Taxation Times

April 2024

Taxation Times April 2024
1Introduction
2Article : NRI Tax Filing – Income from Securities Held in India (FTC)
3Case Laws 
4Circulars and Notifications: April 2024
5Tax Compliance May 2024
6Tax News from around the World
Picture of by Neha Raheja
by Neha Raheja

Senior Advisor - Direct & International Tax

Investing in the Indian stock market has become increasingly popular among Non-Resident Indians (NRIs) in recent years. With the constantly changing financial and taxation landscape, it is important for NRIs to stay updated on tax regulations to ensure compliance.

Coming to this month’s Taxation Times, here’s what we have :

  • An article to guide NRI who has earned income from securities in India .
  • Case Laws from various courts & jurisdictions;
  • Tax Compliance Calendar: May 2024;
  • Circulars & Notifications, April 2024;
  • Tax News from around the world

We hope that you find this month’s edition of the Taxation Times useful. In case you have any feedback or need us to include any information to make this issue more informative, please feel free to write to us at info@uja.in

A Very Happy New Year 2024-2025 for Finance Enthusiasts!

Happy Reading!
Best Regards,
UJA Tax Team

NRI Tax Filing: Income from Securities Held in India

Introduction

Investing in the Indian stock market has become increasingly popular among non-resident Indians (NRIs) in recent years. With the constantly changing financial and taxation landscape, it is important for NRIs to stay updated on tax regulations to ensure compliance. 

Understanding NRI Status and Tax Implications:

The first step for NRIs investing in the Indian share market is to determine their tax residency status. An individual’s tax liability in India depends on their residential status, which is determined by the number of days they have spent in India during the financial year. NRIs are typically subject to disparate tax regulations compared to resident Indians. Consequently, understanding one’s tax residency status is of paramount significance before delving into the intricacies of tax filing. 

Income Sources and Taxation:

NRIs investing in the Indian share market generate income through dividends and capital gains.

Dividends are taxable in the hands of the recipient, NRI.

While, capital gains are divided into short-term and long-term gains based on the duration of shares held by such NRIs,.

summary of the taxation is tabulated as below:

Sr. No.

Income Earned

Tax Rate

1.

Dividend

As per applicable slab rate

2.

Long term capital gains of equity oriented mutual funds or equity shares

10%

3.

Short term capital gains of equity oriented mutual funds or equity shares

15%

4.

Any other long term capital gain

20%

5.

Any other short term capital gain

As per applicable slab rate

While deciding to tax the income in India, NRI shall also consider the effect of Double Taxation Avoidance Agreement (DTAA) and rate as per the DTAA.

Steps in Tax Filing for NRIs:

  • Gather Relevant Documents:
    Documents such as Form 16A, Form 26AS, and Annual Information Statements (AIS), along with other relevant documents, may be useful for filing returns in India.
  • Calculate Total Income:
    Calculate the total taxable income for the year, taking into account income from dividends, capital gains, and income from other sources.
  • Claim Tax Benefits:
    NRIs can claim deductions available under various sections of the Income Tax Act, such as Section 80C for investments in specified financial instruments.
  • File an Income Tax Return (ITR):
    Select the appropriate ITR and disclose accurate details of income, deductions and taxes.

Important Regulations to be kept in Mind:

  • Equalization Levy:
    NRIs should understand the implications of the equalization levy, which is applicable to specified digital transactions and related services.
  • Prevention of Treaty Abuse:
    The provisions of the Income Tax Act, 1961, focus on preventing treaty abuse and may impact the availability of benefits under double taxation avoidance agreements.
  • Digital Taxation:
    The digital economy’s growing influence has led to considerations of digital taxation, affecting NRIs providing digital services.

Conclusion

Tax filing for NRIs investing in the Indian share market requires understanding of tax residency, income types, and relevant tax rules. Staying updated on regulations ensures compliance and avoids legal issues.

By staying informed and seeking professional advice, NRIs can navigate taxes and investments confidently.

Case Laws

Deputy Commissioner of Income-tax V/s BTW Atlanta Transformers India (P.) Ltd. [2024] 161 taxmann.com 507 (Ahmedabad - Trib.)
Reference: Section 4 of the Income-Tax Act, 1961

Facts:  The assessee-company filed its return of income, declaring total income.

The assessing officer completed the assessment and computed the total income.

On appeal, the Commissioner (Appeals) allowed the claim of the assessee that the interest income earned on fixed deposits pertaining to the period prior to the commencement of business of the assessee should be treated as capital receipt.

The revenue filed an appeal before the ITAT.

Held: There is no dispute about the fact that the business activities of the assessee-company did not commence in FY 2014–15 as well. The Assessing Officer has given a categorical finding, in this regard, in the assessment order itself. Thus, the interest earned on FDs during the year was prior to the commencement of business for the assessee-company and was in the nature of a “capital receipt.”. The objection of the Department that the assessee had not shown any nexus between the funds borrowed and the specific investment made by it, is not found relevant, as such a nexus has to be examined in the year in which the investments were made for the first time. In the present case, the investments were made in the earlier years and are continuing in the current year, and the assessee-company is deriving interest income on the fixed deposits made by it in the earlier years. Respectfully following the decision of the Co-ordinate Bench in the AYs 2013–14 & 2014–15, it is held that the interest income earned on fixed deposits pertaining to the prior period commencement of business was in the nature of a “capital receipt,” and the preoperative expenses of the assessee have to be adjusted with this “capital receipt,” and only the balance expense, if any, needs to be amortized as per the provisions of Section 35D of the Act. Accordingly, the Commissioner (Appeals) had rightly allowed the claim of the assessee.

In Favour of: The Assessee

Ayesa Ingenieria Y Arquitectura S.A. V/s Assistant Commissioner of Income-tax (International Taxation) [2024] 161 taxmann.com 666 (Delhi - Trib.)
Reference: Section 9, read with section 40(a)(i), of the Income-Tax Act, 1961 and article 7 of India-Spain DTAA

Facts: The assessee company, incorporated in Spain, operated in India through its branch office, which provided engineering consultancy services. The assessee filed its return of income, declaring its income.

The assessing officer observed that the assessee had paid a certain amount to its head office, which it categorized as reimbursement of salary expenses for expats. The Assessing Officer proposed to disallow said amount under Article 7(3) of the India-Spain Double Taxation Avoidance Agreement (DTAA), considering such an amount as fees for technical services (FTS).

The assessee contended that the above payments were on a cost-to-cost basis and that they were allowable under Article 7(3) of the India-Spain DTAA.

The Assessing Officer, however, passed the draft assessment order under Section 144C(1), proposing to make an addition on the ground that impugned payments made to head office by branch office were in the nature of FTS and the same were assessable in the hands of the assessee which had not been offered to tax.

On appeal, the Dispute Resolution Panel upheld the order of the Assessing Officer.

Finally, an appeal before the Hon. ITAT is filed.

Held: Whether the assessee, a branch office of a Spanish company, had reimbursed the salary cost of expatriates working in India on a cost-to-cost basis without any mark-up and entire salary payments made to expatriates in India as well as outside India had been subject to TDS under Section 192, disallowance of salary cost reimbursement by the assessing officer under Section 40(a)(i) was not justified as TDS had been duly deducted on entire salary payments to expatriates and deposited into the . government account within the prescribed time limit.

In Favor of: The Assessee.

Circulars and Notifications April 2024

Circulars / Orders

Extension of due date for filing Form No. 10A/10AB under the Income Tax Act, 1961

Date extended till 31.05.2024 – Relief for TDS/TCS Deductors on PAN-Aadhaar Linkage

Press Release

Net Direct Tax collections (provisional) for Financial Year (FY) 2023-24 exceed Union Budget Estimates by Rs. 1.35 lakh crore i.e. by 7.40%

CBDT signs record number of 125 Advance Pricing Agreements (APAs) in FY 2023-24

Tax Compliance: May 2024

07 May 2024

  • Due date for deposit of Tax deducted/collected for the month of April, 2024. However, all sums deducted/collected by an office of the government shall be paid to the credit of the central government on the same day that tax is paid without the production of an income-tax challan.

15 May 2024

  • Due date for issue of TDS Certificate for tax deducted under section 194-IA/194-IB/194M/194S is March 2024

Quarterly statement of TCS deposited for the quarter ending March 31, 2024

30 May 2024

  • Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA/194-IB/194M/194S in the month of April, 2024

  • ​Issue of TCS certificates for the 4th Quarter of the Financial Year 2023-24​

31 May 2024

  • Quarterly statement of TDS deposited for the quarter ending March 31, 2024

  • Due date for furnishing of statement of financial transaction (in Form No. 61A) as required to be furnished under sub-section (1) of section 285BA of the Act respect for financial year 2023-24

Tax News from Around the World

US introduces Corporate Tax Dodging Prevention Bill to ensure fair corporate tax payments

UK abolishes ‘non-dom’ tax regime; new arrivals in UK pay tax on global income after expiry of 4 years

Norway to impose tax on foreign companies generating income from Norwegian continental shelf

Australia releases Reportable Tax Position Schedule for 2024

Austrian lawmakers considering bill for public country-by-country reporting

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