NRI Tax Return Filing - Why ITR should be filed before due date?

In India, every individual including Non Resident Indians and non-audit assessee are required to prepare and file their annual Income Tax return on or before due date i.e 31^st July for income earned during previous financial year. However, for FY 2020-21, owing to COVID pandemic due date for Income Tax return filing has been extended to 31^st December 2021.

It is very important for both NRI as well as Indian Residents to complete ITR filing on or before due date otherwise unnecessary fines and penalties are levied which may be avoided.

In this write up, we will understand the consequences of late filing of NRI Tax Return under the Income Tax Act, 1961(“the Act”).

1)      Losses cannot be carried forward 

In case of late filing of NRI Tax Return, losses like business loss and capital loss cannot be carried forward to next year for set off against future year profits. Therefore, this is a serious consequence of not filing ITR within due date as losses will be lapsed.

2)      Interest u/s 234 A

Late filing of NRI tax return will lead to interest @ 1% u/s 234A of the Act from due date of Tax Return filing till date of actual tax return filing.

3)      Penalty u/s 234F

Delay in NRI Tax Return filing will also attract penalty of Rs 1000 to Rs 10,000. Further, non filing of income Tax return may also lead to prosecution in some cases.

4)      Delay in getting refund

Any delay in Tax filing in India will result in late processing of ITR by tax department due to which refunds are also credited late in the assesses bank account. Accordingly, it is advisable to file Income Tax return well in advance before due date so that refunds are credited in the bank account within time.

5)      No Sufficient time for filing tax return

As per amendment in tax laws, now Income Tax return cannot be filed after end of relevant assessment even after paying late fees. Previously, the assessee used to file tax return late after paying late fees but now this option is not available. Therefore, in case the assessee missed the due date, He would have very less time for filing ITR.

6)      Reminders and Notices from tax authorities

Late filing of Income Tax Return would lead to reminder notices from tax authorities. Further, due to Annual Information Report, nowadays tax authorities are aware of all the major income earned and expenses incurred by the assessee. Suppose assessee has earned any income and not filed its tax return, it will result in issuance of Income tax notice by compliance cell as well as commencement of Income Tax Faceless Assessment against the assessee.

7)      Prosecution

Intentional non filing of ITR may also lead to prosecution in some cases by the tax authorities.

8)      Black Money Act

As per Income tax Act as well as Black Money Law, any Resident having foreign income or foreign assests need to disclose the same in his ITR. Failure to do so will lead to harsh penalties as well as prosecution.

Thus, it may be inferred from above, that firstly, it is very important to file Income Tax Return and also such tax return shall be filed on or before due dates in order to avoid interest, penalty, prosecution and loss of refund and carry forward of losses.

Faceless Assessment under Income Tax- A welcome step in Indian Judiciary

One of the main focus areas of the Modi Government right from inception has been tax reforms in the country and to make it more transparent.

From Goods and Services Tax (GST) Bill to the technological advancements in the Income Tax Assessment procedures, the government is not leaving a single stone unturned. Every tax reform that has been made is in line with the “Ease of Doing business in India”, Digital India Initiative”, Start-up India project and with an intention to boost the confidence of tax payers and corporates in Indian tax system. 

In this article, we will be discussing about the faceless Income Tax assessment, one of the major steps taken to change the way of assessment procedure followed from past so many decades.

India is one the few nations that has adopted this type of system. The new faceless Assessment scheme has the following features-

Features of Income Tax Faceless Assessment Scheme

1.  It has brought an epitome shift in the assessment process by eradicating the human interface and making it paperless.
2. Centralized National e-Assessment Centre (NeAc) has been introduced which will be single point of contact between the tax payers and assessing officers for issuance of all the Income Tax notices, communications and smooth conduct of faceless Income Tax Assessment and passing of final income tax assessment order.
3. The scrutiny cases are transferred to assessment units through an automated procedure and randomly by computer algorithms.
4. The National e-Assessment Centre (NeAC) issues the assessment notice electronically to the taxpayer through their e-filling account. Therefore, the identity of the assessing officer is also not disclosed.
5.  It follows an approach that is team-based and makes use of technology.

Some Advantages of faceless income tax assessment are as under:

1. It provides automation and uniformity to entire procedure of Income Tax assessment.
2.  Since it involves team of tax officials, its introduction has removed all the unwanted and unnecessary procedures that could lead to subjective judgments and also individual biases.
3. The uniformity in the assessment process has helped in achieving a corruption-free, justified and truthful assessment order for the taxpayer.
4. It has become time bound
5. No physical interaction with the tax officials are required which will reduce the corruption as well as harassment of honest tax payers.
6.  It reinforces the trust of tax payers in tax officials and entire tax assessment procedure.
   

In addition to above, a revised Form 26AS has been notified by the Ministry of Finance, where all the additional details of the financial transactions of higher value done by a taxpayer during a financial year can be filed. It contains details like property purchases, any cash deposits and withdrawals made by the assessee. The Form 26AS will help, in facilitating the required data to the tax department during the primary phase of the income tax faceless assessment.

The process of the faceless income tax assessment is carried forward in the following way-

1. The NeAC which is the central cell serves a notice to the assessee. It is to be specified in the notices as to why their case has been selected for assessment.
2. The taxpayer has to provide with a response to the notice served to them within 15 days of receiving the notice through the IncomeTax Return e-filing portal.
3. Through an automated procedure the assessment case is allocated to one of the assessment centre.
4.  If there are any prejudicial modifications in the income tax returns of the taxpayer, NeAC provides with an opportunity of being heard to the assessee. The taxpayer can provide suitable documents in support of their explanations before a conclusion is made in the case.
5. The taxpayer can also request for a video conferencing facility to put forward their points.
6. Once the faceless income tax assessment is completed, a draft order is issued and the electronic records are transferred to the Authorized jurisdictional tax office. All further proceeding regarding any imposed penalty or fine, demand recovery, prosecution proceedings are to be done by the tax officer.
   
7. Once the proceedings are done, a best judgment assessment order is to be provided to the taxpayer or assessee.
   

Filing of Form 15CA and 15CB- All you want to know

 

Remittance of Money Outside India

 In case of any remittance of money outside India, the same need to be reported under FEMA Regulations and Income Tax Act.

 Normally, AD Bankers permit remittance of money outside India when the following conditions are fulfilled:

 

1. The amount to be remitted is from a genuine source
2. Applicable taxes have been deducted on such payment 
3. CA certificate in the form of Form 15CB has been obtained 
4. Remitter has declared in form 15CA that proper taxes have been paid on such Income 

 

What is Form 15CA?

 It is an online declaration made by the person remitting the money wherein he states that he has deducted the tax from any payments made to the Non- Resident. 

 The purpose of Form 15 CA is to ensure that the tax on such amount is deposited with the Government before making the remittance to the Non Resident.

 What is Form 15CB?

 It is an online certificate issued by a Practicing Chartered Accountant. 

 The purpose of Form 15 CB is to ensure that the provisions of the Double Taxation Avoidance Agreement and the Income Tax Act have been complied with while computing tax to be deducted before remitting money outside India.

 Requirement of filingof Form 15CA and 15CA 

 Filing of forms 15CA and 15CB is required in the following situations:

 

1. In case of Transfer/Remittance of money from Indian Bank to Foreign Bank Account
2. In case of Transfer of money from NRO to NRE Account
3. In case of Transfer of money from NRO to Foreign Bank Account

 What are the various Components or Parts of Form 15 CA?

Form 15CA has four parts i.e., Part A, B, C, and D.

Part A needs to be filled by the remitter if such remittance is taxable, but the amount is less than INR 5,00,000 in a Financial Year.

Part B needs to be filled by the remitter in case such remittance is taxable and the amount is more than INR 5,00,000 in a Financial Year. Further, an Order/Certificate under Section 195(2)/195 (3)/197 of the Income Tax Act has been obtained from the Assessing Officer for lower/ NIL TDS Deduction.

Part C needs to be filled by the remitter if such remittance is taxable and the amount is more than INR 5,00,000 in a Financial Year. Further, no Order/Certificate under Section 195(2)/195 (3)/197 of the Income Tax Act has been obtained from the Assessing Officer for lower/ NIL TDS Deduction.

Part D needs to be filled by the remitter if such remittance is not taxable as per domestic tax laws.

WHAT ARE THE DETAILS REQUIRED TO BE FILLED IN FORM 15CA and 15CB?

 Following Details are required to be filled in form 15CA and 15CB 

 Form 15CA- Details

1. Remitter Details- Name, Address, PAN, TAN of Remitter, Principal Place of Business, Email id, Phone No., Entity Status
2. Remittee Details- Name, Address, PAN, of Remittee, Principal Place of Business, Email id, Phone No., Entity Status of Remittee,
3. Signatory Details- Details of the person signing Form 15CA like Name, Father Name, Designation
4. Digital Signature- DSC of Remitter signing the form is required.

 Form 15CB- Details

 

1. Remitter Details- Name, Address, PAN of Remitter
2. Remittee Details- Name, Address, Country of Remittee
3. Bank Details- Name and Address of Bank, Currency, Amount in Foreign Currency and INR, BSR Code
4. TDS Details- TDS Rate under domestic law and DTAA, Amount of TDS in Foreign Currency and INR, Date of deduction of TDS, etc.
5. Digital Signature- DSC of professional signing the form is required.
   

 

What type of remittances are allowed 

 Normally, the following types of credits are allowed to be remitted by submitting forms 15CA and 15CB.

 

1. Salary credited in a bank account can be remitted
2. Interest on FDR credited in a bank account can be remitted
3. The principal portion of FDR credited in a bank account can be remitted
4. Proceeds from the sale of immovable property credited in a bank account can be remitted
5. Proceeds from the sale of shares, mutual funds credited in a bank account can be remitted
6. Rental Income credited in a bank account can be remitted

Note: In case one Income is taxable and the other Income is exempt, different parts of Form 15CA must be filled, and accordingly, two forms 15CA and 2 Form 15CB, are required. This is also because RBI codes change with the nature of remittance. For example, in remittance of interest on FDR and the Principal portion of FDR, normally, AD Banker asks for two different forms, 15CA and 15CB. NRI Tax Return Filing

Can Form 15CA and Form 15CB uploaded on the portal can be Revised or Cancelled?

There is no scope for revisions of Forms once filed. It can only be revoked or withdrawn.

It may be noted that Form 15CB cannot be withdrawn, if filed, independently.

However, Form 15CA can be withdrawn within seven days from the submission date through the link available on the online account of the assessee on the Income Tax Portal.

Also, if Form 15CA has been filed after mentioning the acknowledgment number of Form 15CB filed, then in such case, if Form 15CA is withdrawn, automatically, Form 15CB will also be withdrawn.

 

What are the consequences for non-filing of forms 15CA and 15CB?

Non-filing of form 15CA and 15CB would result in a penalty up to Rs 1 lac u/s 271 of the Income Tax Act, 1961. Income Tax E Assessment

IN WHICH CASES SUBMISSIONS OF THE FORMS ARE NOT REQUIRED
 

In following cases of remittances as specified in Rule 37BB no need to file form 15CA and 15CB

 

S. No.	Nature of Payment
1	Indian investment abroad -in equity capital (shares)
2	Indian investment abroad -in debt securities
3	Indian investment abroad-in branches and wholly owned subsidiaries
4	Indian investment abroad -in subsidiaries and associates
5	Indian investment abroad -in real estate
6	Loans extended to Non-Residents
7	Advance payment against imports
8	Payment towards imports-settlement of invoice
9	Imports by diplomatic missions
10	Intermediary trade
11	Imports below Rs.5,00,000-(For use by ECD offices)
12	Payment- for operating expenses of Indian shipping companies operating abroad.
13	Operating expenses of Indian Airlines companies operating abroad
14	Booking of passages abroad -Airlines companies
15	Remittance towards business travel.
16	Travel under basic travel quota (BTQ)
17	Travel for pilgrimage
18	Travel for medical treatment
19	Travel for education (including fees, hostel expenses etc.)
20	Postal Services
21	Construction of projects abroad by Indian companies including import of goods at project site
22	Freight insurance – relating to import and export of goods
23	Payments for maintenance of offices abroad