Everyone who earns or gets an income in India is subject to income tax. Yes, be it a resident or a non-resident of India. For simpler classification, the Income Tax Department breaks down income into five heads.
Each of these taxpayers is taxed differently under the Indian income tax laws. While firms and Indian companies have a fixed rate of tax of 30% of profits, the individual, HUF, AOP and BOI taxpayers are taxed based on the income slab they fall under. People’s incomes are grouped into blocks called tax brackets or tax slabs. And each tax slab has a different tax rate.
An NRI’s income taxes in India will depend upon his residential status for the year. If your status is ‘resident,’ your global income is taxable in India. If your status is ‘NRI,’ your income which is earned or accrued in India is taxable in India. Salary received in India or salary for service provided in India, income from a house property situated in India, capital gains on transfer of asset situated in India, income from fixed deposits or interest on savings bank account are all examples of income earned or accrued in India.
Your form of business determines which income tax return form you have to file. The most common forms of business are the sole proprietorship, partnership and a corporate. A corporate is an entity that has a separate and independent legal entity from its shareholders. Domestic as well as foreign companies are liable to pay corporate tax under the Income-tax Act. While a domestic company is taxed on its universal income, a foreign company is only taxed on the income earned within India i.e. is being accrued or received in India.
Income Tax Returns
Filing income tax return (ITR) is a way of informing the government about the total income that you have earned during a particular financial year and that you have paid taxes on that income accordingly. As per current income tax laws, it is only mandatory for an individual to file ITR if his/her income/expenditure/investments meet certain threshold.
A TDS Return is a summary of all the transactions related to TDS made during a quarter. TDS Return is a quarterly statement submitted by the deductor to the Income Tax Department. The statement shows a summary of all the entries for TDS collected by the deductor and the TDS paid by the deductor to the Income Tax Authority. The TDS Return statement includes details like the PAN number of the deductor & the deductees, all the detailed particulars of the TDS paid to the government and the TDS Challan information.
Assessment & Appeal
At times it may happen that the taxpayer is aggrieved by an order of the Assessing Officer. In such a case he can file an appeal against the order of the Assessing Officer before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) is the first appellate authority. Section 246A specifies the orders against which an appeal can be filed before the Commissioner of Income-tax (Appeals).
Search & Seizure
Search operations are exploratory exercises on the basis of information with the income tax department to find hidden income and wealth in cases of tax payers, who have not disclosed their true financial state of affairs in discharge of their tax obligations. Seizure implies taking possession of assets, which have not been disclosed to the Income-tax Department and of accounts/documents, papers which contain details of unaccounted wealth/income not disclosed to the income tax authorities.
Transfer pricing is an accounting practice that represents the price that one division in a company charges another division for goods and services provided. Transfer pricing allows for the establishment of prices for the goods and services exchanged between a subsidiary, an affiliate, or commonly controlled companies that are part of the same larger enterprise. Transfer pricing can lead to tax savings for corporations, though tax authorities may contest their claims.
International Taxation & DTAA
The Double Tax Avoidance Agreement (DTAA) is a tax treaty signed between two or more countries to help taxpayers avoid paying double taxes on the same income. A DTAA becomes applicable in cases where an individual is a resident of one nation, but earns income in another.
DTAAs can be either be comprehensive, encapsulating all income sources, or limited to certain areas, which means taxing of income from shipping, inheritance, air transport, etc. India presently has DTAA with 90+ countries
Taxes can eat most of your savings. To counter this, tax planning is a legitimate way of reducing your tax liabilities in any given financial year. It helps you utilise the tax exemptions, deductions, and benefits offered by the authorities in the best possible way to minimise your liability. Tax planning is the analysis of a financial situation or plan from a tax perspective. The purpose of tax planning is to ensure tax efficiency. Through tax planning, all elements of the financial plan work together in the most tax-efficient manner possible.
15CA & 15CB Certification
Every person liable for making a payment to non-residents shall deduct TDS from the payments made to non-residents if such sum is chargeable to Income tax then the withholding tax need to be deducted and form 15CA and 15CB are the declaration for the same. A person making the remittance (a payment) to a Non-Resident or a Foreign Company has to submit the form 15CA. This form is submitted online. In some cases, a Certificate from Chartered Accountant in form 15CB is required after uploading the form 15CA online.
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