At the outset as I write this article the world around us which was deeply affected by Covid has now started to get better and will rebounce back to normal situation in a period of time. This article gives underlying focus on Non Resident taxation in the context of individuals. On account of Covid pandemic the return filing date for all assesses is now extended till 30th November 2020. However on account of taxation ordinance act 2019 with respect to Tax audit under 44AB form 3 CA/CB and 3CD has to be filed before 31st October 2020. This write up is exclusively based on finance act 2019 which will be used for AY 20-21 for return filing. The same is also applicable for CA exams May 20/Nov 20. However MAY 20 CA and June 20 CS exam are merged with Nov/Dec. This is the 1st time in history of 71 years of ICAI as well in 40 years of ICSI exam getting cancelled. Due to COVID education has eroded, destroyed a lot starting from preschool till higher studies (PHD). Now coming to main topic the features are as follows
1. In case of Non resident Individuals irrespective of age Limit the basic exemption limit is RS 2,50,000. There is no concept of senior citizen or super senior citizen.
2. The rebate 87 A (Actual or 12500 which is lower who earns less than total income of 500000) is not applicable for non resident.
3. As for Non resident' salary accruing or arising in India will be taxable under provisions of act and also a standard deduction of 50000 is allowed.
4. Business income
Presumption scheme in case of non resident is totally unique. This can be a non resident who is an individual or company(foreign company).
44B- Non resident in case of shipping business
7.5% of freight received in India or outside India for carriage of goods shipped at port in India. Freight received or deemed to be received in India for carriage of goods shipped outside India. Assessee cannot show lower amount.
44BBA - Non resident in aircraft business operation
5% freight received in India or outside India for carriage of goods from India. Freight received or deemed to be received in India for carriage of goods outside India. Assessee cannot show lower amount
44BBB- Non resident in business of supplying services or plant machinery on hire to be used in prospecting extraction of production or mineral oil
10% amount received in India or outside India for extraction or production of Mineral oil in India. Amount received or deemed to be received in India for extraction or production of Mineral oil outside India.
A lower amount cannot be shown however if assessee intends to show he needs to maintain Books of account' undertake tax audit 44AB and will be subject to scrutiny assessment under 143(3).
44BBB
Foreign company in business of civil construction (turnkey project Approved by Central government.
I would like to add a critical point there lies a vast difference between non resident and foreign company. A foreign company can be a non resident but also be a resident considering POEM (place of effective management for company having turnover above 50 crores as on preceding financial year).
In 44BBB it applies only for foreign company (irrespective of residential status) and not for Non resident who is an individual.
10% of amount received in India or outside for carrying work.
A lower amount cannot be shown however if assessee intends to show he needs to maintain Books of account' undertake tax audit under 44AB and will be subject to scrutiny assessment under 143(3).
Some common features of non resident taxation in presumptive scheme are
- Chapter VI A deduction can be claimed.
- Set off current year losses and brought business loss if any can be set off.
- Set off current year depreciation and brought forward depreciation is not possible.
- Unlike resident presumptive scheme where by 8%or 6% or any higher sum can be declared here it is restricted only to that percentage mentioned above.
5. Capital Gain non resident taxation
This is of paramount importance in case of non resident.
112A
Here long term capital gain on sale of equity share where by above 100000 it is taxed at 10%. For non resident no basic exemption limit, no chapter VI A deduction against such income.
112
Assuming a sale of long term capital asset (building) which is taxed at 20%. in case of non resident no basic exemption limit and no chapter VI A deduction can be claimed
111A on sale of short term equity shares is taxed at 15%. No basic exemption limit and no Chapter VI A deduction is available.
6. Income from other sources
A significant amendment was made under Finance act 2019 with respect to section 56.
Income arising outside India being any sum of money or property paid on after 5th July 2019 by a person resident in India to a non resident or a foreign company. in such income shall be accruing or arising in India for Non resident. The government has found the loophole and tightened the provision.
Dividend received from domestic company under 10(34) is fully exempted in case of non resident.
In case of income from lottery taxed at 30%. No basic exemption limit and no chapter VI A deduction against the same. Even TDS is to be deducted at 30% under 194
BB(no basic exemption is available).
7. Chapter VI A deduction
80TTB is a deduction which is exclusive for Non resident as against saving deposit Interest. The deduction is actual or 50,000 which is lower.
80D in case of Non resident the treatment shall be done as if below 60 years maximum deduction is only 25,000.
Source: Finance act 2019 income tax bare act
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