Income Tax Return: How to reconcile difference in Form-16 and Form 26AS?

One of the common problems faced by the assessee while filing their Income Tax Return, whether, salaried employees or businessmen, is that TDS deducted on their income is not matching with the figures of TDS shown in form 26AS or TDS is not reflecting in form 26AS.

 In the case of salaried employees, their taxes are deducted upfront every month by the employer in the form of Tax Deducted at Source (TDS). Further, the employer is under an obligation to deposit such tax deducted within the prescribed time to the government, file quarterly TDS return for such tax deducted and deposited and issue a certificate to the employee in form 16.

On the basis of such certificate in form 16, the employee can claim credit of taxes excess deposited while filing their respective Income Tax Return in India.

Further, the tax so deposited by an employer is normally reflected on the portal of tax department in the form of form 26AS.

In case of Tax return filing of individual employees, it must be ensured that the figures in form 16 is matching with the figures in form 26AS. Any mismatch in two figures will lead to issuance of notice from tax department.

Therefore, in order to avoid notices from tax department, it is essential to understand the reasons for mismatch in form 16 and form 26AS and how to rectify or reconcile such mismatch before filing ITR.

Reasons for the mismatch between form 16 and form 26AS 

Some of the reasons for mismatch between form 16 and form 26AS are as under:

• Deductor of tax has not deposited the TDS so deducted.
• Deductor has not filed TDS return although TDS has been deposited.
• Clerical mistake in the TDS return like mentioning of wrong PAN of employee, wrong amount, wrong PAN and TAN of deductor, wrong challan identification number of TDS payment, wrong assessment year.
• Wrong TDS amount claimed in the ITR filed.

Reconciling the figures of form 16 and form 26AS 

• In case of mismatch in form 16 and form 26AS, first of all identify the reasons for such mismatch. If the mistake is on part of the employer, inform him about the mistake and ask him to rectify the mistake and file revised TDS return. On the basis of such correction, ITR filing shall be done.
• In case a notice has been issued from the Income Tax Department for TDS credit mismatch, an online reply needs to be submitted after login to the portal. The assessee can choose the option of “Taxpayer is correcting data for Tax Credit Mismatch only” and fill in the relevant details. NRI Taxation in India
  

In order to avoid legal hassles, it is advisable to do periodical checking of form 26AS to see whether TDS deducted by the employer is properly reflecting on the portal. In case it is not so reflected, an employer must be contacted immediately and reasons for such mismatch must be conveyed to employer so that he can make necessary corrections and file a revised TDS return. On the basis of reconciled figures only, an income tax return shall be filed.

Non Resident Taxation - How Residential Status of Non-Residents is determined?

 

The last year budget has provided with major changes in determining the residential status of the Non-Resident Indians or Persons of Indian Origin (PIO) for the purpose of filing NRI Income Tax Return in India.
 
These provisions have majorly impacted the residential status as well as liability of NRI Income Tax Return filing in India.  In this article, we will be discussing about changes made in definition of Non Resident Indian.

 
New Rules for determining the NRI Residential status:

1. As per provisions of the Act, a person shall be considered as Non Resident in India in case his period of stay in India during previous year is less than 182 days.  
2. Further, in case period of His stay in India during last 4 years preceding the previous year was less than 365 days and period of his stay during previous year was less than 60 days, even then, He will become Non Resident.    
3. As per Explanation (1A) to section section 6(1) which has been newly inserted, concept of deemed resident has been introduced. As per same, any citizen of India whose total income from India exceeds Rs 15 lac during the previous year shall be deemed to be Resident in India in that previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria.  

4.       Further, the definition of Not Ordinary Resident in India has also been amended. A person is said to be "not ordinarily resident" in India in any previous year if such person is--
(a)   Non-resident in India in nine out of the ten previous years preceding that year, or
(b)   Non Resident in India for more than 729 days during the seven previous years preceding that year.
(c)    A new clause (c) to section 6(1)(6) has been inserted which provides that a person shall be considered as not ordinary resident if He is an Indian citizen or a person of Indian origin and His total income from India exceeds Rs 15 lac during the previous year and his period of stay in India is 182 days or more but less than 180 days.
(d)   Further, new clause (d) to section 6(1)(6) has been inserted which provides that a person shall be considered as not ordinary resident if He a citizen of India who is deemed to be resident in India under clause (1A). 
 
It may be noted that as per the amendment in Section 6, the time period reduced to 120 days is only applicable in cases where the total accrued income in India of the visiting person in a particular financial year is more than Rs. 15 Lakhs. As was the case earlier, if a person’s total income earned in India in a fiscal year is up to Rs. 15 Lakh, they will continue to have their NRI status, even if their stay period has not exceeded 181 days.
 
The visiting Indian person is required to keep a track of all his taxable income accrued in India as well as the number of days of their stay in India. This is to be done because in case the Indian taxable income exceeds the mark of Rs.15 Lakhs, then the provisions related to stay period of more than 120 days will be applicable on them.
 
Any NRI with a stay period of 120 days or more and whose taxable income has exceeded Rs. 15 Lakhs, is required to check whether their stay period in the immediate preceding 4 years is 365 days or more. If their stay period in the preceded immediate 4 years is 365 days in total then they will be treated as a resident Indian and not NRI for the tax purposes. E assessment income tax
 
However, such individuals will be treated as Resident but Not Ordinarily Resident (RNOR) providing them with a relief that their income accrued outside India will not be taxable under Foreign Income Tax in India.
 
Why aforesaid determination of Residential status in case of Non Resident Indians is important?
 
Determination of residential status is important to correctly compute the Income Tax Liability of Non Resident and also for filing NRI Income Tax return.
 
This is due to the fact that unlike Residents, whose global income is taxable in India, in case of NRIs, only income accrued or arise or deemed to be accrued or arise and/or received in India is taxable. Therefore, in case any NRI does not have any income from India, there is no need to file NRI Tax return in India.
 
There may be situation that a person has been NRI for some years but becomes Resident in a particular year, in such case, for that year, his income from foreign country will also become taxable in India and in such case, he need to file his Income tax return from Indian as well as foreign source. However, as per DTAA applicable between both countries, he would be entitled to claim proportionate credit of taxes paid in foreign country.

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What are the Deductions and Exemptions available to NRI under Income Tax?

NRIs are a major contributor to Indian GDP in terms of bringing foreign remittance to India every year. They are also the brand ambassador of India. Tax treatment of NRIs in India are at par with that of Resident with some differences.

 

In this write-up, we would be discussing the NRI tax in India.

While determining NRI Tax in India, the first question which comes to mind of every NRI is about the treatment of their foreign income, i.e. whether foreign income is taxable in India?

The answer will depend upon facts and on case to case basis.

Generally, NRIs are not liable to pay taxes on income earned outside India, but there may be instances where foreign income is taxable in India.

Residents in India are liable to pay taxes on their global income. But in the case of a Non-Resident Indian (NRI) or Resident but Not Ordinary Resident (RNOR), income earned by them abroad is not taxable in India. However, any income generated through their investments inside India will be taxed as per the Indian Tax rules and regulations. 

Therefore, residential status is a very important factor to determine NRI Taxation in India.

NRI Tax Return Filing

The due date for filing an NRI Tax return in India is 31st July of every year. Any non-residents whose annual gross income is above Rs. 2.5 Lakh in a particular financial year is required to file their tax return in India on or before the due date. The following are the categories of income liable to be taxed-

1. Income earned from a business setup in India.
2. Any capital gains from selling the assets such as shares, mutual funds, etc. situated in India.
3. Income accrued as salary or from a profession based in India.
4. Income from house property or rental property.
5. Income from other sources such as interest on bank accounts or NRO deposits, gifts, dividends etc.

 Deductions and Exemptions available to NRI while computing their tax liability:

Like Residents, Non-Resident Indians are also entitled to certain exemptions and deductions per the Income Tax Act. Same are provided as under:

1. Any Income accrued or arise in the NRE account is exempted in the case of NRI.
2. Payment made against children's tuition fee: Any payment is made to a school, college or educational institution within India, as tuition fees for full-time education of any two children.
3. Premium paid for life insurance: In this case, the insurance policy must be in the name of the NRI or their spouse or children. Also, the premium paid should be less than 10% of the total sum assured in the policy, or else it is liable for tax in India.
4. Unit-Linked Insurance Plan (ULIP): For a deduction under Section 80C, life insurance covers are sold along with ULIP. It helps in maximizing the tax benefits to the NRIs.
5. Investments made in Equity Linked Savings Scheme (ELSS): This has emerged as one of the best options to claim deductions of up to Rs in recent years. 1.5 Lakh in taxes. 
6. Repayments made against loan principal for purchase of house property: A deduction on repayment of loan taken for purchasing or making a house property is allowed in the tax computation.
7. Deduction on income from house property: NRIs can easily claim a deduction on incomes accrued from house property in India. They can claim deductions while paying property taxes and on the home loan interests. 
8. Deductions provided under Section 80D: A deduction is allowed on the premium paid for a health insurance policy.
9. Deductions under Section 80E: NRIs can claim a deduction on interests paid against an education loan. However, it cannot be claimed on the principal sum amount of the loan.
10. Deductions under Section 80G of Income Tax Act: Deduction can also be claimed on any donations made for a social cause by the NRI in India.
11. Deductions under Section 80 TTA: Any income accrued as interest on the savings bank account can be claimed for deductions. Faceless assessment income tax

Deductions not allowed to NRI: 

Some sections of the Income Tax Act, 1961 also provide conditions under which NRIs' deductions are not allowed while filing Income tax in India. These are as follows-

1. Investments under Section 80C: Any income generated through the following sources are liable to taxes and not deductions-
2. Investments in PPF after their NRI status are not allowed.
3. Investments made in the National Savings Certificate (NSC).
4. Investments made in Senior Citizen Savings Scheme.
5. Investments in a five-year post-office deposit scheme. 
6. Investments under Section 80CCG: Any deduction on the investment made in the Rajiv Gandhi Equity Savings Scheme (RGESS) is not allowed 
7. Deductions under Section 80DD and 80DDB to differently-abled persons: NRIs are not allowed for any deductions on maintenance and medical treatment of any differently-abled person dependent on them. 
8. Deduction under Section 80U for differently-abled persons: If the taxpayer is himself suffering from a disability, even then not allowed.
9. Exemption from income through the sale of property: Any long term capital gain on property is subject to be taxable. No exemption is provided to NRIs in this case.

Accordingly, all the factors above are important in determining the applicability of NRI Taxation in India.