How to claim your TDS refund for the NRI’s residing in the US

How to claim your TDS refund for the NRI’s residing in the US

by | Apr 22, 2019 | Blog, income tax credit, IRS, NRI, Tax Payers, Tax Planning, Tax Refund, tax savings, TDS

How to claim your TDS refund for the NRI’s residing in the US

TDS refund For an NRI residing in the US, income tax is applicable for the income that is earned in India. Be it salary earned in India or for services rendered to India or on earnings from investments and assets, NRI is liable to pay income tax if the total income for the financial year is more than Rs. 2.5 lakhs.

In India, It’s not very simple when it comes to income tax rules for NRIs.As per tax rules, any payment to non-resident Indians (NRIs) is required to be made after deduction of tax deducted at source (TDS) even if the income of that person is less than Rs. 2.5 lakhs. However, NRIs are allowed to claim refund of TDS deducted at the time of income tax filing if he/she falls below the minimum taxable income i.e. 2.5 lakhs.

Here are some of the major income types on which TDS is deducted for NRIs.

  • Payments received for services rendered in India
  • Interest income earned on bank savings and deposit accounts – NRO accounts
  • Rental income from property owned in India
  • Sale of bonds, mutual funds and shares
  • Sale of property in India owned by an NRI

TDS refund can be claimed by NRIs residing in the US by filing the income tax return in India. Income tax filing is quite a simple process. As the new financial year begins, it’s also important for NRIs to know the time limit to file the income tax for claiming refund.

NRIs are required to file income tax return before 31st July of the new financial year. Any delay would attract penalty. For example, for the financial year 2018-19, income tax filing needs to be done by 31st July 2019 for claiming TDS refund.

Here are the few easy steps for NRIs to file income tax return in India

Reconcile your incomes and taxes with Form 26AS

After determining the residential status for the financial year, NRI‘s need to reconcile their TDS credit or advance taxes paid with the data reflected in Form 26AS.

Keep the necessary documents ready

Keep important documents such as PAN card, bank details, investment details, TDS certificates, passport and Form 26AS ready as these documents give you relevant information required for income tax filing.

File your income tax return through income tax e-filing portal

  • Log on to income tax e-filing portal with your e-filing account user ID and password. Download ITR2 or ITR3 form depending on your type of income.
  • If you earn any income from business in India, ITR3 would be applicable. ITR2 would be applicable if you are not earning any business income (excludes capital gain on sale of assets/property) in India.
  • Fill in all the relevant details and calculate your tax liability.
  • Once all the details are filled validate your form by entering one time password (OTP) sent to you on your registered number.
  • Save the validated XML file on your system and then upload the saved file with adding your digital signature to it.

Verify your income tax return

Once you are done with uploading your tax return file on income tax portal, ITR-V will be generated which needs to be submitted to IT department. On receipt of this, your income tax return will be processed.

It’s important to note that, refunding of TDS will take about 6 months’ time or more. However, the refund is issued with interest of 6% p.a which is applicable from the end of financial year.

NRIs residing in US can save on TDS through DTAA (Double Taxation Avoidance Agreement) as both the countries have signed tax treaties. In this case, as an NRI taxpayer you can avoid paying tax twice for the same income. DTAA either eliminates or reduces your tax implication on the income earned and taxable in India.

Conclusion

As an NRI, adhering to two different tax laws at once can be quite challenging. Knowing and understanding the process involved in the taxation can help you save tax liabilities. Keep yourself updated and seek a professional help whenever needed.

The income tax implications of selling your property in India for the NRI’s residing in the US

The income tax implications of selling your property in India for the NRI’s residing in the US

by | Apr 16, 2019 | Blog, global income tax, NRI, Tax Planning, Tax Refund

The income tax implications of selling your property in India for the NRI’s residing in the US

Indian real estate market is the third largest in the world. Attractive real-estate opportunities, RBI’s general permission and falling rupee value against dollars in recent times have created more interest among Non-resident Indians to invest in immovable properties in India. Along with buying a property of their own, many NRI’s may even have inherited properties in India. When it comes to dealing in property transactions for NRIs, taxation is one of the vital aspect to be considered. Let’s take a look at the income tax implications of selling property in India for NRI residing in the US.

Tax implications of selling property in India

Under the Income Tax Law in India, income from selling property is taxed under the head ‘capital gains’. Taxability on capital gains will be based on the period of holding of the property. Capital gains are taxable in the year of property transfer irrespective of receipt of sale consideration. Here are the tax treatment for capital gains arising out of selling of property in India.

  • Short-term capital gains: If you are selling the property before 24 months from the date of property purchase, gains are treated as short-term capital gains which are taxable at the normal tax slab applicable for you as an NRI. The buyer is liable to deduct TDS (tax deducted at source) at 30% rate irrespective of the tax slab.
  •  Long-term capital gains: If you are selling the property after 24 months or two years from the date of property purchase, gains are treated as long-term capital gains. For which, tax will be applicable at the rate of 20% with applicable surcharge and cess.

Capital gains are calculated as the difference between the sale value and cost of purchase. In case of inherited property, date and cost of purchase to the original owner (from whom the property is inherited) need to be considered for computing capital gains. In case of long-term assets, cost of purchase is indexed to adjust for inflation.

Tax exemptions to reduce tax-outgo

NRIs can claim tax exemptions under Section 54 and section 54EC on long-term capital gains arising out of sale of residential property in India.

  • Section 54: As an NRI if you sell a long-term residential property, you can claim tax exemption on the gains if you acquire another residential house either one year before the sale or two years after the sale of property. Exemption can also be claimed if you construct another residential house within a period of three years from the date of transfer of such property. However, exemption claim is limited to the lower of total capital gains on sale of property or cost of purchase/construction of new property. And, no exemption can be claimed in respect of property purchased or constructed outside India.
  • Section 54EC: As an NRI, you can also save tax on your long-term capital gains by investing in tax saving bonds issued by Rural Electrification Corporation (REC) or National Highway Authority of India (NHAI). To claim the tax exemption on long-term capital gains on sale of property, you need to invest in these bonds within six months from the date of transfer of property. Maximum of Rs. 50 lakhs is allowed to invest in these bonds which are redeemable after three years.

In order to avoid the deduction of TDS, it’s important to produce the relevant proofs or certificate of exemption to the buyer. However, you can claim refund of excess TDS deducted at the time of filing income tax return.

NRIs residing in US needs to keep in mind the tax implications applicable for them in US (country of residence) while selling property in India. It’s important to report the income and related details without any errors. Erroneous tax returns can land you in trouble. IRS sends out more than 9.1 million of notices every year to tax payers for erroneous tax returns. Failing to respond to notice can attract penalties.

Conclusion

Selling property for NRIs is not really a complex thing if taxation and legal aspects are dealt properly. Seeking professional help can smoothen the process and help in saving the tax liability to certain extent.

 

 

 

The top 3 things to keep in mind if you are returning to India in this financial year 2019-20

The top 3 things to keep in mind if you are returning to India in this financial year 2019-20

by | Apr 9, 2019 | Blog, income tax, Tax Extension, Tax Planning, Tax Preparation, Tax Refund

The top #3 things to keep in mind if you are returning to India in this Tax financial year 2019-20

For a non-resident Indian, who lived in another country for many years, the decision of returning to India permanently is never an easy one. There are a lot of considerations to be made for this transition, specifically on financial year matters. To avoid financial loss during transition, Investments, transfer of assets most importantly, taxation process and planning needs to be done thoroughly. Tax Here are the three most important things to keep in mind for NRIs returning to India in this financial year.

Understand your tax status and tax implications

As you return to India permanently, your tax liability for the financial year largely depends on your tax status for the year. You are considered as Non-Resident Indian (NRI)if you satisfy any of the below conditions.

  • Your total stay in India is less than 182 days during the financial year. Or,
  • You are not present in India for 60 days or more and 365 days or more in the four financial years prior to the relevant tax year.

If your tax status is NRI for the year, your income earned outside India is not taxable. Only, income earned in India are taxable for the year.

There is another category of NRI called ‘Resident but Not Ordinarily Resident’ (RNOR).You can become RNOR, if your stay in India in the seven financial years immediately preceding the relevant financial year is less than 729 days or if you have been Non-Resident Indian (NRI) in nine out of ten financial years preceding the relevant tax year.

If you are returning to India, you can keep your RNOR status for up to three financial years after your return to India. You can benefit hugely out of this as your income earned in India is only taxed not the global income. With RNOR status, you can enjoy many tax benefits on various incomes. Here are some of them.

  • Pensions from pension scheme held overseas
  • Capital gains from sale of properties and shares held overseas
  • Interest income from Resident Foreign Currency (RFC) and Foreign Currency Non-Resident (FCNR) deposits
  • Interest on deposits held overseas
  • Dividends earned on securities held overseas
  • Rental income from properties held overseas

Once you lose RNOR status, you will become ordinary resident of India and then your global income will be taxed in India. If your overseas income is taxed abroad, then you can claim tax benefits under Double Taxation Avoidance Agreement (DTAA).

Act oninvestments and assets held overseas

Firstly, you need to jot down list of investments and assets held overseas. This can help you plan properly. If you are planning to dispose overseas investment and assets, you need to plan for transfer of proceeds. If you plan to hold the investments and assets as it is overseas, reporting of such assets for the taxation purpose overseas need to be planned carefully. In order to avoid double taxation, experts recommend to dispose foreign assets and investments and get the proceeds transferred to India when you are an NRI or RNOR.

Re-plan your financials

As you close your overseas bank accounts, investments and get the assets transferred to India, it becomes necessary to re-work on your financials. As you return to India, your bank accounts held in non-resident status needs to be re-designated as resident accounts. However, your Resident Foreign Currency (RFC) account and Foreign Currency Non-Resident (FCNR) accounts can be held till maturity. Similarly, all your investments in India needs to be updated with the change in status. Not just there will be change in your investments, assets and tax implications on them, but also there can be change in your income and expenses. Hence, re-planning your finances need to be kept in mind while returning to India.

Conclusion

To ensure smoother transition, every aspect needs to be well thought out and planned. You can take help of tax experts and financial planners to experience easy transition and for better financial decisions.

4 Tax Benefits that you should not miss if YOU ARE PARENT

4 Tax Benefits that you should not miss if YOU ARE PARENT

by | Feb 11, 2019 | Investment & Income, Tax Planning, Tax Refund

4 Tax Benefits that you should not miss if YOU ARE PARENT?

4 Tax Benefits ,Being a parent is not easy and not is it cost-effective.  Tax creditRight from the moment of birth, you must endure expenses such as diapers, baby food, toys and other essentials. It is possible that one might get a bit exhausted and hope for a quick break.

Well, the quick break is there for your taking in the form of tax benefits.You can claim your parenting related expenses, which will in turn lower your liable taxes via deductions and tax credits. Here is a list of few tax benefits that you as a Parent should not miss or ignore.

  • Child Tax Credit

Tax credits essentially lower your taxes dollar for every dollar spent. If you have a few kids, you can use these tax credits to lower your taxes by a considerable margin. However, you can claim the credits for only qualifying children. Here are a few conditions.

  • You children must be below 18 years of age.
  • Your children must be a citizen of the USA, or a resident alien or a national.
  • You must declare your children as dependent on your tax claims.
  • Your children must be living with you for at least half of a financial year.
  • You can declare your own children, step children, foster children, half brother or sister, or a dependent such as grandchildren as your dependents.

You can claim the credits for several children, as long as you declare them as dependent and they are not listed as dependenton anyone else’s tax filing.

  • Adoption Tax Credit

With the help of adoption tax credit, you can easily offset some of the expenses related to adopting a child. Of course, there are few limitations when it comes to income and amount that you can claim per child. Here are a few expenses that you can claim under this clause.

  • Travel expenses related to court.
  • Food expenses related to court.
  • Attorney and court related fees.

In the event that you adopt a child with special needs, you can claim the entire Adoption tax credit. Irrespective of whether or not it surpasses your actual expenses. Since it is non-refundable, you must ensure that it doesn’t exceed your actual tax liability.

  • Higher Education Credits

Sending your kid for higher education is not cheap these days. Here are two credits that you can avail.

  • Lifetime Learning Credit (LLC)
  • American Opportunity Tax Credit (AOTC)

You can use the AOTC for up to four years, whereas the LLC can be carried forward as long as your kid pursues education.

The following expenses qualify for the above credits.

  • Tuition fees
  • Enrollment related fees
  • Expenses related to school materials

There are certain clauses in AOTC, which allows you for tax credit even if that results in zero tax liabilities.

  • Student Loan Deduction

You can avail deductions in your tax filing based on the payments that you have made for student loans. Since it is a deduction, you can reduce your net taxable income and thus lower the taxes.Here are a couple of conditions that are applicable.

  • A student loan should come from a qualified institution.
  • The loan should not be from any relative.
  • There are certain income limits that apply to deductions.
  • Your child’s enrollment for the degree should be more than half of the duration.

For the fiscal year 2016, as many as 19,273,883 taxpayers had opted for child tax credit. You can be one of them and save your hard earned money.

IRS Tax Refund

IRS Tax Refund

by | Nov 28, 2017 | Tax Refund

IRS Tax Refund

IRS Tax Refund,According to the information available to the IRS, every year a substantial number (about 75-80%) of the taxpayers are eligible for tax refunds in some form or the other. Of course, there are different clauses and conditions when it comes to tax refunds, but the general idea remains the same.

If you have paid more taxes than what you are liable for, the government issues a refund for the same, as long as you meet all the conditions.

You have filed your tax returns and realize that the government owes you a certain amount of money. That can be both exciting as well as confusing. It is exciting because you are eligible for a refund and confusing because you have no idea when you can realize those refunds.

Tracking IRS Tax Refunds

The IRS has several useful tools available for its taxpayers, but the Refund tracking tool is something that all the taxpayers rejoice.

If you visit the IRS website, you get an option of “Where’s My Refund”.

This is the most accurate medium for checking your tax refunds, as the IRS updates the entities every 24 hours. You need not be a techno wiz craft to use the tool as well. All that you need is your Social Security Number or Employee Identification Number, whichever was used for filing of taxes. Up next, you would need the filing status, such as single, married jointly filing or married filing separately etc. And lastly the exact amount of tax refunds.

Individuals who have filed their taxes electronically can track their refunds after 24 hours of their tax filing. On the other hand, if you have done it the old school way you will have to wait for a minimum of four weeks. The usual turnaround time for processing of refunds is about three weeks, but it at times it might take a bit longer owing to the fact that the IRS is underpowered when it comes to resources.

Don’t forget to check out Best Investments for Boosting Your Tax Refund

Missing Refunds

While opting for tax refunds, the safest and easiest option is to provide your details and the amount gets credited directly into your bank account. As you do not have to worry about the check and its traversal, it is the safest option as well. And the quickest as well, since you do not have to visit the bank or ATM to encash the same.

Quite a few individuals or taxpayers to be specific opt for getting the refunds in the form of checks. In fact, the IRS does not allow more than three deposits per year for a specific bank account, so you might have to resort to checks in such cases. Though is it not a usual occurrence, there are chances of the same getting lost from time to time. You should immediately reach out to the IRS in such a scenario to trace your missing check. There are two possible outcomes when it comes to a missing check, either it was cashed or it wasn’t. The IRS will investigate and find out if the check has been cashed or not. If no, they will send out a replacement check for you. If yes, the IRS then starts working towards a claims package. Once all the formalities are over, they will issue a replacement check.

If you have opted for filing your tax returns electronically, you can expect the refunds within 21 days of the filing.

But when it comes to refunds for paper returns, the IRS takes about 6-8 weeks and the duration reaches 8-12 weeks if there are amendments to the returns. Make sure you wait for the mentioned timelines before reaching out to IRS regarding the same.

Looking to get bigger IRS tax refunds, click here to know how.

Taxable Refunds – It’s Details, Understandings and Taxable or Non-taxable

Taxable Refunds – It’s Details, Understandings and Taxable or Non-taxable

by | Nov 24, 2017 | Tax Planning, Tax Refund

Taxable Refunds – It’s Details, Understandings and Taxable or Non-taxable

Taxable Refunds ,The tax system and all of its mechanisms can be confusing at times and difficult to comprehend for a normal person. But if you put in some effort in understanding the system, it doesn’t seem all that difficult anymore. Of course, there are several aspects of taxes, but we will focus mainly on refunds. When you have paid more taxes than you are liable for, you become eligible for tax refunds, provided you meet all the criterion. Statistics show that about 80% of individuals filing for taxes are eligible for tax refunds in some form or the other. However, the fact that state tax refunds can be taxable, puzzles a lot of the tax payers, who find it in bad taste as they must pay taxes on the refunds that they received.

Understanding State Refunds

Most of us do resent the idea of having to pay taxes on tax refunds, but there is more than what meets the eye. When it comes to taxes, the IRS and the States use the terms Refunds and Overcharge identically. And as you might have guessed by now, overcharge is taxable. Let us take an example where Josh has a $1000 over payment to the state and receives a refund for the same amount. The $1000 is taxable and we will get to the reasons in some time. But if he chooses to pay a piece of the same, let’s say $200 in some charity, the refund now becomes $800. He can use the $200 for tax rebates in the tax filing for the coming year.

The Underpinnings

Here is how it works. When you file your federal tax returns, one of the itemized deductions allowed is the State income tax that you have paid. But here is the thing, you cannot prepare for the state tax returns without going through the federal tax returns. Thus, there are chances that you are not aware of the State taxes that you must pay and IRS asks you to provide a tentative amount for the same. If you have overshot or undershot the amount, you need to address those in the next year tax returns. Before you draw any conclusions, the IRS does help you out in figuring the tentative amount of State income taxes. Keeping the above in mind, let us assume Josh had $2500 to be paid as part of State taxes. But when he filed for the state returns, he finds out that he only owed $1500. Thus the remaining $1000 will act as a tax refund for Josh. To overcome this situation, the IRS allows you to declare the $1000 overpayment as one of your income items.

Taxable or Non-taxable?

The state or local tax refunds are taxable in some cases whereas they are non-taxable in other cases. We will look into both the scenarios now. The most common scenario where you end up not paying any taxes on the refunds is if you do not deduct the same. If you have not itemized your tax refunds as part of the deductions, then the overpayment does not become a part of taxable income for that year. Some people manage to deduct their sales taxes, rather than state tax refunds when it comes to the previous year, thus giving them immunity against taxable refunds.

But if you have itemized the state and local taxes and were able to secure a refund for the previous year, the same amount or overpayment becomes a taxable entity for the current year. Keeping a close eye on the Form 1099-G can help you out in such situations. But even if you do not receive the same, overpayments are taxable.