income tax

TDS In case of Non-Resident – Section 195

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tds

An assesses total income earned during the previous year is taxable in the assessment year, i.e., the year following the financial year. However, tax has to be paid in the previous year itself in the form of TDS, TCS, and advance tax.

TDS refers to tax deduction at source, which is required to be deducted by the person at the time of making payments like salary, rent, commission, professional fees, interest etc. and deposit the same with the government on or before the due date. A fixed percentage is defined in the Income Tax Act 1961 for the purpose of TDS.

Here we are looking at the TDS in the case of payment to a non-resident.

Section 195

Section 195 is applicable to any individual (resident or non-resident) who is making payment of interest or any other amount chargeable to tax (except payments under section 194 LB, section 194 LC, and salary payments outside India) to an individual non-resident or foreign company. Such a person is liable to deduct tax at the rate specified by the Income Tax Act 1961. This helps to reduce the revenue loss by deducting the tax while making the payment to a non-resident. Furthermore, the payer is required to furnish the details of payment in the form as prescribed by the Central Board of Direct Taxes.

For the purpose of this section, “payer” can be any person. Here, “any person” includes both residents and non-residents. The residential status of a payee can be determined as per section 6 of the Income Tax Act 1961.

Section 194 LB of the Income Tax Act 1961 deals with the provisions relating to income by way of interest from the Infrastructure Debt Fund.

Section 194LC of the Income Tax Act 1961 deals with the provisions relating to income by way of interest from an Indian company or business trust.

Time of Deduction

Any person who is making payment to a non-resident individual or foreign company is required to deduct TDS at the time of credit of such income to the payee’s account or whichever comes first, at the time of payment.

Rates for the Deduction of TDS

The following are the TDS rates given under section 195:

 

Particulars Rate of TDS
Income from investments made by NRI 20%
Long-term capital gain income for NRIs as defined by section 115E 10%
Income from long-term capital gain (Listed shares and Securities as per section 112A) 10%
Additional long-term capital gain    20%
Short-term capital gain as per section 111A           15%
Interest imposed on foreign currency loans       20%
Royalty or fees for technical services payable by the Government or an Indian Concern          10%
Winning from lotteries, crossword puzzles, horse races, card games, and any other such Games            30%
Any other income source                30%

 

The above rates are given as per Finance Act 2022 and a cess of 4% & surcharge is added as applicable.

The payee can choose between the rates specified in the Finance Act 2022 and the rates specified in the Double Taxation Avoidance Agreement (DTAA), whichever is more advantageous to the payee. Furthermore, no surcharges or less are required to be added to the DTAA rates.

However, if the payee fails to furnish the PAN to the payer, then the payer will be required to deduct TDS at higher rates as per section 206AA.

Threshold limit to deduct TDS

There is no threshold limit for deducting TDS. TDS shall be deducted on all types of payments as prescribed under section 195.

Why should you choose Komplytek?

The auditing service provided by Komplytek entails reviewing all of the client’s financial information and ascertaining its accuracy. We provide unparalleled audit services, including assessing internal controls, testing financial data, and gauging fraud dangers. We also seek to deliver accurate financial accounts and manage the company’s financial assets. In order to enhance your company operations, we give factual observations with the highest honesty.

Komplytek is at your service if you are seeking high-caliber feedback on your company procedures. In addition to trustworthy, high-quality evaluation services, we provide our clients with high-quality audit methods. Our experts are up-to-date with the latest technologies in the audit practice. Our tax and audit assurance services include:

  1. Internal Audit before finalization of books
  2. Statutory Audit
  3. Stock Audit
  4. Assets Audit
  5. Any client-specific financial audits or compliance audits.

 

Tax Audit under section 44AB of Income Tax Act 1961

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Tax Audit

A tax audit verifies that the taxpayers’ books of accounts and other records of their business or profession have been kept up-to-date. This appropriately reflects the assessed taxable income.

It also evaluates whether the assesses has complied with various income tax rules, such as filing taxes and deducting costs, along with other requirements.

The threshold for the Tax Audit varies depending on whether the taxpayer is carrying on a business or a profession, or both. The provisions for tax audits in India are covered by Section 44AB of the Income Tax Act of 1961.

What’s the purpose of a tax audit?

All corporations, limited liability partnerships (LLPs), and individuals whose annual revenue exceeds a certain threshold are subject to a tax audit under section 44AB of the Income Tax Act 1961.

Section 44AB: Tax Audits for Specific Assesses

  1. Assesses carrying on businesses are liable for a tax audit if their sales, gross receipts, or turnover exceed Rs. 1 crore during the previous year. This provision is not applicable to an assesses who opts for the presumptive taxation scheme under section 44AD and whose total sales or turnover does not exceed Rs. 2 crores.

A new clause has been included into the Finance Act 2020. Provided that, in the following cases, the limit of Rs. 1 crore has been increased to Rs. 5 crore if:

  • Cash receipts/turnover do not exceed 5% of total receipts/turnover.
  • Cash payments made in the previous year do not exceed 5% of total payments.

The limit was also raised from Rs. 5 crores to Rs. 10 crores by the Finance Act of 2021 and will take effect from 1st April 2021.

  1. Assesses carrying on professional services are liable to a tax audit if their gross receipts exceed Rs. 50 lacs during the previous year.

Tax Audit Report

After an audit of a company’s books of accounts, a practicing Chartered Accountant prepares a Tax Audit Report. A Tax Audit Report is also filed on Form No. 3CA-CD or 3CB-CD.

Applicability of Form 3CA-CD or 3CB-CD:

Form 3CA: When a person conducting business or practicing a profession is required by law to have their accounts audited. It’s an indenture for an audit report.

Form 3CB is used when an individual conducting business or practicing a profession is not compelled by law to have his accounts audited.

Form 3CD: It is a part of the Audit Report that includes the information relating to business and transactions for the relevant financial year.

Why should you choose Komplytek?

Komplytek’s Auditing Service comprises a review of the client’s complete financial data and determining its exactitude. We deliver unmatched audit services such as measuring fraud threats, testing financial information, and evaluating internal procedures. We also provide accurate financial statements and take care of the other critical areas concerning the financial assets of the company. Our team of experts is well-equipped and also competent in auditing ethics and standards. They deliver factual observations with the utmost integrity in order to improve your business processes.

If you are looking for quality feedback on your business processes, Komplytek is at your service. We provide our clients with high-quality audit procedures and also dependable, high-quality assessment services. Our experts are up-to-date with the latest technologies in audit practice. Our tax and audit assurance services include:

  1. Internal Audit before finalization of books
  1. Statutory Audit
  1. Stock Audit
  1. Assets Audit
  1. Any financial or compliance audits that are specific to a client.

Get on a FREE Consultation Call with us today! https://komplytek.com/

Which ITR to File

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ITR

What ITR should You Submit? Types of ITR Forms
The Income Tax Return (ITR) is a document on which a taxpayer provides information to the IRS regarding their earnings and the taxes they owe.
To date, the Income Tax department has issued advisories for ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, and ITR 7. Every taxpayer must file their income tax return by the deadline or before it.
The type of income, the taxpayer’s classification (individuals, HUFs, businesses, and so on. ), and the individual’s income will all determine the ITR form that must be filed. If taxpayers select the incorrect form, they must also resubmit their ITR. Let’s take a closer look at the ITR Form for Income Tax Return.

ITR – 1 SAHAJ
It is a form (applicable for residents and ordinarily resident) that a taxpayer has to fill and individuals who are Indian citizens with a total income of up to Rs 50 lakh for the fiscal year 2021–22, and whose total income comprises the following items:
Income from a salary or pension
Income from one house property (except circumstances where a loss from a prior year is carried forward)
Earnings from other sources, such as dividends and interest (excluding gambling, winning lottery and race horse earnings),
Agricultural income up to Rs. 5000
No deductions under section 57 have been claimed by an individual.
There is no overseas income or assets for the individual.

Who can’t use the ITR-1?
Individuals who fall into the following categories are not eligible for ITR-1:
Earnings more than Rs.50 lakh
Agricultural income of more than Rs. 5000
If you have capital gains that are taxable,
If you make money from a business,
Having income from multiple rental properties (more than one house property)
In the event that the individual is a company director,
If you have unlisted equity shares in your portfolio at any point during the fiscal year,
If you are a resident, you may own assets (including financial interests in any company) outside India, as well as signatory authority on any account located outside India.
If you’re a non-resident who happens to be a resident who isn’t ordinarily resident (RNOR),
Possessing overseas assets or receiving foreign income
In the event that the individual is a company director,
If you owe tax on someone else’s income, and that person’s tax has been deducted.

ITR -2
This form is for an individual or a Hindu Undivided Family (HUF) with the following total income for the fiscal year:
Individuals with an income of more than Rs. 50 lakh are eligible.
Income from a pension or a salary.
Income derived from residential real estate.
Additional sources of income (including winnings from the lottery and income from racing horses).
If the person is a company’s director,
Agricultural income greater than Rs. 5,000
Profits from capital gains
If a person is an RNOR (resident not normally resident) and a non-resident,
If any unlisted equity shares were held by the company during the fiscal year.
Foreign earnings and assets.
In addition, if the taxable income is to be combined with the income of another person, such as a spouse or child, this return form can also be used if that income falls into any of the following categories.
Who can’t use this form?
Anyone whose total income for the fiscal year 2021-22 includes money from a business or profession should not use this return form. You may need to use ITR-3 or ITR-4 to declare these forms of income.

ITR 3
Individuals and Hindu Undivided Families that earn money from a sole proprietorship or profession must use the latest ITR3 Form. Anyone who earns money from the following sources can use ITR 3.
Individuals who support themselves through a profession or a business (this applies to both Tax Audit and Non-Audit cases).
The return may include income from a house, salary/pension, capital gains, and earnings.
The company’s revenue exceeds Rs. 2 crores.
During the fiscal year, if any unlisted equity stock investments were made,
You are a company’s individual director.
If the person is a business partner,

ITR-4 or Sugam
Form ITR-4 is used by taxpayers who are opting for the Presumptive Taxation Scheme under section 44AD, section 44ADA and section 44AE and who have income as per ITR-1.
Resident individuals, HUFs, partnership firms (other than LLPs), and partnership firms (other than LLPs) who are Indian residents and whose total income includes:
Earnings from a business under section 44AD or 44AE’s presumptive income scheme
Section 44ADA’s presumptive income scheme applies to professional income.
Salary or pension income up to Rs. 50 lakh (total income)
Not more than Rs. 50 lakh in income from a single house property (excluding the amount of brought forward loss or loss to be carried forward).
Other sources of income with a total income of less than Rs.50 lakh (excluding income from the lottery and race-horses)
Agriculture Income up to Rs. 5000.

Additional Disclosure:
If a taxpayer is filing a return under section 139(1)’s seventh provision, they must provide additional disclosures. Section 139(1)’s seventh clause applies to taxpayers whose income does not exceed the given threshold but they have:
During the financial year, deposited Rs. 1 crore or more in one or more current accounts, or
Incurred expenses of Rs. 2 lakh or more for travel to a foreign country for self or any other person, or
Spent at least Rs. 1 lakh on the power bill.
Taxpayers must disclose the amount of such transactions in all of the aforementioned circumstances.
Who is unable to utilise the ITR 4 Form?
If your annual gross income exceeds Rs 50 lakh,
If you have revenue from more than one residential property.
If you have any carried forward loss or loss to be carried forward under any head of income,
Possessing any kind of foreign asset
If you have signing authority over an account outside of India,
Having a source of income other than India
If you are a company director,
Being a resident not ordinarily resident (RNOR) and non-resident during the financial year
Possessing overseas assets or receiving foreign income
If you are liable for taxation on the income of another person, yet the other person has deducted the tax.

ITR-5
Companies, Limited Liability Partnerships (LLPs), Associations of Persons (AOPs), Bodies of Individuals (BOIs), Artificial Juridical Persons (AJPs), Properties of the Deceased, Estates of the Insolvent, Business Trusts, and Investment Funds are all covered by ITR 5.

ITR-6
To file an income tax return, all firms must use this form. To file their income tax return with the Income Tax Department of India, only corporations that do not seek exemption under section 11 must submit ITR Form -6.
Businesses that do not claim an exemption under section 11 must file this form online (income from property kept for charity or religious purposes).

ITR–7
Individuals and businesses must use ITR-7 if they have filed returns under Sections 139 (4A), 139 (4B), 139 (4C), 139 (4D), 139 (4E), or 139 (4F). The returns that must be filed under each section are listed below:
Section 139 (4A): Section 139 requires individuals who receive money from a trust or other legal obligations and use the proceeds entirely for religious or charitable purposes to file returns (4A).
Section 139 (4B): If a political party’s total income exceeds the limit amount, it must also file returns under this section.
Section 139 (4C): The following entities must file returns under this section:
The Association for Scientific Research.
Institutions or organizations covered by Section 10 (23A),
Educational institutions include medical institutions, hospitals, colleges, financial institutions, and other educational institutions, to name a few.
News companies
Institutions covered under Section 10 (23B)
Section 139 (4D): This section requires any college, university, or other institution that is not required to furnish a return of income or loss under any other provision of this section.
Section 139 (4E): This section requires business trusts that are not obligated to report their revenue or loss to file their returns.
Section 139 (4F) This section applies to investment funds that are required to file returns under Section 115UB but are not required to report any income or losses.

Important Note:
The following are the tax filing deadlines for FY 2020-21 (AY 2021-22):
Taxpayer classification                                       Last date for Tax Filing
FY 2020-21 
Individual / HUFs/ AOP/ BOI                                            31st December 2021
(Books of accounts are not required to be audited.)
Business (Requiring Audit)                                                15th February 2022
Business (Requiring Transfer Pricing Report)                28th February 2022
 
Audit Report Furnishing due dates:
Submission of Audit Report (Section 44AB)
For AY 2021-22 for taxpayers liable for                            15th January 2022
Audit under the Income Tax Act 1961.
 
Submission of Audit Report for AY 2021-22
For taxpayers having transfer pricing and                          31st January 2022
Specific domestic transactions
Komplytek will make your ITR filing effortless so that you don’t have to worry about missing deadlines.