to the date of the regular assessment.

As per Section 40(a) disallowance in respect of payments like rent, commission, interest, etc. will not be made in the case of the deductor for the expenditure even if payments are made by the last date of filing the income-tax return.

11. Remedies By Way Of Appeal, Etc. Available To A Non-Resident Indian

The right of appeal against the order of the Assessing Officer is given only to the taxpayer and not to the Income Tax Department. Against the order of assessment or refund or any other order, the non-resident Indian can file an appeal in Form No. 35 to the Commissioner (Appeals) within 30 days of the service of notice or order against which the appeal is preferred. The minimum filing fee is Rs. 250 and the maximum Rs. 1,000. The CIT. (Appeals) will fix a date for hearing of the appeal where the nonresident Indian as well as the Assessing Officer get hearing either in person or through a representative. Normally he will pass an order within 1 year from the end of the financial year in which the appeal was filed. A further appeal against the order of the CIT (Appeals) lies with the Income Tax Appellate Tribunal. Such an appeal is to be filed in Form No. 36. The period of limitation for appeal to the Appellate Tribunal is 60 days from the date on which such an order is communicated to the assessee or CIT. The assessee is required to deposit a filing fee of Rs. 500 or Rs.1,500 or maximum of Rs.10,000 before preferring an appeal to the Tribunal. The order passed by the Tribunal normally within 4 years is final on questions of fact only. Against the decision of the Appellate Tribunal, a direct appeal can be filed, with a filing fee as fixed by High Court Rules on or after 1 October 1998, to the High Court of the state concerned. The period of limitation for making an appeal is 60 days. An appeal lies with the supreme Court from a judgment of a High Court. In certain cases where the subject involved is small, a non-resident Indian can apply to the C.I.T. within one year from the date of order passed by the Assessing Officer The order of the Commissioner is fmal. Similarly, the C.I.T. can also revise the order of the Assessing Officer on his own, subject of coui se to certain conditions.

12. Other Provisions For Rectification And Settlement Of Cases

A mistake apparent from record can be rectified by the authority concerned within four years from the end of the financial year in which the order sought to be rectified was passed. The authority has to pass an order under Section 154 within six months. In cases where the proposed rectification involves a debatable question, no rectification which is adverse to the assessee can be made. In certain special cases where the additional tax payable involved exceeds Rs. 10,00,000, application for the settlement of the case can be made to the Income Tax Settlement Commission.

13. Who can be an Agent of a Non-Resident Indian?

A non-resident Indian may be assessed directly or through an agent. Section 160(1)(i) provides that “representative assessee” means in respect of the income of a non-resident, an agent including the person who is treated as an agent under Section 163. Agent of a non-resident Indian according to the provisions of Section 163 includes any person in India —

who is employed by or on behalf of the non-resident Indian; or
who has any business connection with non-resident; or
from or through whom the non-resident is in receipt of any income whether directly or indirectly; or
who is a trustee of the non-resident ; and

also includes any other person who has acquired by means of transfer a capital asset in India. No person is to be treated as an agent of a nonresident Indian unless he has had an opportunity of being heard by the Assessing Officer as to his liability to be treated as such. A nonresident Indian may also appoint an authorised representative to act as his agent. Such an agent would also be entitled to file an income tax return for and on his behalf and also for claiming refund of income tax and carry on other formalities in the matter of income tax, etc.

14. Procedure for getting a Permanent A/c Number (PAN)

1. Documents Required to Apply for NRI PAN Card

NRI applicants are required to submit the following documents when applying for a PAN card:

2 recent passport-sized photographs
Copy of passport
Overseas address proof- copy of overseas bank statement

2. Procedure for NRIs to Apply for a PAN

The Income Tax Department has simplified and streamlined the entire PAN application process, ensuring that an eligible NRI doesn’t have to spend his/her valuable time running after it. A NRI can follow a few simple steps to apply for a PAN.

An applicant can log on to the official website of TIN-NSDL or UTIITSL to start the application process
Since a NRI is an Indian citizen he/she should use Form 49A, providing the necessary information required in the form
The form should be submitted along with the necessary documents (photographs, proof of address, ID proof and proof of age)
A fee equivalent to Rs 107 (if the communication address is within India) or Rs 989 (if the communication/delivery address is outside India) should be paid
Post payment, an acknowledgement number will be generated which can be used to track the status of a particular application

3. How to Apply for NRI PAN Card Online

Visit the TIN NDSL website and select the “Online PAN Application” tab on the homepage.
Select Form 49A, which is the form for Indian citizens from the two options provided.
A page with instructions will open. Read the instructions carefully.
At the bottom of the page, select the type of applicant from the drop down menu.
An online form will open in anew tab. fill in the relevant details, taking care to follow the instructions on filling the form.
On filling the form, an option to review the information will be provided.
Upload the documents if the facility applies to you (if you have a DSC signature).
After reviewing the information, click on “Submit”.
A payment gateway will open, through which you can pay the processing fee by credit card.
You can also choose to pay by cheque/DD from an Indian bank.

15. Double Taxation Relief

The income of an NRI may sometimes be liable to tax in India as well as in the foreign country. To avoid such double taxation, the Government of India has entered into Double Taxation Avoidance (DTA) Agreements with over 70 countries as per Section 90. Hence, an NRI should refer to such DTA Agreement, if necessary. If there is no DTA Agreement of India with a foreign country and the income becomes taxable in India as well as in the foreign country then it is provided by Section 91 that unilateral relief at the lower of the two rates of tax will be given in India to a resident in India. Thus, an NRI is not entitled to such relief u/s 91.

16. Assessment Procedure for Wealth Tax

The procedure of making assessment, appeal, payment of tax, etc., in the matter of wealth tax under the Wealth Tax Act 1957 in the case of a non-resident Indian broadly follows the same pattern as that under the Income Tax Act. A non-resident is liable to wealth tax in India only when the net taxable wealth in India exceeds Rs. 30 lakh (on and from the A.Y. 2010-20 1 1) as on the valuation date. This sum of net wealth is found out after deducting all the exemptions. The return of net wealth is to be filed on or before the date for voluntary submission of income tax return. The rate of wealth tax is only 1% of the net wealth in excess of Rs. 30 lakh. Many items of wealth are fully exempt from wealth tax.