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.

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.

 

A Complete Guide to NRI Taxation in India

A foundation of any economy lies in the tax collected from the citizens of the country.

Non Resident Indians or NRIs as they are popularly called are major contributor of taxes in India. In this write up we will try to understand NRI Taxation in India in brief.

NRI Taxation laws fall on those people who earns outside the country and it is to be noted that their perks and rules are quite different compared to the people living and earning in India. 

 Who are considered to be a NRI?

A person is considered to be a Non-Resident Indian when they fall under any of the below mentioned categories,

 

•     The person needs to be in India for 182 days or more during a financial year
• Or
•        If the person has been in India for 365 days in the preceding 4 years and for at least 60 days in the present year.

Further, an Indian citizen whose Indian income 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 of similar nature.

Why determining residential status is important?

In case Non Resident becomes Resident, he would be liable to his Foreign Income Taxable in India. This is because in case of Residents, His global income becomes taxable in India.

However, He would be eligible to get tax credit of doubly taxed income in home country as well as source country. This is an important aspect of NRI Taxation in India.

Therefore, NRIs would be taxed according to the NRI Taxation system prevalent in India.

 Is all NRI income taxable?

Not all incomes of NRIs are taxable in India. Only income earned in India through source in India is taxable in India.

 Some components of NRIs income however are taxable in India and they are listed below:

 

•   Salary received in India
•    Salary received for providing services in India
•    Income from selling any Indian property
•    Capital gains in India
•   Transfer of asserts that is situated in India
•    Fixed deposit income
•   Interest earnings from savings account

Under what situation NRI income is taxable?

 NRI Tax in India would be applicable in case his income from India exceeds maximum amount not chargeable to tax i.e Rs 2,50,000. Also, in case His tax liability is more than Rs 10,000, He would also be liable to pay advance tax in India. Also, he needs to file his tax return in India on or before due date i.e 31^st July every year.

 How to file the returns?

Tax laws in India are complicated. Also, in case of NRIs whose foreign income taxable in India, expert knowledge of DTAA is required in order to provide treaty benefits. Therefore, it is advisable that NRIs should get some professional help from CA or tax consultants in order to file their tax returns in India. They would guide you throughout the process and would also advice you the best ways to get all the NRI Taxation benefits.

 

Ezybiz India is one such Tax and Business Advisory firm wherein you would get experienced CAs that would guide you through the process completely at the most affordable prices. They would also advice on the Treaty benefits and other tax planning to minimize your tax liability.