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Taxability of Gifts received by Individual & HUF

FAQs on Taxability of gifts received by an Individual or HUF

  • Are monetary gifts received by an individual or Hindu Undivided Family (HUF) taxable?

If the following conditions are satisfied then any sum of money received (i.e, monetary gift may be received in cash, cheque, draft, etc.) by an individual/ HUF will be charged to tax (*):

  • Sum of money received without consideration.
  • The aggregate value of such sum of money received during the year exceeds Rs. 50,000.
  • Are there any cases in which sum of money received without consideration, i.e., monetary gift received by an individual or HUF is not charged to tax?

If any sum of money is received on or after 01/10/2009 by an Individual or HUF without any consideration and the aggregate value of which exceeds Rs. 50,000 during the previous year, then the whole of the aggregate value of such sum is chargeable to tax.

However, in the following cases nothing will be charged to tax in respect of any sum of money received by an Individual or HUF without any consideration, if the same is received:​

  • from any relative or by a HUF from its members; or
  • on the occasion of the marriage of the individual; or
  • under a will/ by way of inheritance; or
  • in contemplation of death of the payer or donor as the case may be; or
  • from a local authority as defined under Explanation to clause (20) of section 10 of the Income-tax Act, 1961; or
  • from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10 or
  • by any fund, trust, institution, any university, other educational institution, any hospital, other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or(applicable if the property is received on or after 1st day of April, 2017)
  • from a trust or institution registered under section 12AA​​; or
  • from a trust or institution registered under section 12A; or(applicable if the property is received on or after 1st day of April, 2017)
  • from an Individual by a trust created or established solely for the benefit of relative of the Individual.(applicable if the property is received on or after 1st day of April, 2017)

any sum received by the way which is not regarded as transfer accordance with section 47.

  • Gift received from relatives are exempt from tax. Who will be considered as relative for the purpose of claiming such exemption?

​Following persons would be considered as relative ​

(a) Spouse of the individual;

(b) Brother or sister of the individual;

(c) Brother or sister of the spouse of the individual;

(d) Brother or sister of either of the parents of the individual;

(e) Any lineal ascendant or descendent of the individual;

(f) Any lineal ascendant or descendent of the spouse of the individual;

(g) Spouse of the persons referred to in (b) to (f).​

  • Apart from marriage are there any other occasions in which monetary gift received by an individual will not be charged to tax?

​​​Gift received only on the occasion of marriage of the individual is not charged to tax. Apart from marriage there is no other occasion in which gift received by an individual is not charged to tax. Hence, gift received on occasions like birthday, anniversary, etc. will be charged to tax.​​

  • Are monetary gifts received from friends liable to tax?

Gifts received from relatives are not charged to tax.

Friend is not a relative as defined in the list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).​

  • Are monetary gifts received from abroad liable to tax?

​​If the aggregate value of monetary gift received during the year by an individual or HUF exceeds Rs. 50,000 and the gifts are not covered under the exceptions prescribed in the preceding FAQ, then gifts whether received from India or abroad will be charged to tax.​​

  • An Individual received different gifts (cash) from his friends, none of the gift exceeded Rs. 50,000 but the total of the gifts received during the year exceeded Rs. 50,000. What will be the tax treatment in such a case?

Sum of money received without consideration by an individual or HUF is chargeable to tax if the aggregate value of such sum received during the year exceeds Rs. 50,000.

The important point to be noted in this regard is the “aggregate value of such sum received during the year”. The taxability of the gift is determined on the basis of the aggregate value of gift received during the year and not on the basis of individual gift. Hence, if the aggregate value of gifts received during the year exceeds Rs. 50,000, then aggregate value of such gifts received during the year will be charged to tax.​

  • If the aggregate value of gift received during the year by an individual or HUF exceeds Rs. 50,000, whether total amount of gift will be charged to tax or only the amount in excess of Rs. 50,000 will be charged to tax?

Sum of money received without consideration by an individual or HUF is charged to tax if the aggregate value of such sum received during the year exceeds Rs. 50,000. Once the aggregate value of monetary gift received during the year exceeds Rs. 50,000, then the aggregate value of gift received during the year will be charged to tax.​

  • Are there any cases in which the value of immovable property received by an individual or HUF without consideration (i.e. by way of gift) is not charged to tax?|Are gifts of immovable property received by an individual or HUF charged to tax?

Stamp duty of immovable property is chargeable to tax, if immovable property is received by an Individual or HUF without any consideration and the stamp duty value exceeds Rs. 50000.

However, in the following cases nothing will be charged to tax in respect of immovable property received on or after 01/10/2009 without any consideration, even if the stamp duty value exceeds Rs. 50,000:

  • from any relative or by a HUF from its members; or
  • on the occasion of the marriage of the individual; or
  • under a will/ by way of inheritance; or
  • in contemplation of death of the payer or donor as the case may be; or
  • from a local authority as defined under Explanation to clause (20) of section 10of the Income-tax Act, 1961; or
  • from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C); or
  • by any fund, trust, institution, any university, other educational institution, any hospital, other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or  (applicable if the property is received on or after 1stday of April, 2017)
  • from a trust or institution registered under section 12AA ; or
  • from a trust or institution registered under section 12A; or  (applicable if the property is received on or after 1stday of April, 2017)
  • by way of transaction not regarded as transfer:   (applicable if the property is received on or after 1stday of April, 2017)
  1. property received by way of distribution at the time of total or partial partition of HUF [sec. 47(i)]
  2. property received by an Indian subsidiary company, if the parent company or its nominees hold the whole of the share capital of the subsidiary company [sec. 47(iv)]   (Inserted by Finance Act, 2018 i.e. w.e.f 01.04.2018)
  3. property received by an Indian holding company, if the whole of the share capital of the subsidiary company is held by the holding company [sec. 47(v)]  (Inserted by Finance Act, 2018 i.e. w.e.f 01.04.2018)
  4. property received by amalgamated company from amalgamating company in the scheme of amalgamation, if amalgamated company is an Indian company. [sec. 47(vi)]
  5. property received by resulting company from demerged company in the scheme of demerger, if resulting company is an Indian company. [sec. 47(vib)]
  6. property received by a banking institution from banking company in a scheme of amalgamation of a banking company with a banking institution sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of the Banking Regulation Act, 1949 (10 of 1949)  [sec. 47(viaa)]
  7. property received by successor co-operative bank from predecessor co-operative bank in a business reorganisation.  [sec. 47(vica)]
  8. from an Individual by a trust created or established solely for the benefit of relative of the Individual.  (applicable if the property is received on or after 1stday of April, 2017)

 

  • An individual received gift of three properties from his friend. The value of none of the property exceeded Rs. 50,000, but the aggregate value of these three properties exceeded Rs. 50,000. What will be the tax treatment of gift in this case?

​​In case of immovable property received without consideration by an individual or HUF, the limit of Rs. 50,000 is to be applied transaction-wise and all immovable properties received as gift during the year are not to be clubbed for applying the limit of Rs. 50,000. Hence, if the total stamp value of immovable properties received as gift during the year exceeds Rs. 50,000 but the stamp value of none of the property exceeds Rs. 50,000, then nothing will be charged to tax.

  • Are immovable properties received as gift from friends liable to tax?

Gifts received from relatives are not charged to tax. Relative for this purpose means:

(a) Spouse of the individual;

(b) Brother or sister of the individual;

(c) Brother or sister of the spouse of the individual;

(d) Brother or sister of either of the parents of the individual;

(e) Any lineal ascendant or descendent of the individual;

(f) Any lineal ascendant or descendent of the spouse of the individual;

(g) Spouse of the persons referred to in (b) to (f).

Friend is not a relative as defined in the above list and hence, gift received from friends will be charged to tax (if other criteria of taxing gift are satisfied).​

  • Are gifts of immovable property located abroad liable to tax?

​​If the aggregate value of monetary gift received during the year by an individual or HUF exceeds Rs. 50,000 and the gifts are not covered under the exceptions prescribed in the preceding FAQ, then gifts whether received from India or abroad will be charged to tax.​

  • An Individual received gift of a flat from his friend. The stamp duty value of the flat is Rs. 84,000. In this case whether the total value of gifted property will be charged to tax or only the value in excess of Rs. 50,000 will be charged to tax?

​​If the conditions discussed in earlier FAQ (regarding the taxability of gift of immovable property) are satisfied, then the entire value of immovable property received without consideration, i.e., received as gift will be charged to tax. Once the taxability is attracted, i.e., value of property received as gift exceeds Rs. 50,000 then the entire value of the property is chargeable to tax. Hence, in this case entire value of property, i.e., Rs. 84,000 will be charged to tax.​

  • Would any taxability arise if an immovable property is received for less than its stamp duty value?

If an Individual or HUF receives (on or after 1st day of October, 2009 but before April 1, 2017) and any person receives (After April 1, 2017), in any previous year from any person or persons any immovable property(being land or building or both):

  • without consideration, the stamp duty value of which exceeds Rs. 50,000 then the stamp duty value shall be chargeable to tax.
  • for a consideration, if stamp duty value exceeds the amount of consideration and the difference between stamp duty value and consideration is more than Rs. 50,000, then such difference is chargeable to tax. (applicable from A.Y 2014-15 to A.Y 2018-19).
  • for a consideration, if stamp duty value exceeds 105% of the amount of consideration and the difference between stamp duty value and consideration is more than Rs. 50,000, then such difference is chargeable to tax. (applicable from A.Y 2019-20)

    Provided that where the date of an agreement and date of registration are not same, Stamp Duty will be considered as applicable on the date of agreement. This will be applicable only when the amount of consideration is received by account-payee cheque or bank draft or online transfer before the date of agreement.

    Provided that if the stamp duty value of immovable property is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) ofsection 155shall apply in relation to stamp duty value of such property as they apply for valuation of a capital asset under those sections.

  • Are gifts of movable property received by an individual or HUF charged to tax?​​

If the following conditions are satisfied then value prescribed for movable property (*) received by an individual or HUF will be charged to tax​:

  • Prescribed movable property is received without consideration (e.,received as gift).
  • The aggregate fair market value of such property received by the taxpayer during the year exceedsRs.50,000

    In above case, the fair market value of the prescribed movable property will be treated as income of the receiver.

(*) Prescribed movable property means shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and bullion, being capital asset of the taxpayer.

Considering the above definition, nothing will be charged to tax in respect of gift of any item being a movable property other than covered in the above definition, e.g., Nothing will be charged to tax in respect of a television set  received as gift, because  a television  set  is not covered in the definition of prescribed movable property.

(#) Refer next FAQ for situations in which prescribed movable property received without consideration by an individual or HUF, i.e., received as gift is not charged to tax.​

  • Are there any cases in which the value of prescribed movable property received without consideration, i.e., received as gift by an individual or HUF is not charged to tax?​​​​​

If the conditions given in preceding FAQ are satisfied, then value of prescribed movable property received without consideration, i.e., received as gift by an individual or HUF is charged to tax. However, in the following cases nothing will be charged to tax in respect of prescribed movable property received without consideration:

  • Property received from relatives.
  • Property received by a HUF from its members.
  • Property received on the occasion of the marriage of the individual.
  • Property received under will/ by way of inheritance.
  • Property received in contemplation of death of the donor.
  • Property received from a local authority as defined under section 10(20​)of the Income-tax Act).
  • Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C).
  • Property received from a trust or institution registered under section 12AA​.
  • Any shares received by an individual or HUF, as a consequence of business re-organisation of co-operative bank or demerger or amalgamation of a company [as referred to in clause (vicb) or clause (vid) or clause (vii) of Section 47]
  • An individual received gift of jewellery from his friends. The total value of jewellery received during the year as gift from all the friends amounted to Rs. 84,000. What will be the tax treatment of gift in this case?

​If the aggregate fair market value of prescribed movable property received by an individual or HUF without consideration during the year exceeds Rs. 50,000, then the total value of such properties received during the year without consideration will be charged to tax. In this case the total value of jewellery received during the year exceeds Rs. 50,000 and hence, Rs. 84,000 will be charged to tax.​

  • Does any taxability arise if prescribed movable property is received by an individual or HUF for less than its fair market value?

If the following conditions are satisfied then prescribed movable property (*) received by an individual or HUF will be charged to tax (#):

  • Prescribed movable property is acquired by an individual or HUF.
  • The aggregate fair market value of such properties acquired by the taxpayer during the year exceeds the consideration of these properties by more than Rs. 50,000. In other words, the aggregate fair market value of all such properties is higher than the consideration and the difference is more than Rs. 50,000.

(*) Prescribed movable property means shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and bullion, being capital asset of the taxpayer.

Considering the above definition, nothing will be charged to tax if any movable property (other than those covered in the above definition) is received for less than its fair market value e.g., Nothing will be charged to tax in respect of a television set received for less than its fair market value because a television set is not covered in the definition of prescribed movable property.

(#) Refer next FAQ for situations in which prescribed movable property received for less than its fair market value is not charged to tax.​

  • Are there any cases in which prescribed movable property received for less than its fair market value by an individual or HUF is not charged to tax?​​​​

If the conditions given in preceding FAQ are satisfied, then prescribed movable property received (i.e. acquired) by an individual or HUF for less than its fair market value is chargeable to tax. However, in the following cases nothing will be charged to tax in respect of prescribed movable property received for less​ than its fair market value:

  • Property received from relatives (*).
  • Property received by a HUF from its members.
  • Property received on the occasion of the marriage of the individual.
  • Property received under will/ by way of inheritance.
  • Property received in contemplation of death of the donor.
  • Property received from a local authority as defined under section 10(20)of the Income-tax Act.
  • Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C).
  • Property received from a trust or institution registered under section 12AA​.

    (*)Relative for this purpose means:

(a) Spouse of the individual;

(b) Brother or sister of the individual;

(c) Brother or sister of the spouse of the individual;

(d) Brother or sister of either of the parents of the individual;

(e) Any lineal ascendant or descendent of the individual;

(f) Any lineal ascendant or descendent of the spouse of the individual;

(g) Spouse of the persons referred to in (b) to (f).​

 

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Annual Return on Foreign Liabilities and Assets (FLA return) FAQs under FEMA 1999

FLA: The annual return on Foreign Liabilities and Assets (FLA) is required to be submitted directly by all the Indian companies which have received FDI (foreign direct investment) and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year i.e. who hold foreign Assets or Liabilities in their Balance Sheets.

If a company did not receive FDI or made overseas investment in any of the previous year(s) including the current year, is it required to submit the FLA Return?

Ans.: If the Indian company does not have any outstanding investment in respect of inward and outward FDI as on end-March of reporting year, the company need not submit the FLA Return.

If a company has only share application money, then is that company supposed to submit the FLA Return?

Ans.: If a company has received only share application money and does not have any foreign direct investment or overseas direct investment outstanding as on end-March of the reporting year, then that company is not required to fill up FLA return.

If the company has not received any inward FDI / made overseas investment in the latest year, does it need to submit the FLA Return?

Ans.: If the company has not ‘received any fresh FDI and/or ODI (overseas direct investment)’ in the latest year but the company has outstanding FDI and/or ODI, then that company is required to submit the FLA Return every year by July 15.

Whether FLA Return is required to be submitted by Registered Partnership Firms (Registered under Partnership Registration Act) or branches or trustees, who have made Overseas Direct Investment or it is mandatory only for Companies (Registered under Companies Act, 1956 / Companies Act 2013)?

Ans.: If  Partnership firms, Branches or Trustees have any outward FDI outstanding as on end-March of the reporting year, then they are required to send a request mail to RBI to get a dummy CIN number which will enable them to file the Excel based FLA Return. If any entity has already got the dummy CIN number from the previous survey, they should use the same CIN number in the current survey also.

It is also informed that these dummy CIN numbers are provided by RBI for filling the excel based FLA return only and not for any other purpose.

 Is it required to submit Annual Performance Report for ODI, if FLA Return being submitted?

Ans.: FLA Return and Annual Performance Report (APR) for ODI are two different returns and monitored by two different departments of RBI. So, one is required to submit both the returns if these are applicable to the company.

 If non-resident shareholders of a company have transferred their shares to the residents during the reporting period, then whether that company is required to submit the FLA Return?

Ans.: If all non-resident shareholders of a company have transferred their shares to the residents during the reporting period and the company does not have any outstanding investment in respect of inward and outward FDI as on end-March of reporting year, then the company need not submit the FLA Return.

If company issued the shares to non-resident on Non-Repatriable basis, whether that company is required to submit the FLA Return?

Ans.: Shares issued by reporting company to non-resident on Non-Repatriable basis should not be considered as foreign investment; therefore, companies which have issued the shares to non-resident only on Non-Repatriable basis, are not required to submit the FLA Return.

 What will be the consequences in case one does not file the said FLA Return by 15th July, as accounts are not audited as yet, and company does not wish to file it with unaudited figures. Will there be any imposition of penalty or prosecution initiated against the company by RBI or FEMA? Since nowhere it is mentioned either in the Circular No. 145 dated June 18, 2014 or in the Annex to AP (DIR Series) Circular No. 145 about the penalty or the prosecution, so, can it be assumed that company can file the same once the accounts are audited without any risk of penalty or other proceedings from the concerned authority in future?

Ans.: Annual return on Foreign Liabilities and Assets has been notified under FEMA 1999 and it is required to be submitted by all the India resident companies which have received FDI and/ or made overseas investment in any of the previous year(s), including current year by July 15 every year. Non-filing of the return before due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA.

What information should be reported in FLA return, if balance sheet of the company is not audited before the due date of submission?

Ans.: If the company’s accounts are not audited before the due date of submission, i.e. July 15, then the FLA Return should be submitted based on unaudited (provisional) account. Once the accounts get audited and there are revisions from the provisional information submitted by the company, they are supposed to submit the revised FLA return based on audited accounts by end – September.

 In case where Account Closing Period of the company is different from reference period (end-March), can company report the information as per Account Closing Period?

Ans.: No. Information should be reported for all the reference period, i.e. Previous March and Latest March. If Account Closing Period of the company is different from the reference period, then information should be given for the reference period on internal assessment.

 

 

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TAX AUDIT

TAX AUDIT

 

  • What is tax audit?

​​The dictionary meaning of the term “audit” is check, review, inspection, etc. There are various types of audits prescribed under different laws like company law requires a company audit, cost accounting law requires a cost audit, etc. The Income-tax Law requires the taxpayer to get the audit of the accounts of his business/profession from the view point of Income-tax Law.

Section 44AB gives the provisions relating to the class of taxpayers who are required to get their accounts audited from a chartered accountant. The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfillment of other requirements of the Income-tax Law. The audit conducted by the chartered accountant of the accounts of the taxpayer in pursuance of the requirement of section 44AB​ is called tax audit.

The chartered accountant conducting the tax audit is required to give his findings, observation, etc., in the form of audit report. The report of tax audit is to be given by the chartered accountant in Form Nos. 3CA/3CB and 3CD. ​

  • As per section 44AB, who is compulsorily required to get his accounts audited, i.e., who is covered by tax audit?

​​​​

As per section 44AB, following persons are compulsorily required to get their accounts audited :

  • A person carrying on business, if his total sales, turnover or gross receipts (as the case may be) in business for the year exceeds Rs. 1 crore. This provision is not applicable to the person, who opts for presumptive taxation scheme under section 44AD​ and his total sales or turnover doesnot excceeds Rs. 2 crores.
  • A person carrying on profession, if his gross receipts in profession for the year exceed Rs. 50 lakhs.
  • A person who is eligible to opt for the presumptive taxation scheme of section 44ADbut claims the profits or gains for such business to be lower than the profits and gains computed as per the presumptive taxation scheme of section 44ADand his income exceeds the amount which is not chargeable to tax.
  • ​If an eligible assessee opts out of the presumptive taxation scheme, after specified period, he cannot choose to revert back to the presumptive taxation scheme for a period of five assessment years thereafter.
  • ​A person who is eligible to opt for the presumptive taxation scheme of section 44ADAbut he claims the profits or gains for such profession to be lower than the profit and gains computed as per the presumptive taxation scheme and his income exceeds the amount which is not chargeable to tax.

  • ​A This provision is not applicable to the person, who opts for presumptive taxation scheme under section 44AD​ and his total sales or turnover does not exceed Rs. 2 crores.
  • A person who is eligible to opt for the presumptive taxation scheme of sections 44AEbut he claims the profits or gains for such business to be lower than the profits and gains computed as per the presumptive taxation scheme of sections 44AE.
  • A person who is eligible to opt for the taxation scheme prescribed under section 44BB or section 44BBB but he claims the profits or gains for such business to be lower than the profits and gains computed as per the taxation scheme of these sections.

 

section 44BB is applicable to non-resident taxpayers engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire basis to be used in exploration of mineral oils.

 

section 44BBB​ is applicable to foreign companies engaged in the business of civil construction or erection of plant or machinery or testing or commissioning thereof, in connection with a turnkey power project.

  • If a person is required by or under any other law to get his accounts audited, then is it compulsory for him to once again get his accounts audited to comply with the requirement of section 44AB?

​​​​​Persons like company or co-operative society are required to get their accounts audited under their respective law. S​ection 44AB provides that, if a person is required by or under any other law to get his accounts audited, then he need not again get his accounts audited to comply with the requirement of section 44AB. Is such a case, it shall be sufficient if such person gets the accounts of such business or profession audited under such law and obtains the report of the audit as required under such other law and also a report by the chartered accountant in the form prescribed under section 44AB, i.e., Form No. 3CA and Form 3CD ​

 

  • What is the due date by which a taxpayer should get his accounts audited?

​​​​​​​​

A person covered by section 44AB should get his accounts audited and should obtain the audit report on or before the due date of filing of the return of income, i.e., on or before 30th September (*) of the relevant assessment year, e.g., Tax audit report for the financial year 2017-18 corresponding to the assessment year 2018-19 should be obtained on or before 30th September, 2018.

(*) In case of a taxpayer who is required to furnish a report in Form No. 3CEB​​ under section 92​ in respect of any international transaction or specified domestic transaction, the due date of filing the return of income is 30th November of the relevant assessment year.

​The tax audit report is to be electronically filed by the chartered accountant to the Income-tax Department. After filing of report by the chartered accountant, the taxpayer has to approve the report from his e-fling account with Income-tax Department (i.e., at www.incometaxindiaefiling.gov.in).

  • What is the penalty for not getting the accounts audited as required by section 44AB?

​​​​

According to section 271B, if any person who is required to comply with section 44AB fails to get his accounts audited in respect of any year or years as required under section 44AB, the Assessing Officer may impose a penalty. The penalty shall be lower of the following amounts:

(a) 0.5% of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession, in such year or years.

(b) Rs. 1,50,000.

However, according to section 273B​, no penalty shall be imposed if reasonable cause for such failure is proved.

 

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ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA  by non- residents-FEMA REGULATIONS, 2000

ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA

 by

non- residents-FEMA REGULATIONS, 2000

 

1)Acquisition and Transfer of Property in India by an Indian Citizen resident outside India.

 

A person resident outside India who is a citizen of India may-

 (a) acquire immovable property in India other than an agricultural property, plantation, or a farm house.

(b) transfer any immovable property in India to a person resident in India, and

(c) transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India.

Provided that in case of acquisition of immovable property, payment of purchase price, if any, shall be made out of

  • funds received in India through normal banking channels by way of inward remittance from any place outside India or
  • (ii)funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank :

Also no payment of purchase price for acquisition of immovable property shall be made either by traveller’s cheque or by foreign currency notes or by other mode other than those specifically permitted by this clause.

 

2)Acquisition and Transfer of Property in India by a person of Indian origin.

 

A person of Indian origin resident outside India may-

(a) acquire immovable property in India other than an agricultural property, plantation, or a farm house.

(b) acquire any immovable property in India other than agricultural land/farm house/plantation property, by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India;

(c) acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India;

(d) transfer any immovable property in India other than agricultural land/farm house/plantation property, by way of sale to a person resident in India;

(e) transfer agricultural land/farm house/plantation property in India, by way of gift or sale to a person resident in India who is a citizen of India;

(f) transfer residential or commercial property in India by way of gift to a person resident in India or to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India

 

Provided that in case of acquisition of immovable property, payment of purchase price, if any, shall be made out of

  • funds received in India through normal banking channels by way of inward remittance from any place outside India or
  • (ii)funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank:

Also no payment of purchase price for acquisition of immovable property shall be made either by traveller’s cheque or by currency notes of any foreign country or any mode other than those specifically permitted by this clause.

 

3)Acquisition of Immovable Property for carrying on a permitted activity.

 

A person resident outside India who has established in India in accordance with the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000, a branch, office or other place of business for carrying on in India any activity, excluding a liaison office, may-

(a) acquire any immovable property in India, which is necessary for or incidental to carrying on such activity:

Provided that

(i) all applicable laws, rules, regulations or directions for the time being in force are duly complied with; and

(ii) the person files with the Reserve Bank a declaration in the Form IPI , not later than ninety days from the date of such acquisition;

(b) transfer by way of mortgage to an authorized dealer as a security for any borrowing, the immovable property acquired in pursuance of clause (a).

 

3A)Purchase/Sale of Immovable Property by Foreign Embassies/Diplomats/Consulate Generals.

 

A Foreign Embassy/Diplomat/Consulate General may purchase/sell immovable property in India other than agricultural land/plantation property/farm house provided

  • clearance from Government of India, Ministry of External Affairs is obtained for such purchase/sale, and
  • the consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through banking channel.

 

4) Repatriation of sale proceeds.

 

(a) A person resident outside India may hold, own or transfer any immovable property situated in India if such  property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India.

A person resident outside India, or his successor shall not, except with the prior permission of the Reserve Bank, repatriate outside India the sale proceeds of any immovable property.

 

(b) In the event of sale of immovable property other than agricultural land/farm house/plantation property in India by a person resident outside India who is a citizen of India or a person of Indian origin, the authorised dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely:

(i) the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations.

(ii) the amount to be repatriated does not exceed

(a) the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in Foreign Currency Non-Resident Account, or

(b) the foreign currency equivalent, as on the date of payment, of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property; and

(iii) in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

 

(c) In the event of failure in repayment of external commercial borrowing availed by a person resident in India under the provisions of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 (Notification No. FEMA 3/2000-RB, dated 3-5-2000) a bank which is an authorised dealer may permit the overseas lender or the security trustee (in whose favour the charge on immovable property has been created to secure the ECB) to sell the immovable property on which the said loan has been secured only to a (by the) person resident in India and to repatriate the sale proceeds towards outstanding dues in respect of the said loan and not any other loan.

 

 

 

 

5)Prohibition on acquisition or transfer of immovable property in India by citizens of certain countries.

 

No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan without prior permission of the Reserve Bank shall acquire or transfer immovable property in India, other than lease, not exceeding five years.

 

6)Prohibition on transfer of immovable property in India.

 

Except as allowed in the Act or Regulations, no person resident outside India shall transfer any immovable property in India :

Provided that the Reserve Bank may, for sufficient reasons, permit the transfer, subject to such conditions as may be considered necessary.

Also a bank which is an authorised dealer may, subject to the directions issued by the Reserve Bank in this behalf, permit a person resident in India or on behalf of such person to create a charge on his immovable property in India in favour of an overseas lender or security trustee, to secure an external commercial borrowing availed under the provisions of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 (Notification No. FEMA 3/2000-RB, dated 3-5-2000).]

 

 

Definitions:

(a) ‘Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999);

(b) ‘An authorised dealer’ means a person authorised as an authorised dealer under sub-section (1) of section 10 of the Act- The Reserve Bank may, on an application made to it in this behalf, authorise any person to be known as authorised person to deal in foreign exchange or in foreign securities, as an authorised dealer, money changer or off-shore banking unit or in any other manner as it deems fit.

(c) ‘a person of Indian origin’ means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who

(i) at any time, held Indian passport or

(ii) who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955);]

(d) ‘repatriation outside India’ means the buying or drawing of foreign exchange from an authorised dealer in India and remitting it outside India through normal banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorised dealer from which it can be converted in foreign currency;

(e) the words and expressions used but not defined in these Regulations shall have the same meanings respectively assigned to them in the Act.

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Income Charged to Tax in India in the hands of Resident/Non Resident taxpayer

 

  • Which incomes are charged to tax in India in the hands of a taxpayer

The following chart highlights the tax incidence in case of different persons:

Nature of income Residential status Residential status ​​ Residential status
ROR (*) RNOR (*) NR (*)
Income which accrues or arises in India Taxed Taxed Taxed
Income which is deemed to accrue or arise in India Taxed Taxed Taxed
Income which is received in India Taxed Taxed Taxed
Income which is deemed to be received in India Taxed Taxed Taxed
Income accruing outside India from a business controlled from India or from a profession set up in India Taxed Taxed Not taxed
Income other than above (i.e.,income which has no relation with India) Taxed Not taxed Not taxed

 

(*)  ROR means resident and ordinarily resident.

RNOR means resident but not ordinarily resident.

NR means non-resident.​

  • Which incomes are deemed to be received in India

​Following incomes are treated as incomes deemed to be received in India:

  • Interest credited to recognized provident fund account of an employee in excess of 9.5% per annum.
  • Employer’s contribution to recognized provident fund in excess of 12% of the salary of the employee.
  • Transferred balance in case of reorg​anisation of unrecognized provident fund.

Contribution by the Central Government or other employer to the account of the employee in case of notified pension scheme referred to in section 80CCD​​.​

  • What incomes are deemed to have accrue or arise in India

Following incomes are treated as incomes deemed to have accrued or arisen in India:

  • Capital gain arising on transfer of property situated in India.
  • Income from business connection in India.
  • Income from salary in respect of services rendered in India.
  • Salary received by an Indian national from Government of India in respect of service rendered outside India. However, allowances and perquisites are exempt in this case.
  • Income from any property, asset or other source of income located in India.
  • Dividend paid by an Indian company.
  • Interest received from Government of India.
  • Interest received from a resident is treated as income deemed to have accrued or arisen in India in all cases, except where such interest is earned in respect of funds borrowed by the resident and used by resident for carrying on business/profession outside India or is in respect of funds borrowed by the resident and is used for earning income from any source outside India.
  • Interest received from a non-resident is treated as income deemed to accrue or arise in India if such interest is in respect of funds borrowed by the non-resident for carrying on any business/profession in India.
  • Royalty/fees for technical services received from Government of India.
  • Royalty/fees for technical services received from resident is treated as income deemed to have accrued or arisen in India in all cases, except where such royalty/fees relates to business/profession/other source of income carried on by the payer outside India.

Royalty/fees for technical services received from non-resident is treated as income deemed to have accrued or arisen in India if such royalty/fees is for business/profession/other source of income carried by the payer in India.

 

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Three major Changes that came into effect from April 1st 2018

New Income Tax Rules

  • No change in the income tax slab for the individual tax payers.
  • The Budget 2018 proposals including the reintroduction of the tax on long-term capital gains (LTCG) exceeding 100,000 from the sale of shares from April 1.
  • Reduced corporate tax of 25 per cent on businesses on turnover of up to R250 crore.
  • Standard deduction of R40,000 in lieu of transport allowance and medical reimbursement.

GST e-way bill for inter-state movement of goods

  • The e-way (electronic way) bill system under GST (Goods and Services Tax) for inter-state movement of goods became effective from April 1.
  • The e-way bill applies to inter-state transportation of goods worth over R50,000 through road, railways, airways and vessels.

State Bank of India (SBI) chops charges for non-maintenance of minimum balance

  • SBI has reduced its penalties for non-maintenance of average monthly balance (AMB).
  • The charges for non-maintenance of AMB for customers in metro and urban centres are reduced from a maximum of R50 per month plus goods and services tax (GST), to Rs. 15 per month plus GST.
  • For semi-urban and rural centres, the charges are reduced from R40 per month plus GST to Rs. 12 per month and Rs. 10 per month plus GST respectively from April 1
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E-Way Bill under GST

E-Way Bill came into effect from April 1, 2018 for all inter-state movement of goods. One can register on the E-way bill portal ewaybillgst.gov.in by using the GSTIN. An E-Way bill is generated through the GST Common Portal for e-Way bill system – ewaybill.nic.in – by registered users or transporters who cause movement of goods of consignment. The E-way bill is required to be generated only where the value of the consignment exceeds Rs.50,000 which includes tax, but doesn’t include value of exempted goods. Validity of E-way bill is one day upto 100 km. For every 100 km or part thereafter, it is one additional day. Where the goods are transported by railways, or air or vessel, the e-way bill shall be generated by the registered supplier/ recipient only and not by the transporter. However, the bill has to be produced at the time of delivery of goods.

E-Way Bill FAQs

  • The consignor or consignee, as a registered person or a transporter of the goods, can generate the e-Way bill. The unregistered transporter can enroll on the common portal and generate the E-Way bill for movement of goods for his clients, according to the CBEC now CBIC.
  • The documents such as tax invoice or bill of sale or delivery challan and the transporter’s ID must be available with the person who is generating the e-Way bill.
  • The e-way bill is required to transport all the goods except exempted under the notifications or rules. The movement of handicraft goods or goods for job-work purposes under specified circumstances also requires E-Way bill even if the value of consignment is less than Rs. 50,000.
  • Once generated, e-Way bill cannot be edited or modified. Only Part-B can be updated. However, if e-way bill is generated with wrong information, it can be cancelled and generated afresh.
  • Any person can verify the authenticity or the correctness of the e-way bill by entering EWB No, EWB Date, Generator ID and Doc No in the search option on the EWB Portal.
  • If multiple invoices are issued by the supplier to recipient, that is, for movement of goods of more than one invoice of same consignor and consignee, multiple EWBs have to be generated. That is, for each invoice, one EWB has to be generated, irrespective of the fact whether same or different consignors or consignees are involved.
  • If validity of the E-Way bill expires, the goods are not supposed to be moved. However, one can extend the validity of the E-Way bill if the consignment is not reaching the destination within the validity period due to exceptional circumstances such as natural calamity, law and order issues, trans-shipment delay, accident of conveyance, etc.
  • One doesn’t require to generate E-way bill if the value of the goods in an individual consignment is less than Rs. 50,000 even if the total value of all such consignments is more than Rs. 50,000 in single conveyance.
  • Empty cargo containers are exempted from e-way bill.
  • The goods which are in transit to or from Nepal/ Bhutan don’t require E-way bill for movement.
  • One can even insert the temporary vehicle number for the purpose of E-way bill generation.
  • How to update the details: E-way bill system is dependent on GST common portal for tax payer’s registration like legal name/trade name, businesses addresses, mobile number and email id. The EWB system will not allow taxpayer to update these details in the EWB portal. If the taxpayer changes these details at GST common portal, it will be updated in the EWB system within a day automatically. Alternatively, the taxpayer can update the same instantaneously by selecting the option update my GSTIN in the E-way bill system and the details will be fetched from the GST common portal and updated in the E-way bill system.
  • The shipping charges charged by e-commerce companies need not be included in ‘consignment value’.
  • Sub-users: For every principal place of business, users can create a maximum of 3 sub-users. That is, if taxpayer has one principal place of business and 1 additional place, he can create 6 (3X2) sub-users.
  • In case of movement by railways, there is no requirement to carry E-way bill along with the goods, but the E-way bill generated must be produced at the time of delivery of the goods.
  • Consignment value is the value of the goods declared in invoice or a delivery challan issued in respect of the said consignment and also include central tax, state or union territory tax. This doesn’t include the value of exempt supply of goods and value of freight charges.
  • A transporter need not generate E-way bill for consignments having value less than Rs. 50,000, even if the value of the goods carried in single conveyance is more than Rs. 50,000, till the sub- rule 138 (7) is notified.
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Refund facility on GST Portal

1)Refund on Account of:

  • Export of Goods (With Payment of Tax)

Refund of Integrated Tax on account of Export of goods (with payment of tax) if the following conditions are met

  • Filed GSTR-1, providing Export details in Table 6A of GSTR-1 along with Shipping bill details having Integrated Tax levied AND
  • Filed GSTR-3B of the relevant tax period for which refund is to be paid

How it works:-

GST Portal shares the export data with ICEGATE, Custom system validates the data with their shipping bill and EGM and processes the refund

The shipping and invoice details can be added in subsequent month, if it was missed during current month and refund can be availed.

Refund to be credited in bank account maintained with the customs/ICEGATE.

 

  • Export of Services (With Payment of Tax)
  • GSTR-1 and GSTR-3B of the relevant tax period for which you want to file for refund on account   of Export of services with payment of Tax must be filed.
  • After filing GSTR-1 and GSTR- 3B, form RFD-01A to be filed at the GST Portal.
  • On submission of form RFD-01A, GST Portal will generate an ARN.
  • After generation of ARN, Taxpayer needs to take print of the submitted application and the Refund ARN Receipt generated at the portal, and handover the same along with supporting documents to the jurisdictional authority. Application will be processed and refund will be disbursed manually.

 

2) Refund of ITC paid on Exports of Goods and Services without payment of Integrated Tax

GSTR- 3B of the period for which Refund is sought has to be filed.

Refund application RFD – 1A to be filed at GST Portal.

Turnover of Zero-Related supplies and Adjusted Total Turnover in a State or UT for the period refund is sought for and the net ITC (the ITC availed during the period refund is sought for) to be mentioned.

In case of export of services, FIRC/BRC to be obtained from the concerned bank.

Once Application Reference Number (ARN) is generated, application print to be submitted to the Jurisdictional Authority manually along with other documents required under RFD-01

 

3) Refund of Excess Amount from the Electronic Cash Ledger

RFD- 01 A to be filed and print of ARN generated to be submitted manually to Jurisdictional Authority. There is no restriction on claiming refund amount from Cash Ledger. However, law specifies that the refund of excess amount in Cash Ledger can be permitted only if amount is greater than Rs. 1000/.

4) Refund on Account of Supplies made to SEZ Unit/ SEZ Developer (Without Payment of Tax)

The following conditions must be met

  • The Taxpayer is registered with GST Portal and holds an active GSTIN during the period for which refund is being applied for.
  • GSTR-3B must have been filed for the relevant tax period

 

How it works:-

 

RFD-01A to be filed for the amount that is lowest of the following:

  1. ITC Ledger balance as on date (Matched ITC)
  2. ITC availed for the selected tax period
  3. Formula value of refund amount, calculated as “(((Turnover of Zero Rated Supply of Goods and Services) x (Net Input Tax Credit)) ÷ Adjusted Total Turnover)
  4. Once the ARN is generated on submission of form RFD-01A, the Taxpayer needs to take print of the filed application and the Refund ARN Receipt generated at the portal, and submit the same along with supporting documents to the jurisdictional authority manually. The application will also be processed and refund will be disbursed manually.

 

5) Refund on Account of Supplies made to SEZ Unit/ SEZ Developer (With Payment of Tax)

The following conditions must be met for being eligible to file form RFD-01A to claim refund on account of supplies made to SEZ unit / SEZ developer (with payment of tax):

  • The taxpayer is registered with GST Portal and holds an active GSTIN during the period for which refund is being applied for.
  • Form GSTR-1 and a Valid GSTR-3B Return must have been filed for the relevant tax period.
  • In Table 6B of the GSTR-1 filed for the relevant period, the details of supplies made to SEZ units or SEZ developer should have been mentioned by the taxpayer.
  • It is to be declared by the refund claimant that the SEZ Unit /Developer has not availed input tax credit of the tax paid, which has been claimed as refund.
  • It is to be declared by refund claimant that such goods have been admitted in full in the SEZ for authorized operations / services have been received by SEZ for authorized operations.

 

The refund amount that one enters should not be more than the amount of IGST / CESS mentioned in Zero-rated supplies of GSTR-3B , filed for the selected period.

 

6) Refund of ITC accumulated due to Inverted Tax Structure

 

Inverted Tax Structure’ refers to a situation where the rate of tax on input received (i.e. Input tax credit received) is more than the rate of tax (i.e. the tax paid) on output supplies. As a result, the higher tax paid on input supplies gets accumulated in the Electronic Credit Ledger of the receiver Taxpayer. The Taxpayer can claim the refund of ITC accumulated on account of Inverted Tax structure by filing the refund application form RFD-01A.

Refund of IGST / CGST / SGST on account of ITC accumulated due to Inverted Tax Structure can be filed if  GSTR1 and GSTR-3B of the relevant tax period have been filed, for which refund is to be claimed.

However, in case registered persons having aggregate turnover of up to Rs1.5 crores in the preceding financial year or the current financial year are opting to file FORM GSTR-1 quarterly (notification No. 57/2017-Central Tax dated 15.11.2017 refers), such persons shall apply for refund on a quarterly basis. Please note that such refund on account of inverted tax structure is not available in case of exempted or nil rated supplies.

 

7) Refund on account of Refund by Recipient of Deemed Export

The following conditions must be met for being eligible to file form RFD-01A, for refund by recipient of deemed exports:

  • The Taxpayer is registered with GST Portal and holds an active GSTIN during the refund application period.
  • Balance in the Electronic Credit Ledger must be greater than or equal to the amount of refund to be claimed, since the same is required to be debited in case of Refund of ITC by recipient of deemed exports.
  • GSTR-3B must have been filed for the relevant tax period.

While filing form RFD-01A (Recipient of deemed exports), Taxpayers need to enter the amount that they want to get as refund. The lowest of the following three categories are eligible for refund:

  • Balance in Electronic Credit Ledger
  • ITC availed for the particular tax period
  • Amount entered by Taxpayer in Refund Claim Matrix.

 

8) Refund Application on Account of Assessment/Provisional assessment/ Appeal/ Any Other Order (under CGST Rule 97A/ and relevant Rules of SGST/IGST Acts) i.e. online filing and offline processing by the tax authority

Any person, including regular taxpayer, casual taxpayer, non-resident taxpayer or unregistered person, in whose favour an Assessment Order/Provisional Assessment Order/Appeal Order or any other Order entailing refund has been issued may file the application for refund.

 

Refund application can be filed by unregistered person using his temporary login.

Applicant has to file application on GST portal after login to the GST Portal with valid credentials. Navigate to Refund Menu > Click on Refund Application > Select reason of Refund as ‘On Account of Assessment/provisional assessment/ Appeal/ Any Other order’.

Scanned copy of following documents is mandatory to be uploaded.

Assessment/ Provisional Assessment/ Appeal/ / Any Other Order

The taxpayer after submitting the refund application form shall take out the print of the application form and ARN generated after submission. The tax official shall manually issue acknowledgement till the backend processing release. The tax official is allowed 15 days’ period for issuance of Acknowledgement RFD-02 after examining application for refund.

 

In case tax official manually conveys deficiencies to the applicant in FORM GST RFD-03, For the same applicant has to correct the deficiency at the jurisdictional Authority

 

Taxpayer will receive refund amount in account which has been selected by taxpayer while filing of the refund application

 

 

Note:

 

Only one Refund application (form RFD-01A) can be filed for each Refund type in a given tax period. For example, a Taxpayer may choose to file the refund on account of supplies made to SEZ unit / SEZ developer (without payment of tax), as well as on account of being a recipient of deemed exports for the single tax period. However, the Taxpayer cannot file two refund applications for supplies made to SEZ unit / SEZ developer (without payment of tax) during a single tax period.

 

After login to the GST portal, you can view your jurisdictional details in Profile Section. The same is also indicated in the GSTIN Certificate

 

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