Modes of e-verifying Income Tax returns for NRIs

Modes of e-verifying Income Tax returns for NRIs

Process Note on the Modes of E-verification of Returns for NRI’s

KORAH AND KORAH, CHARTERED ACCOUNTANTS

 

A. The different modes available for NRI’s are as follows:

✓  Aadhaar OTP
✓  Electronic Verification Code using a Bank Account
✓  Electronic Verification Code using the Demat Account
✓  Net Banking

 

B. Pre-requisites for availing these services
e-Verification MethodPre-requisite
OTP on mobile number registered with AadhaarPAN is linked with Aadhaar
Bank Account EVC / Demat Account EVCPre-validated and EVC-enabled bank / Demat account
Net BankingPAN linked with your bank account and net Banking should be enabled for the preferred bank account

 

C. Procedures

a) e-Verification by generating Aadhaar OTP

Step 1: On the e-Verify page, select ‘I would like to verify using OTP on mobile number registered with Aadhaar’ and click ‘Continue’.

Step 2: On the Aadhaar OTP page, select the ‘I agree to validate my Aadhaar Details’ checkbox and click ‘Generate Aadhaar OTP’.

Step 3: Enter the 6-digit OTP received on mobile number registered with Aadhaar and click ‘Validate’.

b) e-Verification by generating Electronic Verification Code (EVC) through Bank Account

Step 1: On the e-verification page, select ‘Through Bank Account’ and click ‘Continue’.

Note:EVC will be generated and will be sent to the mobile number and email ID registered with the pre-validated and EVC enabled bank account.
Also please note that for enabling EVC through bank account, the same must be integrated with e-filing. Following are the list of banks integrated with e-filing:
✓  Canara Bank
✓  Central Bank of India
✓  City Union Bank Ltd
✓  Federal Bank Ltd
✓  HDFC Bank Ltd
✓  ICICI Bank Ltd
✓  IDBI Ltd
✓  Karur Vysya Bank
✓  Kotak Mahindra Bank
✓  State Bank of India
✓  UCO Bank
✓  Axis Bank
✓  Indian Bank
✓  Indusind Bank Ltd
✓  Karnataka Bank Ltd
✓  Yes Bank Ltd

In case if the taxpayer does not possess bank accounts in any of the banks listed above and fails to verify his return using any of the verification methods (i.e., using DSC/ EVC/ Aadhaar OTP/ Physical Verification), an alternative facility has been provided by the new Income Tax Portal to e-verify return with an acknowledgement number and a valid 10-digit mobile number.

Step 2: Enter the EVC received on mobile number and email ID registered with the bank account in the ‘Enter EVC’ textbox and click ‘e-Verify’.

c) e-Verification after generating Electronic Verification Code (EVC) through Demat Account

Step 1: On the e-Verification page, select ‘Through Demat Account’ and click ‘Continue’

Note: EVC will be generated and will be sent to your mobile number and email ID registered with the pre-validated and EVC-enabled Demat account.

Step 2: Enter the EVC received on mobile number and email ID registered with the demat account in the ‘Enter EVC’ textbox and click ‘e-Verify’.

d) e-Verification using Net Banking

Step 1: On the e-Verification page, select ‘Through Net Banking’ and click ‘Continue’.

Step 2: Select the bank through which you want to e-verify and click ‘Continue’.

Step 3: Read and understand the disclaimer. Click ‘Continue’ and the taxpayer will be redirected to Net Banking login page of the Bank Account.

Step 4: Log in to your Net Banking using your Net Banking user ID and password.

Step 5: Click the link to log in to e-Filing from your bank’s website. On successful login, go to the respective ITR and click ‘e-Verify’. The ITR will be e-Verified successfully.

Tax Deducted at Source – Section 194C

Tax Deducted at Source – Section 194C

Tax Deducted at Source – Section 194C

(Angeleena Roy, Articled Associate)

 

192 : Salary
  • Deals with tax deducted at source (TDS) on salary.
  • The employer is responsible for deducting TDS on an average rate of income tax based on the current slab rate during the relevant financial year by considering the estimated income.
  • The TDS deducted u/s 192 is reflected in Form 16, which is issued by the taxpayer at the end of the financial year.

 

“Work” Includes
  • Advertising
  • Broadcasting and telecasting including production of programs for such broadcasting or telecasting
  • Carriage of goods and passengers by any mode of transportation, other than railways
  • Catering
  • Manufacturing or supplying of a product according to the requirement or specification of a customer by using the materials purchased from such customer

(Work does not include manufacturing or supplying of a product according to the requirements or specifications of a customer by using the materials purchased from a person, other than such a customer.)

 

“Specified person” shall mean,—

(a) the Central Government or any State Government; or
(b) any local authority; or
(c) any corporation established by or under a Central, State or Provincial Act; or
(d) any company; or
(e) any co-operative society; or
(f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; (example: CIDCO , HUDCO)or
(g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or
(h) any trust; or
(i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or
(j) any Government of a foreign State or a foreign enterprise or any association or body established outside India; or
(k) any firm; or
(l) any person, being an individual or HUF or an AOP or a BOI subject to Tax audit u/s 44AB(a)/(b) in the immediately preceding FY

44AB (a)/(b)
[has total sales, gross receipts or turnover from business or
profession carried on by him exceeding 1 crore rupees in case of business or 50 lakh rupees in case of profession]

 
Threshold Limit

TDS is to be deducted under this section if,

  • Amount credited or paid or likely to be credited or paid to a contractor or subcontractor
    • exceed Rs. 30,000 in a single payment

OR

    • Rs. 1,00,000 in the aggregate during the FY
Rate of TDS?
Sl NoNature of PaymentTDS Rate if PAN Available
1Payment / Credit to resident individual or HUF1%
2Payment / Credit to any resident person other than individual/HUF2%
3Payment / Credit to transportersNIL

*If PAN not available? 
TDS RATE = 20%

Non applicability of TDS u/s 194 C
  • No deduction is required to be made from any sum credited or paid or likely to be credited or paid during the PY to the account of a contractor ,
  • During the course of the business of plying, hiring, or leasing goods carriages,
  • If the following conditions are fulfilled :
E-Invoicing Under GST Law

E-Invoicing Under GST Law

E-Invoicing Under GST Law

KORAH AND KORAH, CHARTERED ACCOUNTANTS

 

Q) What is this concept of E-Invoicing?
  • A system in which Business to Business (B2B) invoices are authenticated electronically by the GST Network (GSTN) for further use on the common GST portal
  • A 64-digit identification number called as Invoice Reference Number (IRN) will be issued against every invoice by the Invoice Registration Portal (IRP) managed by the GSTN.
  • A Quick Response Code (QRC) will also be generated for every invoice reported which if scanned using the NIC QR code scanning application, will display details relating to a particular invoice.
  • A B2B invoice generated by a specified person (to whom E-invoicing applies) without an IRN will not be considered valid under GST.

 

Q) What is the primary purpose?
  • To bring in more transparency into GST reporting.
  • To curb fake invoicing and reporting of bogus transactions for benefitting from input tax credit (ITC).
  • Ease of flow of information to various returns (GSTR 1, E-Way portal etc.) and other compliance requirements.
  • It is indeed a conscious step made by the government towards digitization and transparency.

 

Q) To whom is it applicable?
  • E-invoicing was first made applicable from 1st April 2020 to all taxpayers having aggregate turnover exceeding INR 100 Crores. The applicability of the same was deferred to 1st October 2020.
  • Thereafter, this threshold limit was further increased to INR 500 Crores with effect from 1st January 2021.
  • From 1st April 2021 onwards, it is applicable to all registered tax payers whose aggregate turnover exceeds INR 50 Crores.
  • If the aggregate turnover of a registered person exceeds the above limits for Financial Years 2017-18 onwards, then E-Invoicing would become applicable.
  • Aggregate turnover for this purpose would have to be calculated at the PAN level i.e., taking the aggregate turnover of all units of a business.

 

Q) To whom is it not applicable?
  • Units in Special Economic Zones (SEZ)
  • Insurance / banking / non-banking financial companies
  • Goods transport agencies (GTA’s) supplying services in relation to transportation of goods by road in a goods carriage.
  • Suppliers of passenger transportation service.
  • Suppliers of services by way of admission to the exhibition of cinematograph films.
Q) What is the process-flow under E-Invoicing?
Q) What is the pre-requisites of E-Invoicing?
  • It is essential to ensure a confirmation from the customer before invoicing owing to the intricacies in this process of invoice cancellation once IRN is generated.
  • Before adoption, it is very important to understand and confirm the extent to which the existing accounting software / ERP can support the integration.
  • QR code generated by IRP must be printed on the physical invoice.
  • The time limit for cancellation of an E-Invoice is 24 hours. This means that an invoice once reported to IRP can be cancelled only within 24 hours from the time of generation of IRN.
  • Automatic filling up of GSTR-1 and linking of an invoice with the E-Way Bill.
  • E-invoicing adds one more layer to the GSTR-2A reconciliation and further complicates the process.

 

Q) Best practices under E-Invoicing?
  • Proper filling up of the offline-tool to ease process of uploading data.
  • Securing access rights on ERP and IRP for generation and cancellation of documents.
  • Daily monitoring of IRNs generated on the previous day by an independent person.
  • Printing IRN on the invoice even though optional.
  • It is advisable to obtain written declarations from vendors regarding applicability of E-Invoicing to them and confirmation of compliance, if applicable. This will serve as a basis for the recipients for availing the ITC.

Taxation of dividends on shares received from companies

Taxation of dividends on shares received from companies

In the light of the Union Budget 2020

KORAH AND KORAH, CHARTERED ACCOUNTANTS

 

Up to FY 2019-20, what was the tax treatment of dividends on shares declared / distributed / paid by companies?
A. For Domestic Companies
  • All domestic companies were required to pay dividend distribution tax(DDT) at the rate of 15% (excluding cess and surcharge) on the dividends declared / distributed / paid under Section 115-O of the Income Tax Act,1961.
B. For Foreign Companies
  • Foreign companies were not required to pay DDT.
Up to FY 2019-20, what was the taxability of such dividends in the hands of a shareholder?
A. From Domestic Companies
  • As per Section 10(34), dividends on shares received from domestic companies were exempt in the hands of a shareholder (resident and non-resident).
  • However as per Section 115BBDA of the Income Tax Act, 1961, a resident individual was liable to pay tax at 10% if his total income included income by way of dividends declared / distributed / paid by Domestic Companies in excess of INR 10 Lakhs.
B. From Foreign Companies
  • If received by an individual shareholder, then normal income tax rates applied on such income.
  • If it was received by an Indian Company holding 26% or more equity share capital in the Foreign Company, then dividends were taxed at 15%(excluding cess and surcharge) in the hands of the Indian Company as per Section 115BBD.
What are the changes now as per Finance Act 2020?
A. For Domestic Companies
  • DDT has been abolishede. there is no requirement for domestic companies to pay DDT on dividends declared / distributed / paid to shareholders.
B. For Foreign Companies
  • No change e. foreign companies are still not required to pay DDT.
C. For Shareholders
  • Section 10(34) has been withdrawnand now the shareholders will be required to pay tax on such dividends received from domestic companies (like any other ordinary income) based on their Normal Income Tax Slabs.
  • Also, fromFY 2020-21 onwards, Section 115BBDA has been abolished and dividends received by resident shareholders will be taxed as per Normal Income Tax Slabs without any threshold exemption of INR 10 Lakhs.
  • There is no change as regards dividends from foreign companies i.e. shareholders will still continue to be liable to pay tax on dividends (as discussed above)
What are the amendments in the TDS provisions on dividend payments made by Companies?
    • Earlier, there was no requirementto deduct TDS on dividend payments made by Domestic Companies under Section 194 of the Income Tax Act, 1961 since the same was exempt in the hands of shareholders.
    • Now, this section has been amendedand accordingly, payment of dividends by Domestic Companies to resident recipients shall be liable for tax deduction at 10%.
    • A threshold limit of INR 5000has also been introduced i.e. the requirement to deduct tax at source is only if the aggregated payments made by a Company during a Financial Year exceeds INR 5000.
    • Dividend payments made to non-residents continue to be out of the purview of Section 194.
    • Also, there is no requirement to deduct TDS on dividend payments made by LIC, GIC and their wholly owned subsidiaries.
Taxation of dividends received from mutual funds

Taxation of dividends received from mutual funds

In the light of the Union Budget 2020

KORAH AND KORAH, CHARTERED ACCOUNTANTS

Up to FY 2019-20, what was the tax treatment of dividends received from Mutual Funds in the hands of a unitholder?
  • Exemptin the hands of the unitholders (resident as well as non-resident) under Section 10(35) of the Income-tax Act, 1961.
  • However, the Mutual Fund was required to pay dividend distribution tax (‘DDT’) on the amount of dividend under Section 115R
Up to FY 2019-20, what was the amount of DDT payable by Mutual Funds?
  • The Mutual Fund was required to pay a DDT under Section 115Rof the Act at the following rates (excluding surcharge and cess) –.
Category of InvestorsEquity Oriented

Scheme

Other than Equity

Oriented Scheme

Resident Individual / HUF10%25%
Domestic Company10%30%
NRI10%25%*

*In the case of Infrastructure Debt Fund, the rate was 5%

As per the Finance Act 2020, how has this taxation changed?
  • Removed the levy of DDT in the hands of the Mutual Fund (i.e. equity oriented and other than equity oriented mutual fund schemes under dividend pay-out and dividend reinvestment options).
  • The dividend shall now be taxed only in the hands of the unitholders at applicable tax rates provided under the Act.
  • The new tax regime shall be applicable e.f. April 1, 2020 and will apply from FY 2020-21.
What would be the TDS provisions from FY 2020-21 onwards on dividends paid by Mutual Funds to unitholders?
  • Resident Unitholders:
    Mutual Funds shall be required to deduct tax at source (‘TDS’) as per Section 194K of the Act at the rate of 10%on dividend income credited / paid to resident unitholders.
  • TDS provisions should not apply in case where the amount of dividend credited / paid does not exceed the threshold limit i.e. INR 5000 in aggregate in a particular financial year. (The threshold limit is to be computed at the PAN level)
  • The dividend reinvested under the dividend reinvestment option shall be deemed as dividend paid and accordingly, TDS provision shall apply.

Non-Resident Unitholders:

  • As per Section 196Aof the Act, TDS at the rate of 20% (plus applicable surcharge and cess) should be deducted on dividend income credited /paid to non-resident unitholders.
  • There is no threshold limit applicable in case of dividend income credited / paid to non-resident unitholders.
  • Also, as per Section 196D of the Act, TDS at the rate of 20%(plus applicable surcharge and cess) should be deducted on dividend income credited / paid to FII/FPI.
Some other points related to TDS:
  • In case PAN of the unitholder is not available, TDS shall be deducted at 20%(plus applicable surcharge and cess) for both Residents & Non-residents.
  • In case of dividend payments to a minor, the parent should provide a declaration under to the Mutual Fund for TDS deduction under the PAN of the parent. (In the absence of such a declaration, TDS shall be deducted on dividend credited / paid under the PAN of the minor)
  • A resident unitholder may make an application to the Income-Tax Authorities under Section 197 of the Act for obtaining a certificate for lower / non-deduction of TDS on dividend income credited / paid by Mutual Fund.
  • The non-resident unitholders/FII/FPI may offer the said dividend income to tax in his income-tax return at a lower tax rate by claiming the benefit under relevant tax treaty, if any, subject to eligibility and compliance with applicable conditions.