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.

Setting Up Business in India

 

 

SETTING UP BUSINESS IN INDIA

FOREIGN COMPANY INCORPORATION IN INDIA

SUBSIDIARY COMPANY REGISTRATION IN INDIA

 

First thing which comes to anybody’s mind is why set up business in India? Well, presently, India is one of the fastest growing economies of the world.

 

Every year, more and more foreign companies are setting up business in India. Also, it is an attractive foreign investment destination in the world due to following factors:

 

a)      Vast range of industries,

b)      Availability of skilled and unskilled manpower,

c)      Huge middle class consumer base,

d)     Second highest English speaking population,

e)      Ease of doing business and

f)       Government initiative for attracting foreign investment and adoption of best practices in production of goods and services.

 

Let’s deep dive more and explore some more facts about India.

 

Facts about India

 

1)      It is world’s largest democracy

2)      It is highly populated, only next to China with 1.38 Billion People

3)      It is second largest English speaking country in world.

4)      It has huge market in terms of huge middle class consumer base of 500 million people with good purchasing power

5)      Fourth largest automobile industry in world and by 2026, it will be in no. 3 position

6)      Second largest telecommunication market in world with subscriber base of 1.18 Billion

7)      World’s largest offshoring destination for IT companies across the globe. Estimated revenue from ITES AND BPO was USD 135 Billion

8)      Total FDI in FY 2018-19 was approx. USD 45 Billion. Major countries are Japan, Singapore and Mauritius.

9)      World’s 5^th Largest global destination in RETAIL space

10)  Majority of the Fortune 500 companies have R&D centre and or assembly line in India

 

All the aforesaid factors have contributed to attracting foreign investment and leading to more and more foreign company incorporation in India.

 

 

Options available for Foreign Companies/Foreign Citizens to set up business in India

 

Foreign companies have following options to set up business in India, namely

 

a)      Wholly Owned Subsidiary Company

b)      Joint Ventures

c)      Limited Liability Partnerships

d)     Branch/Liaison/Project Office

 

Out of above, Subsidiary Company Registration in India is most popular and tax efficient option.

 

CORPORTAE TAX RATES ON ENTITY

 

a)      PRIVATE LIMITED COMPANY/ WOS- Company is liable to tax on global income at different tax rates like 15%, 22%, 25% and 30% depending upon case to case. Also, Subject to MAT @ 15% of book profits.

 

b)      LIMITED LIABILITY PARTNERSHIPS- LLPs are liable to tax on global income @30%. Further, LLPs are liable for alternate minimum tax @18.5% on its book profits.

 

c)      BRANCH OFFICE and PROJECT OFFICE - Tax rate applicable on income earned in India @ 40% plus surcharge and education cess

 

d)     LIAISON OFFICE- Since they cannot do any business. No Taxes applicable

 

PROCEDURE FOR OPENING PRIVATE LIMITED COMPANY OR WOS IN INDIA

 

1)      Minimum 2 Directors and 2 shareholders required

2)      Atleast 1 Director shall be Indian Resident

3)      Shareholders can be Company or Individual

4)      First of all Digital Signature of all Directors are prepared

5)      Second step is for applying name approval from Registrar of Companies [ROC]

6)      Third step is drafting of Memorandum and Article of Association and Director Identification number and other documents and applying for incorporation

7)      Finally, Certificate of Incorporation [ COI] is obtained

8)      Once COI is obtained, Bank account need to be opened

9)      Then share subscription money is brought in bank account

10)  Reserve Bank of India, Indian apex Bank for regulating foreign exchange need to be intimated about receipt of FDI from foreign company/foreign citizen

 

Time taken in entire process-

 

Approx. 3-4 weeks

 

Documents required

 

1)      KYC Documents of Directors and shareholders- Passport, utility bills, Bank statements, ID proofs

2)      Indian address proof of business premises

3)      Photos of Directors

4)      Mobile and email ids of Directors

5)      Certificate of registration of parent company

 

All documents of foreign director/ foreign shareholder need to be notarized and apostiled in home country. Further, if documents are not in English, English translation also need to be notarized and apostiled.