Exemption from Filing Return to Non-Residents: Cases
There are sections under the Income Tax Act, 1961 that require a person to deduct Tax on the Income of Assessee. The concept of Tax Deduction at Source (TDS) is introduced to avoid tax evasion. Government becomes aware of the income earned by the assessee as soon as TDS is deducted and the amount of TDS gets deposited to the account of Government. Of course, this is also a source of periodic revenue to government. Sometimes, it happens that TDS is deducted at the Rate at which the income is taxable and the assessee has no other income.
Suppose the above case is the case of Non-Resident Indian (NRI). NRIs had the argument as saying that, they shall not deal with India because of the compliances they need to follow. Their contention was that, why they are required to file the returns in the case where entire amount of tax payable has been deducted in form of TDS. Understanding this, Government has provided relief to Non-Resident Indians (NRIs) in few cases that were cumbersome and required compliances of Indian Law. The following are the sections under which no return is to be filled by NRI subject to few elementary conditions:
- Section 115A
- Section 115AC
- Section 115G
- Section 115BBA
Section 115A
Section 115A of the Income Tax Act, 1961, deals with taxability of interest in hands of NRI.
As per section 115A,
1) Interest received from Government or an Indian concern in foreign currency other than the interest of the nature referred to in (2), (3) and (4) below is taxable at the rate of 20%. Tax shall be deducted at the rate of 20% plus surcharge (if applicable) plus education cess u/s 195 by the payer of interest (i.e. Government).
2) Interest received from an infrastructure debt fund referred to in Section 10(47) shall be taxable at the rate of 5%. Tax shall be deducted at the rate of 5% plus surcharge (if applicable) plus education cess u/s 194LB by the payer of interest.
3) Interest received from an Indian Company or a business trust in respect of money borrowed in foreign currency under a loan agreement or by way of issue of long-term bonds (including long-term infrastructure bond) shall be taxable at the rate of 5%. Tax shall be deducted at the rate of 5% plus surcharge (if applicable) plus education cess u/s 194LC by the payer of interest.
4) Interest received on rupee denominated bond of an Indian Company or Government securities to a Foreign Institutional Investor or a Qualified Foreign Investor shall be deducted at the rate of 5%. Tax shall be deducted at the rate of 5% plus surcharge (if applicable) plus education cess u/s 194LD by the payer of interest.
In all of the above cases flat rate of tax is levied i.e. no benefit of slabs would be available. Neither deduction of expenses incurred nor the benefit of unabsorbed benefit Depreciation would be allowed.
In all of the cases referred above Return of Income need not be filed if, Total income includes only the interest income and TDS has been deducted on it.
Section 115AC
Income u/s 115AC of the Income Tax Act, 1961covers income by way of interest on bonds of an Indian company issued in accordance with such scheme as notified by the Central Government or on bonds of a public sector company sold by the Government and purchased by interest receiver in foreign currency. The amount of Interest shall be chargeable at the rate of 10% (given the bonds are not notified u/s 194LB, 194LC or 194LD. TDS is required to be deducted on such interest income at the rate of 10% plus surcharge (if applicable) plus education cess u/s 196C of the Income Tax Act, 1961. TDS is to be deducted at the time of payment or credit whichever is earlier.
In the above case Return of Income need not be filed by the recipient of interest if, Total income includes only the interest income and TDS has been deducted on it.
Section 115G
Interest Income from foreign exchange assets and Deemed Dividend u/s 2(22)(e) of the Income Tax Act, 1961 is known as Investment Income. It is taxable at the rate of 20% as per Section 115E of the Income Tax Act, 1961. No benefit of Section 28 to 44C, Section 57 or Chapter VI A shall be available.
Long Term Capital Gain (LTCG) on sale of Foreign Exchange Assets stated above is taxable at the rate of 10% as per section 115E. The person can avail benefit of first proviso to Section 48 and no benefit of indexation will be allowed.
In both the above cases TDS is to be deducted at the rate in force as per section 195.
In the above case Return of Income need not be filed by the recipient of investment income or/and LTCG if, Total income includes only such income and TDS has been deducted on it.
Section 115BBA
Income of Non-Resident from participation in India in any game or sports or advertisement or by contribution of articles relating to any game or sport in India in newspaper, magazine, journal are taxable at the rate of 20% as per section 115BBA.
Income of Non-Resident Sports Association or Institution and Entertainer is also taxable at the rate of 20%.
TDS on above income is to be deducted at the rate of 20% plus surcharge (if applicable) plus education cess.
In the above case Return of Income need not be filed by the Non-Resident if Total income includes only such income and TDS has been deducted on it.
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