“Explore 21 FAQs on Taxation Laws for Foreign Corporates, NRIs, and NRs in India. Understand the intricate regulations governing businesses, investments, and technology exchanges. Learn about Indian government initiatives to create favorable tax policies, stimulate growth opportunities, and reduce uncertainties. Delve into concepts like Place of Effective Management (POEM) and Significant Economic Presence (SEP).”

Article explains taxation laws that govern foreign corporations operating in India, interest of multinational companies (MNCs) located outside India and MNCs based in India in expanding their businesses, investments, and technological exchanges. Article further explains Indian government’s efforts to create favorable tax and business regulatory policies to stimulate growth opportunities for foreign and domestic MNCs. Additionally, learn about measures to expand India’s income tax base and reduce tax uncertainties through the introduction of concepts like Place of Effective Management (POEM) and Significant Economic Presence (SEP).

(A) Taxation Laws for Foreign Corporate in India

1. Introduction on Taxation Laws for foreign corporate in India

(i) Multi National Companies (MNCs) located outside India taking keen interest in multiplying their businesses + investments + supply of technologies + supply of know how’s + also listing at various stock of exchanges in India (all).

+ (plus)

(ii) MNCs located in India taking keen interest in multiplying their businesses + investments + supply of technologies + supply of know how’s + also listing at various stock of exchanges outside India (all).

(iii) of India (Govt.) felt urgent need to prepare for friendly taxes + business regulatory policies to grave growth opportunities for India from MNCs located outside India + also enable to grave growth opportunities for MNCs located in India (all).

(iv) already given importance for expansion of Indian income tax base through framing income tax provisions against digital + e-governance businesses in India like introduction of concept of Place of Effective Management (POEM) + Significant Economic Presence (SEP) to reduce tax uncertainties + also litigations in India (all).

2. Briefs on Base Erosion & Profit Shifting (BEPS) + Multilateral Instrument (MLI)

(i) Organization for Economic Co-operation and Development (OECD) introduced 15 Action Plans for BEPS in July 2013 for international collaborations to abolish tax avoidances.

(ii) 15 Action plans developed + introduced by OECD to recognize importance of borderless digital economies + to develop new set of standards to prevent BEPS + to equip govt. with domestic + also international instruments to prevent BEPS’s manipulation through payment of negligible tax or 0% tax in tax heavens (all).

(iii) Several incomes (profits) still untaxed due to application of existing international tax provisions in India + also outside India (both).

(iv) OECD keeping track through modern business models with object to expedite + to streamline implementation for measures developed to address BEPS’s manipulation + also to amend bilateral tax treaties (all).

(v) Presently more than 90 countries (jurisdictions) already concluded negotiations for multilateral convention to implement tax treaties measures to prevent BEPS’s manipulation.

3. Briefs on General Anti Avoidance Regulations (GAAR) provisons in India

    • Govt. already introduced GAAR provisions under Income Tax Act (ITA), 1961 from April 01, 2017 to declare Impermissible Avoidance Arrangement (IAA) under section 96 of ITA, 1961 to avoid aggressive tax planning to reduce income tax liability in India for international + also domestic  transactions (both).

4. Briefs on Tax collection at source (TCS) provisions for seller of goods in India

(i) Govt. already introduced TCS provisions for seller of Goods from Oct 01, 2020 through Finance Act, 2020.

(ii) TCS @ 0.1% applicable against receipt for sales consideration when amount exceeding INR 50 Lac in preceding to previous financial year from same buyer + also annual turnover for seller exceeding INR 10 crore in previous financial year (both)

(iii) Turnover from export of goods not included for computing limit of INR 50 Lac

5. Briefs on Tax deduction at source (TDS) provisions for purchaser of E-Services

(i) Govt.  already introduced TDS provisions for e-commerce operators from Oct 01, 2020 through Finance Act, 2020.

(ii) TDS @ 1% applicable against payment for purchase consideration for goods + services (both) on gross amount under section 194-O of ITA, 1961

6. Briefs on Equalization Levy (EQL) provisions for payments to Non-Residents (NRs)

(i) Govt. already introduced EOL provisions for payment to non-resident service provider against online advertisements + also e-commerce supply of services (both) from April 01, 2020 through Finance Act, 2020.

(ii) (a) EQL @ 6% applicable for payment against online advertisements on gross amount

+ (plus)

(b) EQL @ 2% applicable for payment against e-commerce supply of services on gross amount

(iii) Govt. already introduced EQL provisions based on BEPS’s Action Plan 1 out of BEPS’s Action 15 Plans introduced by OECD

 7. Briefs on Govt’s faceless assessment + faceless appeal mechanism (both) in India

(i) Govt. already introduced faceless assessments + faceless appeals to provide transparency + efficiency + accountability + to eliminate interface between Assessing officer (AO) + Commissioner of Income Tax (CIT) – appeals and taxpayer for proceedings through stringent compliance dates + no personal hearing permitted + limited adjournments permitted + also etc. (all)

(ii) Taxpayer required to keep ready 100% documents + 100% information’s to be submitted to AO + also CIT – appeals during continuity for proceedings (all).

(B) Taxation Laws for Non Resident Indian (NRIs) + Non-Residents (NRs) in India

8. Briefs on Taxation Laws for NRIs in India

 (i) (a) International Taxation has set of provisions in India which primary different from legal provisions in countries located outside India

+ (plus)

(b) International Taxation required to cover tax aspects on cross border transactions for direct taxes like Income tax + also Indirect tax like GST  (both).

(ii) (a) International taxation required to study for taxation beyond National boundaries (in other countries outside India).

+ (plus)

(b) International taxation required to study for taxation in India + also taxation outside India simultaneously for determining taxation against international transactions in India (both).

 9. Briefs on Income Tax on Income actual received by NRs in India

(i) (a) Residential status of tax resident in India based on physical stay in every financial year (from April 01 to March 31).

+ (plus)

(b) Total global taxable incomes of tax resident in India be 100% liable for income tax in India.

+ (plus)

(c) Tax resident in India permitted to avail Foreign Tax Credit (FTC) against income tax paid + also income tax deducted at source (TDS) outside India (both).

(ii) Tax resident in India’s incomes received + Incomes deemed received by himself + received on his behalf + incomes accrues + arises + deemed accrue + also deemed arising taxable (all) in India.

10. Briefs on Income Tax on Income Deemed received by NRs in India

    • Certain deemed incomes earned by NRs be liable for income tax in India beside actually earned by him outside India specified under section 9 of ITA 1961 like:

(i) Deemed incomes through business’s connection existed in India.

(ii) Deemed incomes through property + asset + also source located in India (all).

(iii) Deemed capital gains through transfer of capital asset located in India.

(iv) Deemed incomes through salaries earned in India + services rendered in India (both).

(v) (a) Deemed incomes through salaries paid by India’s govt. to Indian Citizen beside services rendered outside India.

+ (plus)

(b) Perquisites + also allowances not taxable in India beside paid by India’s govt. (both).

(c) Incomes through salaries taxable in India but perquisites + also allowances not taxable in India beside paid by India’s govt. (both).

(vi) Deemed incomes through dividends paid by Indian company.

(vii) Deemed incomes through interests (subject to satisfaction of certain conditions)

(viii) Deemed incomes through royalties (subject to satisfaction of certain conditions)

(ix) Deemed incomes through Fee for Technical Services (FTS) (subject to satisfaction of certain conditions)

11. Briefs on Income Tax on Investments + Capital gains for NRIs in India

    • NRIs not required to file Income Tax Return (ITR) in India in following cases:

(i) When taxable incomes in India consisting from investments + also from Long Term Capital Gains (LTCG) both

+ (plus)

(ii) When Income tax in India already deducted through TDS mechanism against investments + also on LTCG (both)

12. Briefs on Income Tax on notified tax free certificates + etc. for NRIs in India

    • NRIs not required to file Income Tax Return (ITR) in India in following cases:

(i) When income in India earned on notified tax free Saving Certificate + also etc. (both)

(ii) When income in India earned on notified tax free Non Resident (Non repatriable) [NRNR] deposits issued by banks in India.

    • Banks in India not permitted to accept fresh NRNR deposits from April 1st 2002. However Interest on NRNR deposits + also principal at time of maturity to be transferred to NRE account of NRI in India (both).

 13. Briefs on Income Tax on interest on FCNR (B) deposites + etc. for NRIs in India

    • NRIs not required to file Income Tax Return (ITR) in India in following cases: 

(i) When income in India earned on FCNR (B) deposits where interest income already exempted under section 10(4)(ii) of ITA 1961

(ii) (a) When income earned on tax free dividends from Indian Public Limited Company + Private Limited Company + Indian Mutual Fund + also Unit Trust of India (all) .

(b) However income earned on dividends from Indian public limited company + also etc. not exempted under section 10(34) of ITA, 1961 from Assessment year 2021-22 (both).

(iii) When income in India earned on tax free LTCG against transfer of equity shares traded on recognized Stock Exchange + units of equity schemes of Mutual Fund + also income exempted under ITA, 1961 (all).

(iv) When income in India earned on tax free remuneration + fee received for rendering technical consultancy in India under approved programme of Govt. + also income exempted under ITA, 1961 (all).

(v) When income in India earned on tax free notified bonds issued by Govt. + also income exempted under ITA, 1961 (both).

14. Briefs on Tax Deducted at Source (TDS) for payments to NRs in India

    • Payer for making any payment to non-resident in India required to deduct TDS from April 01, 2008 + to file 15CA + also 15CB (all) before remitting outside India under section 195 (6) of ITA, 1961

 15. Briefs on of Double Taxation Avoidance Agreement (DTAA) with other countries

(i) Several DTAAs already executed between Govt. of India and Govt. outside India for resolving matters for taxing incomes in India + outside India + to increase transparency in tax systems + to avoid tax evasion by tax resident in India + also tax resident outside India (all).

(ii) (a) DTAAs required because each country has own taxation system to determine for taxing of incomes in own country + also to allow Foreign Tax Credit (FTC) in tax resident’s country (both).

(b) DTAAs required to avoid effect of double taxation on NRs against their incomes liable to income tax in country of source of incomes + also in country of residency through allowing FTC in tax resident’s country (both).

 16. Briefs on Advantages (benefits) of DTAAs for NRs in India

 (i) To take benefit of tax credit + tax relief (both) for tax resident in India

(ii) To avoid double taxation for tax resident in India

(iii)  To prevent tax discrimination for tax resident in India

(iv) To certain for tax treatment to investors in India

(v) To exchange of information’s with India

(vi) To ease in recovery of liability of Income tax for tax resident in India

(vii) To promote investments + mutual relation (both) in India

(viii) To prevent fiscal evasion in India

 17. Briefs on Computation of Income of NRIs under section 115D of ITA 1961

    • Govt. already inserted section 115D as special provisions for computation of total taxable incomes of NRIs in India like:-

(i) NRI not permitted to claim any expenditure + also any allowance for computing taxable income on investments made by NRIs in India (both)

+ (plus)

(ii) NRI not permitted to claim any deduction under section 80C to 80U of Chapter VIA + also section 48 of ITA 1961 (both).

 18. Briefs on Income Tax of NRIs on Investment’s Incomes + LTCG – sec 115E of ITA 1961

(i) Income Tax @ 20% be levied on investment’s incomes of NRIs in India.

(ii) Income Tax @ 10% be levied on LTCGs of NRIs in India.

 19. Briefs on Capital gains on transfer of foreign exchange assets of NRIs – Sec. 115F

(i) NRI permitted to invest against LTCGs received on transfer of Foreign exchange assets in not exceeding 6 month from date of transfer + investment be in specified assets + saving certificates already notified under section 10(4B) to avail income tax exemption on LTCGs specified under section 45 of ITA, 1961

(ii) List of Specified Assets

(a) Eligible equity shares of Indian company

(b) Eligible debentures + also deposits of Indian public limited company (both)

(c) Notified security issued by Govt.

(d) Other notified assets issued by Govt.

 20. Briefs on available benefits for NRIs after becoming residents in India –Sec 115H

(i) NRIs required to apply in writing to Assessing Officer (AO) for informing about becoming resident in India + also required to file ITR under section 139(1) of ITA, 1961 (both).

(ii) NRIs required to fulfil certain terms + also conditions for availing benefits after becoming resident in India (both).

 21. Briefs on Difference between International Taxation Law & Indian Taxation Law

 (i) India has no separate taxation laws for studying for international taxation + also for Indian taxation (both).

(ii) India has no separate judicial courts for appearing for international taxation + also for Indian taxation (both).

(iii) India has specific Income tax provisions for taxation of international transactions in India under ITA Act, 1961.

(iv) India has general Income tax provisions for taxation of international (cross border) transactions for direct tax under ITA Act, 1961.

*****

(Author can be reached at email address satishagarwal307@yahoo.com or on Mobile No. 9811081957)

Disclaimer :  The contents of this article are solely for informational purpose. Neither this article nor the informations as contained herein constitutes a contract or will form the basis of a contract. The material contained in this article does not constitute or substitute professional advice that may be required before acting on any matter. While every care has been taken in the preparation of this article to ensure its accuracy at the time of publication. Satish Agarwal assumes no responsibility for any error which despite all precautions may be found herein. We shall not be liable for direct, indirect or consequential damages if any arising out of or in any way connected with the use of this article or the informations as contained herein.

(Republished with amendments)

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