Forfeiture of Bonus of employee who has dismissed from service for fraud or riotous or violent behaviour while on the premises of the establishment or theft, misspproproation or sabtoage of any property of the establishment. The relevant section 9 is as follows.
9. Disqualification for bonus.- Notwithstanding anything contained in this Act, an employee shall be disqualified from receiving bonus under this Act, if he is dismissed from service for--
(a) fraud; or
(b) riotous or violent behaviour while on the premises of the establishment; or
(c) theft, misappropriation or sabotage of any property of the establishment.
The section mentioned forfeiture of bonus of the employee who has dismissed from service. The question arises whether bonus will be forfeited for particular accounting year or previous years.
In one of the judgement delivered by Karnataka High Court in the case of Himalays drug Company Makali vs Presiding officer Second Additional court, Banglore 1987 that Section 9 of the Bonus Act exercised only with reference to accounting year in which the misconduct was committed.
Conclusion: X being employee of the company dismissed from service as per Section 9 of the act September 2011 then the company can forfeit his bonus for the accounting year 2011-12 not 2010-11. For accounting year 2010-2011 the bonus payable cannot be forfeited as per the Karnataka High Court Judgment.
Sunday, October 30, 2011
updates on companies bill
CNBC-TV18 :- The Finance Ministry and the Ministry of Corporate Affairs finally seem to have ironed out issues regarding the Companies Bill, especially with respect to clashes with market regulator Sebi's jurisdiction, reports CNBC-TV18’s Aakansha Sethi. The Finance Ministry and SEBI had asked for a review of those provisions of the Companies Bill which were in conflict with the SEBI Act and those provisions where SEBIs powers were curtailed. Yesterday, there was a meeting between the Finance Ministry, Sebi officials and the Ministry of Corporate Affairs and all these issues have now been resolved. Sebi’s jurisdiction in all such matters where there is a conflict has been upheld. For instance, where insider trading is concerned, it was one of the issues that Sebi had expressed that all powers have been delegated to Sebi and all regulations will be administered by Sebi. They have been given flexibility for timing of any notices that they may issue, whether its seven days, 24 hours, considering the dynamic nature of capital markets it will be up to Sebi to decide that. Sebi’s Civil Enforcement powers have been upheld in all the sections that they administer. Now the new Companies Bill with these revised revisions will be taken up by the Cabinet on November 3.
Wednesday, October 26, 2011
Companies bill deferred- source The Business standard
Companies bill deferred
BS REPORTERS New Delhi, 25 October
THE much awaited Companies Bill 2011 will require further fine tuning before it can get the approval of the Union Cabinet.
The Cabinet today deferred adecision on the Bill following objections by the finance and law ministries. It is learnt the objections were related to the newly introduced provisions regarding the corporate social responsibility norms. The jurisdictional issues with regard to the role of Securities and Exchanges Board, the Central Board of Direct Taxes and certain statutory provisions under the proposed Bill were also contentious matters.
Briefing the Cabinet decisions, Ambika Soni, minister of information and broadcasting, said the deferment was technical in nature. “There is no difference of opinion. Some of the Cabinet members had some queries on certain issues.
It will be clarified and the Bill will be back for Cabinet approval within a week or 10 days,” she said.
Corporate Affairs Minister MVeerappa Moily declined to speak on the matter.
He is expected to sort out the matter with Finance Minister Pranab Mukherjee and Planning Commission Deputy Chairperson Montek Singh Ahluwalia before the Bill goes back to the Cabinet.
BS REPORTERS New Delhi, 25 October
THE much awaited Companies Bill 2011 will require further fine tuning before it can get the approval of the Union Cabinet.
The Cabinet today deferred adecision on the Bill following objections by the finance and law ministries. It is learnt the objections were related to the newly introduced provisions regarding the corporate social responsibility norms. The jurisdictional issues with regard to the role of Securities and Exchanges Board, the Central Board of Direct Taxes and certain statutory provisions under the proposed Bill were also contentious matters.
Briefing the Cabinet decisions, Ambika Soni, minister of information and broadcasting, said the deferment was technical in nature. “There is no difference of opinion. Some of the Cabinet members had some queries on certain issues.
It will be clarified and the Bill will be back for Cabinet approval within a week or 10 days,” she said.
Corporate Affairs Minister MVeerappa Moily declined to speak on the matter.
He is expected to sort out the matter with Finance Minister Pranab Mukherjee and Planning Commission Deputy Chairperson Montek Singh Ahluwalia before the Bill goes back to the Cabinet.
Manufacturing to get boost with national policy- source The Business standard
Manufacturing to get boost with national policy
BS REPORTER New Delhi, 25 October
FACING tough times due to successive rate rise by the Reserve Bank of India, manufacturing at last will get some respite in the long run. The Union Cabinet today buried all inter-ministerial differences to clear the first-ever National Manufacturing Policy (NMP) to provide a hasslefree environment and tax incentives to the sector.
The policy will now be notified within a month and individual departments will come out with separate notifications, Commerce and Industry Minister Anand Sharma said.
The policy, cleared after one-and-a-half-years of first draft policy, aimed at increasing the share of manufacturing to 25 per cent of the gross domestic product (GDP) by 2022 from 16 per cent at present, and generate additional 100 million jobs by that time.
For this, manufacturing has to grow by 12-14 per cent ayear on an average, a target which seems quite feasible, Sharma said. In the last five years, manufacturing grew in this range only in 2006-07.
The policy envisages a number of fiscal incentives like income tax concession on venture capital funds with a focus on small and medium enterprises (SME), rollover relief from long-term capital gains tax to individuals on sale of a residential property wherever such sale consideration is invested in the equity of a new start-up SME, viability gap funding to polytechnics and special purpose vehicle in proposed National Manufacturing and Investment Zones (NMIZs) etc. There would be other tax benefits for adopting green technology.
A separate manufacturing industry promotion board (MIPB) would also be set up under Sharma to oversea coordination between the Centre and state for proper implementation of the policy.
Besides, RBI will be approached for providing liberal banking norms for banks investing in venture capital funds with a focus on SMEs in manufacturing and IRDA will be talked to for easy norms for insurance companies in this regard.
The policy was stalled last month when differences cropped up between the commerce and industry ministry and labour and environment ministries over delegation of the power to a special purpose vehicle, which is proposed to be set up for managing the show in NIMZ, which should have at least 5,000 hectares of land, much larger than special economic zones (SEZs).
The NMIZs would be large areas of developed land, with the requisite eco-system for promoting world class manufacturing activity.
The NMP, Sharma said "will ensure compliance of labour and environmental laws while introducing procedural simplifications and rationalisation so that the regulatory burden on the industry is reduced".
BS REPORTER New Delhi, 25 October
FACING tough times due to successive rate rise by the Reserve Bank of India, manufacturing at last will get some respite in the long run. The Union Cabinet today buried all inter-ministerial differences to clear the first-ever National Manufacturing Policy (NMP) to provide a hasslefree environment and tax incentives to the sector.
The policy will now be notified within a month and individual departments will come out with separate notifications, Commerce and Industry Minister Anand Sharma said.
The policy, cleared after one-and-a-half-years of first draft policy, aimed at increasing the share of manufacturing to 25 per cent of the gross domestic product (GDP) by 2022 from 16 per cent at present, and generate additional 100 million jobs by that time.
For this, manufacturing has to grow by 12-14 per cent ayear on an average, a target which seems quite feasible, Sharma said. In the last five years, manufacturing grew in this range only in 2006-07.
The policy envisages a number of fiscal incentives like income tax concession on venture capital funds with a focus on small and medium enterprises (SME), rollover relief from long-term capital gains tax to individuals on sale of a residential property wherever such sale consideration is invested in the equity of a new start-up SME, viability gap funding to polytechnics and special purpose vehicle in proposed National Manufacturing and Investment Zones (NMIZs) etc. There would be other tax benefits for adopting green technology.
A separate manufacturing industry promotion board (MIPB) would also be set up under Sharma to oversea coordination between the Centre and state for proper implementation of the policy.
Besides, RBI will be approached for providing liberal banking norms for banks investing in venture capital funds with a focus on SMEs in manufacturing and IRDA will be talked to for easy norms for insurance companies in this regard.
The policy was stalled last month when differences cropped up between the commerce and industry ministry and labour and environment ministries over delegation of the power to a special purpose vehicle, which is proposed to be set up for managing the show in NIMZ, which should have at least 5,000 hectares of land, much larger than special economic zones (SEZs).
The NMIZs would be large areas of developed land, with the requisite eco-system for promoting world class manufacturing activity.
The NMP, Sharma said "will ensure compliance of labour and environmental laws while introducing procedural simplifications and rationalisation so that the regulatory burden on the industry is reduced".
SERVICE TAX RETURN DUE DATE EXTENDED
Dear friends,
Due date of service tax return is extended for the period April 2011 to September 2011 from 25thOctober 2011 to 26th December 2011.
Pls find below text of order:
________________________________________________________________________________________________________
F. No. 137/99/2011 – Service Tax, New Delhi dated the 20th October 2011
ORDER NO. 1 /2011 – Service Tax
In exercise of the powers conferred by Rule 7(4) of the Service Tax Rules 1994 read withnotification No. 48/2011-Service Tax dated 19th October 2011, Central Board of Excise and Customs hereby extends the date of submission of half yearly return for the period April 2011 to September 2011 from 25thOctober 2011 to 26th December 2011.This is being done in view of the fact that thee-filing of service tax returns for all class ofservice tax assesses has been made mandatory for the first time vide notification no. 43/2011- Service Tax dated 25.8.11, as such leaving less time for the trade to adjust to the requirement of e-filing.
_____________________________________________________________________________________________________
With regards,
Bipul Kumar
FEMA & Tax Advisory Services
Wisdom Management Consultancy Private Limited
--------------------------------------------------
Reg. Office: B-94/9, Dharni Chamber, Joshi Colony, IP Extension, New Delhi-110092.
+91-9560084833 [Cell]
Due date of service tax return is extended for the period April 2011 to September 2011 from 25thOctober 2011 to 26th December 2011.
Pls find below text of order:
________________________________________________________________________________________________________
F. No. 137/99/2011 – Service Tax, New Delhi dated the 20th October 2011
ORDER NO. 1 /2011 – Service Tax
In exercise of the powers conferred by Rule 7(4) of the Service Tax Rules 1994 read withnotification No. 48/2011-Service Tax dated 19th October 2011, Central Board of Excise and Customs hereby extends the date of submission of half yearly return for the period April 2011 to September 2011 from 25thOctober 2011 to 26th December 2011.This is being done in view of the fact that thee-filing of service tax returns for all class ofservice tax assesses has been made mandatory for the first time vide notification no. 43/2011- Service Tax dated 25.8.11, as such leaving less time for the trade to adjust to the requirement of e-filing.
_____________________________________________________________________________________________________
With regards,
Bipul Kumar
FEMA & Tax Advisory Services
Wisdom Management Consultancy Private Limited
--------------------------------------------------
Reg. Office: B-94/9, Dharni Chamber, Joshi Colony, IP Extension, New Delhi-110092.
+91-9560084833 [Cell]
FEMA Updates:External Commercial Borrowings (ECB) in Renminbi (RMB)
Please find herewith latest FEMA Update:
RBI/2011-12/205
A.P. (DIR Series) Circular No. 30
External Commercial Borrowings (ECB) in Renminbi (RMB)Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to the Foreign Exchange Management (Borrowing or lending in foreign exchange) Regulations, 2000, notified vide Notification No. FEMA 3/2000-RB dated May 3, 2000, amended from time to time, the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 notified vide Notification No. FEMA.14/2000-RB dated May 3, 2000, amended from time to time and the A.P. (DIR Series) Circular No. 5 dated August 1, 2005, amended from time to time relating to the External Commercial Borrowings (ECB).
2. Considering the specific needs of the infrastructure sector, the existing ECB policy has been reviewed in consultation with the Government of India and it has been decided to allow Indian companies which are in the infrastructure sector, where “infrastructure” is as defined under the extant guidelines on External Commercial Borrowings (ECB), to avail of ECBs in Renminbi (RMB), under the approval route, subject to an annual cap of USD one billion pending further review.
3. Once approved, the approval of the Reserve Bank will be valid for a period of three months from the date of issue of the approval letter and the loan agreement should be executed within the validity period. The company may thereafter submit the completed Form 83 to the Department of Statistics and Information Management (DSIM), Reserve Bank of India for allotment of loan registration number (LRN) within seven days (from the date of signing the loan agreement between the borrower and the lender). In case the borrower fails to obtain LRN within the above period, the approval of the Reserve Bank will stand cancelled.
4. AD Category- I bank will be permitted to open Nostro accounts in Renminbi (RMB). The designated AD - Category I bank shall monitor the end-use of funds and bank(s) in India will not be permitted to provide any form of guarantee(s). All other conditions of ECB, such as eligible borrower, recognized lender, all-in-cost, average maturity, prepayment, refinancing of existing ECB and reporting arrangements shall remain unchanged and shall be complied with.
5. The amended ECB policy will come into force with immediate effect and is subject to review.
6. Necessary amendments to the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 are being issued separately, wherever necessary.
7. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers.
8. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
--
With regards,
Manoj Pandey
Wisdom Management Consultancy Private Limited
----------------------------------------------------------------
Reg. Office: B-94/9, Dharni Chamber, Joshi Colony, IP Extension, New Delhi-110092.
+91-9313649750 [Cell]
RBI/2011-12/205
A.P. (DIR Series) Circular No. 30
External Commercial Borrowings (ECB) in Renminbi (RMB)Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to the Foreign Exchange Management (Borrowing or lending in foreign exchange) Regulations, 2000, notified vide Notification No. FEMA 3/2000-RB dated May 3, 2000, amended from time to time, the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 notified vide Notification No. FEMA.14/2000-RB dated May 3, 2000, amended from time to time and the A.P. (DIR Series) Circular No. 5 dated August 1, 2005, amended from time to time relating to the External Commercial Borrowings (ECB).
2. Considering the specific needs of the infrastructure sector, the existing ECB policy has been reviewed in consultation with the Government of India and it has been decided to allow Indian companies which are in the infrastructure sector, where “infrastructure” is as defined under the extant guidelines on External Commercial Borrowings (ECB), to avail of ECBs in Renminbi (RMB), under the approval route, subject to an annual cap of USD one billion pending further review.
3. Once approved, the approval of the Reserve Bank will be valid for a period of three months from the date of issue of the approval letter and the loan agreement should be executed within the validity period. The company may thereafter submit the completed Form 83 to the Department of Statistics and Information Management (DSIM), Reserve Bank of India for allotment of loan registration number (LRN) within seven days (from the date of signing the loan agreement between the borrower and the lender). In case the borrower fails to obtain LRN within the above period, the approval of the Reserve Bank will stand cancelled.
4. AD Category- I bank will be permitted to open Nostro accounts in Renminbi (RMB). The designated AD - Category I bank shall monitor the end-use of funds and bank(s) in India will not be permitted to provide any form of guarantee(s). All other conditions of ECB, such as eligible borrower, recognized lender, all-in-cost, average maturity, prepayment, refinancing of existing ECB and reporting arrangements shall remain unchanged and shall be complied with.
5. The amended ECB policy will come into force with immediate effect and is subject to review.
6. Necessary amendments to the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 are being issued separately, wherever necessary.
7. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers.
8. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
--
With regards,
Manoj Pandey
Wisdom Management Consultancy Private Limited
----------------------------------------------------------------
Reg. Office: B-94/9, Dharni Chamber, Joshi Colony, IP Extension, New Delhi-110092.
+91-9313649750 [Cell]
COMPANY LAW BOARD (AMENDMENT) REGULATIONS, 2011 - AMENDMENT IN REGULATION 29
COMPANY LAW BOARD (AMENDMENT) REGULATIONS, 2011 - AMENDMENT IN REGULATION 29NOTIFICATION NO. G.S.R. 682(E), DATED 15-9-2011
In exercise of the powers conferred by sub-section (4B) and sub-section (6) of section 10E of the Companies Act, 1956 (1 of 1956), the Company Law Board hereby makes the following regulations further to amend the Company Law Board Regulations, 1991 namely :—
1. (1) These regulations may be called the Company Law Board (Amendment) Regulations, 2011.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Company Law Board Regulations, 1991, after the proviso to sub-regulation (4) of regulation 29 the following proviso shall be inserted, namely :—
"Provided further that service of an order on a foreign party resident outside India shall be deemed to be sufficiently served if a copy thereof is delivered or tendered or sent by post at the last known address of such party's authorised representative(s) resident in India, where he appears by such representative(s)."
--
With regards,
Manoj Pandey
Wisdom Management Consultancy Private Limited
----------------------------------------------------------------
Reg. Office: B-94/9, Dharni Chamber, Joshi Colony, IP Extension, New Delhi-110092.
+91-9313649750 [Cell]
In exercise of the powers conferred by sub-section (4B) and sub-section (6) of section 10E of the Companies Act, 1956 (1 of 1956), the Company Law Board hereby makes the following regulations further to amend the Company Law Board Regulations, 1991 namely :—
1. (1) These regulations may be called the Company Law Board (Amendment) Regulations, 2011.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Company Law Board Regulations, 1991, after the proviso to sub-regulation (4) of regulation 29 the following proviso shall be inserted, namely :—
"Provided further that service of an order on a foreign party resident outside India shall be deemed to be sufficiently served if a copy thereof is delivered or tendered or sent by post at the last known address of such party's authorised representative(s) resident in India, where he appears by such representative(s)."
--
With regards,
Manoj Pandey
Wisdom Management Consultancy Private Limited
----------------------------------------------------------------
Reg. Office: B-94/9, Dharni Chamber, Joshi Colony, IP Extension, New Delhi-110092.
+91-9313649750 [Cell]
Fema updates regarding opening Foreign Currency- Non resident account
Dear Friends,
Please find herewith latest FEMA Updates regarding Opening Foreign Currency (Non-Resident) Account and Liberalized Remittance Scheme - Clarification
RBI/2011-12/225
A.P. (DIR Series) Circular No. 36
October 19, 2011Opening Foreign Currency (Non-Resident) Account (Banks) Scheme
[FCNR(B)] account in any freely convertible currency – liberalisationAttention of Authorised Dealer (AD) banks is invited to the Paragraph 2 of Schedule 2 to the Notification No.FEMA 5/2000-RB dated May 3, 2000, viz. Foreign Exchange Management (Deposit) Regulations, 2000, as amended from time to time, read withNotification No. FEMA 14/2000-RB dated May 3, 2000, viz. Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000, as amended from time to time, in terms of which deposit of funds in the Foreign Currency (Non-Resident) Account (Banks) Scheme [FCNR(B)] accounts may be accepted in such permissible currencies as may be designated by the Reserve Bank from time to time. Presently, Pound Sterling, US Dollar, Japanese Yen, Euro, Canadian Dollar and Australian Dollar are the currencies designated by the Reserve Bank.
2. The Committee to Review the Facilities for Individuals under FEMA, 1999 in its Report has recommended that FCNR(B) accounts may be permitted to be opened in any freely convertible currency.
3. On a review, it has been decided that AD banks in India may be permitted to accept FCNR (B) deposits in any permitted currency. It may be noted that 'Permitted currency' for this purpose would mean a foreign currency which is freely convertible as defined in terms of Regulation 2(v) of FEMA 14/2000-RB dated May 3, 2000, as amended from time to time.
4. Authorised Dealer banks may bring the contents of this circular to the notice of their account holders concerned.
5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
RBI/2011-12/226
A.P. (DIR Series) Circular No. 37
October 19, 2011 (i) Repatriation of income and sale proceeds of assets held abroad by NRIs who have returned to India for permanent settlement (ii) repatriation of income and sale proceeds of assets acquired abroad through remittances under Liberalised Remittance Scheme - ClarificationAttention of the Authorised Dealer (AD) banks is invited to sections 6(4) of the Foreign Exchange Management Act (FEMA), 1999. Further, the attention of AD banks is also invited to section 8 of FEMA, 1999 which states that save as otherwise provided in this Act, where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realize and repatriate to India such foreign exchange within such period and in such manner as may be specified by the Reserve Bank.
2. The Committee to Review the Facilities for Individuals under FEMA, 1999 has suggested in its Report that necessary clarifications may be issued forthwith clarifying the position that income and sale proceeds of assets held abroad by NRIs who have returned to India for permanent settlement and income and sale proceeds of assets held abroad through remittances under LRS need not be repatriated.
3. Accordingly, it is clarified as under:
(a) in terms of sub-section 4 of Section (6) of FEMA, 1999, a person resident in India is free to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India.
(b) an investor can retain and reinvest the income earned on investments made under the Liberalised Remittance Scheme.
4. AD banks may bring the contents of this circular to the notice of their constituents/customers concerned.
--
With regards,
Manoj Pandey
Wisdom Management Consultancy Private Limited
----------------------------------------------------------------
Reg. Office: B-94/9, Dharni Chamber, Joshi Colony, IP Extension, New Delhi-110092.
+91-9313649750 [Cell]
Please find herewith latest FEMA Updates regarding Opening Foreign Currency (Non-Resident) Account and Liberalized Remittance Scheme - Clarification
RBI/2011-12/225
A.P. (DIR Series) Circular No. 36
October 19, 2011Opening Foreign Currency (Non-Resident) Account (Banks) Scheme
[FCNR(B)] account in any freely convertible currency – liberalisationAttention of Authorised Dealer (AD) banks is invited to the Paragraph 2 of Schedule 2 to the Notification No.FEMA 5/2000-RB dated May 3, 2000, viz. Foreign Exchange Management (Deposit) Regulations, 2000, as amended from time to time, read withNotification No. FEMA 14/2000-RB dated May 3, 2000, viz. Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000, as amended from time to time, in terms of which deposit of funds in the Foreign Currency (Non-Resident) Account (Banks) Scheme [FCNR(B)] accounts may be accepted in such permissible currencies as may be designated by the Reserve Bank from time to time. Presently, Pound Sterling, US Dollar, Japanese Yen, Euro, Canadian Dollar and Australian Dollar are the currencies designated by the Reserve Bank.
2. The Committee to Review the Facilities for Individuals under FEMA, 1999 in its Report has recommended that FCNR(B) accounts may be permitted to be opened in any freely convertible currency.
3. On a review, it has been decided that AD banks in India may be permitted to accept FCNR (B) deposits in any permitted currency. It may be noted that 'Permitted currency' for this purpose would mean a foreign currency which is freely convertible as defined in terms of Regulation 2(v) of FEMA 14/2000-RB dated May 3, 2000, as amended from time to time.
4. Authorised Dealer banks may bring the contents of this circular to the notice of their account holders concerned.
5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
RBI/2011-12/226
A.P. (DIR Series) Circular No. 37
October 19, 2011 (i) Repatriation of income and sale proceeds of assets held abroad by NRIs who have returned to India for permanent settlement (ii) repatriation of income and sale proceeds of assets acquired abroad through remittances under Liberalised Remittance Scheme - ClarificationAttention of the Authorised Dealer (AD) banks is invited to sections 6(4) of the Foreign Exchange Management Act (FEMA), 1999. Further, the attention of AD banks is also invited to section 8 of FEMA, 1999 which states that save as otherwise provided in this Act, where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realize and repatriate to India such foreign exchange within such period and in such manner as may be specified by the Reserve Bank.
2. The Committee to Review the Facilities for Individuals under FEMA, 1999 has suggested in its Report that necessary clarifications may be issued forthwith clarifying the position that income and sale proceeds of assets held abroad by NRIs who have returned to India for permanent settlement and income and sale proceeds of assets held abroad through remittances under LRS need not be repatriated.
3. Accordingly, it is clarified as under:
(a) in terms of sub-section 4 of Section (6) of FEMA, 1999, a person resident in India is free to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India.
(b) an investor can retain and reinvest the income earned on investments made under the Liberalised Remittance Scheme.
4. AD banks may bring the contents of this circular to the notice of their constituents/customers concerned.
--
With regards,
Manoj Pandey
Wisdom Management Consultancy Private Limited
----------------------------------------------------------------
Reg. Office: B-94/9, Dharni Chamber, Joshi Colony, IP Extension, New Delhi-110092.
+91-9313649750 [Cell]
Managerial remuneration
Sunday, 16 October 2011Managerial Remuneration - A Bird's Eye View
Remuneration payable as per Schedule XIII without the approval of Central Government:
Situation 1
Remuneration payable by companies having profits in a financial year - Section I:
Steps to be followed:
1)The remuneration should as far as possible be broken up under the following broad heads as per the requirements of Schedule VI to the Companies Act:-
a) Salaries and allowances;
b) Monetary value of various perquisites;
c) Contribution to provident, superannuation and gratuity funds;
d) Commission.
2) Need to obtain and check the computation of net profit as per Section 349.
(a) The various adjustments to arrive at the net profit needs to be correctly done.
(b) The depreciation should be the same as that provided for in the accounts (as per Section 350). The difference in depreciation, if any, should be added (in case it is more than it should have been, the amount of difference) or subtracted (in case it is less than it should have been, the amount of difference), as applicable.
3) The total remuneration should be expressed as a % of the net profits computed.
4) The % should not exceed the following limits:-
a) 5% of the net profits in case of remuneration to only one managerial person.
b) 10% of the net profits in case of remuneration to more than one managerial person.
c) 11% of the net profits in respect of the total remuneration to all managerial personnel (including the non-whole time directors).
5) Board Meeting to be held for getting the approval for the remuneration payable to managerial personnel.
Situation 2
Remuneration payable by companies having no profits or inadequate profits in a financial year - Section II:
Where the effective capital(1) of the company is:
Monthly Remuneration payable
Rs.(A) (B) (C)
Not
exceeding the
ceiling limit of
Rs. 24 lacs p.a.
or Rs. 2 lacs p.m Not
exceeding the
ceiling limit of
Rs. 48 lacs p.a.
or Rs. 4 lacs p.m
Not
exceeding the
ceiling limit of
Rs. 48 lacs p.a.
or Rs. 4 lacs p.m
()
(i) less than Rs. 1 crore 75,000 1,50,000 1,50,000
(ii) Rs.1 crore or more but less than Rs.5 crores. 1,00,000 2,00,000 2,00,000
(iii) Rs.5 crores or more but less than Rs.25 crores. 1,25,000 2,50,000 2,50,000
(iv)Rs.25 crores or more but less than Rs.50 crores. 1,50,000 3,00,000 3,00,000
(v) Rs.50 crores or more but less than Rs. 100 crores. 2,00,000 4,00,000 4,00,000
OTHER CRITERIA/ REQUISITES
Board Meeting for calling Extra Ordinary Meeting. Required Required Required
Listed below are the conditions of Schedule XIII required to be fulfilled for paying remuneration in any of the categories:
a)
Requirement of approval of general meeting by way of:-
Ordinary
Resolution
Special Resolution
Special
Resolution
b)
Approval by way of resolution passed by the Remuneration Committee(2):-
Required
Required
Required
c)
Company should not have committed any default in repayment of any debts (including public deposits or debentures or interest payable thereon) for a continuous period of 30 days in the preceding financial year before the date of appointment
Applicable
Applicable
Applicable
d)
Period of sanction of remuneration
Not exceeding 5 years
Not exceeding 3 years
Not exceeding 3 years
e)
A statement along with notice calling the general meeting of the shareholders containing:-
Not required
Required
Required
I. General Information
II. Information about the appointee
III. Other Information
IV. Disclosure
f)
Approval of Central Government for payment of Remuneration
Not Required
Not Required
Prior approval required (3)
Provided Effective Capital of the company Should be positive Should be positive Is negative
Requirement of filing of Form No.25C with ROC within 90 days from the date of appointment, duly certified by a professional
Applicable Applicable Applicable
Note: (Total 3 notes)
(1) Calculation of Effective Capital:
(To be made as on the last date of the financial year preceding the financial year in which the appointment of the managerial person is made. But if the appointment of managerial person is made in the year in which company is incorporated, the effective capital shall be calculated as on the date of such appointment).
A quick format for facilitating calculation of effective capital:
Particulars Amount (in Rs.)
(inner column) Amount (in Rs.)
(outer column)
Paid up Share Capital
Add:
1) Share Premium
2) Reserve & Surplus (excluding revaluation reserve)
3) Long Term loans and deposits repayable after one year (excluding working capital loans, overdrafts, interest due on loans unless funded, bank guarantee etc. and other short term arrangements).
Less:
1) Aggregate of any investments (except in the case of investment by an investment company whose principal business is acquisition of shares, stock, debentures or other securities)
2) Accumulated loses and preliminary expenses not written off.
Total
(2) Remuneration Committee:
“Remuneration Committee” means a committee which consists of at least 3 non executive independent directors including nominee director or nominee directors, if any.
As per Notification vide G.S.R. 70(E) dated 08.02.2011, the definition of Remuneration Committee has changed and stands as under:
“Remuneration Committee” means:
(i) in respect of a listed company, a committee which consists of atleast 3 non executive independent directors including nominee director or nominee directors, if any and
(ii) in respect of any other company, a Remuneration Committee of Directors.
The Remuneration Committee while approving the remuneration shall-
a) take into account, financial position of the company, trend in the industry, appointee’s qualification, experience, past performance, past remuneration, etc.
b) be in the position to bring about objectivity in determining the remuneration package while striking a balance between the interest of the company and shareholders.
(3) Prior Approval required (mentioned in page 4)
As per Notification vide G.S.R. 70(E) dated 08.02.2011 in Schedule XIII, Part II, Section II, in Sub Para (C) it is mentioned that:
The prior approval of Central Government is required to be obtained only if the company is listed company or subsidiary of listed company.
Unlisted companies (which are not subsidiaries of listed companies) shall not require prior Government approval for managerial remuneration provided they meet the other conditions stipulated in the Schedule.
Further, as per Notification vide G.S.R 396(E) dated 23.05.2011 in Schedule XIII, Part II, Section II, Sub Para (C) it is mentioned that:
The prior approval of Central Government is not required for a subsidiary of a listed company, if -
1. The Remuneration Committee and Board of Directors of the Holding Company give their consent for the amount of remuneration of the applicant and for the said amount to be deemed as remuneration paid by the Holding Company for the purpose of Section 198 of the Companies Act, 1956.
2. The remuneration of the applicant is approved by the Holding Company in the general meeting.
3. If the remuneration of the applicant is deemed to be remuneration paid by Holding Company.
4. All the members of the subsidiary are bodies corporate.
Provided that a listed company or a subsidiary of a listed company shall not require Central Government approval for payment of remuneration to its managerial personnel, if the remuneration is fixed by the Board of Industrial and Financial Reconstruction.
As per Notification vide G.S.R 534(E) dated 14.07.2011 in Schedule XIII, Part II, Section II, Sub Para (C) it is mentioned that:
The approval of Central Government is not required if the managerial person is not having any interest in the capital or its holding company, directly or indirectly or through any other statutory structures and not having any direct or indirect interest or related to the directors or promoters of the company or its holding company at any time during last two years before or on the date of appointment and having a graduate level qualification with expert and specialized knowledge in the field of profession.
Section III
This applies for: Remuneration payable to a managerial person in two companies subject to the provisions of Section I and II, a managerial person shall be eligible to draw remuneration from one or both companies subject to that the total remuneration drawn from the companies does not exceed the higher maximum limit admissible from any one of the companies of which he is a managerial person.
Remuneration payable with the prior approval of Central Government:
Situation 1.
Requirement of approval of the Central Government for payment of remuneration to managerial person:-
A Company which has no profits or has inadequate profits shall not pay to its directors, including any managing or whole-time director or manager, by way of remuneration a sum exclusive of any fees payable to directors under section 309(2), except with the previous approval of the Central Government.
However, approval of the Central Government shall not be required for payment of remuneration to its managerial person if the appointment has been made in accordance with the provisions of section 269 read with Schedule XIII to the Act. [Section 198(4)].
Situation 2.
Compulsory requirement of approval of the Central Government for appointment of managerial personnel
If the appointment and remuneration of a managerial person has not been made in accordance with the provisions of Schedule XIII, it shall be got approved by the Central Government.
In order to obtain approval of the Central Government, application shall be made in the prescribed Form 25A within a period of ninety days from the date of appointment.
Posted by mamta binani at 18:58 Email ThisBlogThis!Share to TwitterShare to Facebook1 comments:
ankit said...
let assumed that a company appoint a WTD for 3 year assume 09 to 12 , now at present time mean 2011, in AGM we intimate our shareholders for their reappointment for current year , is it require to file form 23 ? for year 2011 ?
in 2009 we already file form 23 for their appoitment for 3 year s and the current year is cover is thoese period.
16 October 2011 23:14
Remuneration payable as per Schedule XIII without the approval of Central Government:
Situation 1
Remuneration payable by companies having profits in a financial year - Section I:
Steps to be followed:
1)The remuneration should as far as possible be broken up under the following broad heads as per the requirements of Schedule VI to the Companies Act:-
a) Salaries and allowances;
b) Monetary value of various perquisites;
c) Contribution to provident, superannuation and gratuity funds;
d) Commission.
2) Need to obtain and check the computation of net profit as per Section 349.
(a) The various adjustments to arrive at the net profit needs to be correctly done.
(b) The depreciation should be the same as that provided for in the accounts (as per Section 350). The difference in depreciation, if any, should be added (in case it is more than it should have been, the amount of difference) or subtracted (in case it is less than it should have been, the amount of difference), as applicable.
3) The total remuneration should be expressed as a % of the net profits computed.
4) The % should not exceed the following limits:-
a) 5% of the net profits in case of remuneration to only one managerial person.
b) 10% of the net profits in case of remuneration to more than one managerial person.
c) 11% of the net profits in respect of the total remuneration to all managerial personnel (including the non-whole time directors).
5) Board Meeting to be held for getting the approval for the remuneration payable to managerial personnel.
Situation 2
Remuneration payable by companies having no profits or inadequate profits in a financial year - Section II:
Where the effective capital(1) of the company is:
Monthly Remuneration payable
Rs.(A) (B) (C)
Not
exceeding the
ceiling limit of
Rs. 24 lacs p.a.
or Rs. 2 lacs p.m Not
exceeding the
ceiling limit of
Rs. 48 lacs p.a.
or Rs. 4 lacs p.m
Not
exceeding the
ceiling limit of
Rs. 48 lacs p.a.
or Rs. 4 lacs p.m
()
(i) less than Rs. 1 crore 75,000 1,50,000 1,50,000
(ii) Rs.1 crore or more but less than Rs.5 crores. 1,00,000 2,00,000 2,00,000
(iii) Rs.5 crores or more but less than Rs.25 crores. 1,25,000 2,50,000 2,50,000
(iv)Rs.25 crores or more but less than Rs.50 crores. 1,50,000 3,00,000 3,00,000
(v) Rs.50 crores or more but less than Rs. 100 crores. 2,00,000 4,00,000 4,00,000
OTHER CRITERIA/ REQUISITES
Board Meeting for calling Extra Ordinary Meeting. Required Required Required
Listed below are the conditions of Schedule XIII required to be fulfilled for paying remuneration in any of the categories:
a)
Requirement of approval of general meeting by way of:-
Ordinary
Resolution
Special Resolution
Special
Resolution
b)
Approval by way of resolution passed by the Remuneration Committee(2):-
Required
Required
Required
c)
Company should not have committed any default in repayment of any debts (including public deposits or debentures or interest payable thereon) for a continuous period of 30 days in the preceding financial year before the date of appointment
Applicable
Applicable
Applicable
d)
Period of sanction of remuneration
Not exceeding 5 years
Not exceeding 3 years
Not exceeding 3 years
e)
A statement along with notice calling the general meeting of the shareholders containing:-
Not required
Required
Required
I. General Information
II. Information about the appointee
III. Other Information
IV. Disclosure
f)
Approval of Central Government for payment of Remuneration
Not Required
Not Required
Prior approval required (3)
Provided Effective Capital of the company Should be positive Should be positive Is negative
Requirement of filing of Form No.25C with ROC within 90 days from the date of appointment, duly certified by a professional
Applicable Applicable Applicable
Note: (Total 3 notes)
(1) Calculation of Effective Capital:
(To be made as on the last date of the financial year preceding the financial year in which the appointment of the managerial person is made. But if the appointment of managerial person is made in the year in which company is incorporated, the effective capital shall be calculated as on the date of such appointment).
A quick format for facilitating calculation of effective capital:
Particulars Amount (in Rs.)
(inner column) Amount (in Rs.)
(outer column)
Paid up Share Capital
Add:
1) Share Premium
2) Reserve & Surplus (excluding revaluation reserve)
3) Long Term loans and deposits repayable after one year (excluding working capital loans, overdrafts, interest due on loans unless funded, bank guarantee etc. and other short term arrangements).
Less:
1) Aggregate of any investments (except in the case of investment by an investment company whose principal business is acquisition of shares, stock, debentures or other securities)
2) Accumulated loses and preliminary expenses not written off.
Total
(2) Remuneration Committee:
“Remuneration Committee” means a committee which consists of at least 3 non executive independent directors including nominee director or nominee directors, if any.
As per Notification vide G.S.R. 70(E) dated 08.02.2011, the definition of Remuneration Committee has changed and stands as under:
“Remuneration Committee” means:
(i) in respect of a listed company, a committee which consists of atleast 3 non executive independent directors including nominee director or nominee directors, if any and
(ii) in respect of any other company, a Remuneration Committee of Directors.
The Remuneration Committee while approving the remuneration shall-
a) take into account, financial position of the company, trend in the industry, appointee’s qualification, experience, past performance, past remuneration, etc.
b) be in the position to bring about objectivity in determining the remuneration package while striking a balance between the interest of the company and shareholders.
(3) Prior Approval required (mentioned in page 4)
As per Notification vide G.S.R. 70(E) dated 08.02.2011 in Schedule XIII, Part II, Section II, in Sub Para (C) it is mentioned that:
The prior approval of Central Government is required to be obtained only if the company is listed company or subsidiary of listed company.
Unlisted companies (which are not subsidiaries of listed companies) shall not require prior Government approval for managerial remuneration provided they meet the other conditions stipulated in the Schedule.
Further, as per Notification vide G.S.R 396(E) dated 23.05.2011 in Schedule XIII, Part II, Section II, Sub Para (C) it is mentioned that:
The prior approval of Central Government is not required for a subsidiary of a listed company, if -
1. The Remuneration Committee and Board of Directors of the Holding Company give their consent for the amount of remuneration of the applicant and for the said amount to be deemed as remuneration paid by the Holding Company for the purpose of Section 198 of the Companies Act, 1956.
2. The remuneration of the applicant is approved by the Holding Company in the general meeting.
3. If the remuneration of the applicant is deemed to be remuneration paid by Holding Company.
4. All the members of the subsidiary are bodies corporate.
Provided that a listed company or a subsidiary of a listed company shall not require Central Government approval for payment of remuneration to its managerial personnel, if the remuneration is fixed by the Board of Industrial and Financial Reconstruction.
As per Notification vide G.S.R 534(E) dated 14.07.2011 in Schedule XIII, Part II, Section II, Sub Para (C) it is mentioned that:
The approval of Central Government is not required if the managerial person is not having any interest in the capital or its holding company, directly or indirectly or through any other statutory structures and not having any direct or indirect interest or related to the directors or promoters of the company or its holding company at any time during last two years before or on the date of appointment and having a graduate level qualification with expert and specialized knowledge in the field of profession.
Section III
This applies for: Remuneration payable to a managerial person in two companies subject to the provisions of Section I and II, a managerial person shall be eligible to draw remuneration from one or both companies subject to that the total remuneration drawn from the companies does not exceed the higher maximum limit admissible from any one of the companies of which he is a managerial person.
Remuneration payable with the prior approval of Central Government:
Situation 1.
Requirement of approval of the Central Government for payment of remuneration to managerial person:-
A Company which has no profits or has inadequate profits shall not pay to its directors, including any managing or whole-time director or manager, by way of remuneration a sum exclusive of any fees payable to directors under section 309(2), except with the previous approval of the Central Government.
However, approval of the Central Government shall not be required for payment of remuneration to its managerial person if the appointment has been made in accordance with the provisions of section 269 read with Schedule XIII to the Act. [Section 198(4)].
Situation 2.
Compulsory requirement of approval of the Central Government for appointment of managerial personnel
If the appointment and remuneration of a managerial person has not been made in accordance with the provisions of Schedule XIII, it shall be got approved by the Central Government.
In order to obtain approval of the Central Government, application shall be made in the prescribed Form 25A within a period of ninety days from the date of appointment.
Posted by mamta binani at 18:58 Email ThisBlogThis!Share to TwitterShare to Facebook1 comments:
ankit said...
let assumed that a company appoint a WTD for 3 year assume 09 to 12 , now at present time mean 2011, in AGM we intimate our shareholders for their reappointment for current year , is it require to file form 23 ? for year 2011 ?
in 2009 we already file form 23 for their appoitment for 3 year s and the current year is cover is thoese period.
16 October 2011 23:14
Tuesday, October 4, 2011
KNOW YOUR TAX BENEFITS ON HOME LOAN
Dear friends
Know your tax benefits on home loan:
1 Home loan borrowers are entitled to tax benefits under Section 80C and Section 24 of the Income Tax Act. These can be claimed by the property's owner.
2 In the case of co-owners, all are entitled to tax benefits provided they are co-borrowers for the home loan too. The limit applies to each co-owner.
3 A co-owner, who is not a co-borrower, is not entitled to tax benefits. Similarly, a co-borrower, who is not a co-owner, cannot claim benefits.
4 Housing companies usually require all co-owners to be joint borrowers to a home loan. Loan providers specify who can be a joint borrower for a home loan.
5 The tax benefit is shared by each joint owner in proportion to his share in the home loan. It's important to establish the share for each co-borrower to claim tax benefits.
6 The certificate issued by the housing loan company, showing the split between principal and interest for the EMIs paid, is required for claiming tax benefits.
Please don't hesitate to call us for any suggestion/clarification .
With regards,
Bipul Kumar
Wisdom Management Consultancy Private Limited
--------------------------------------------------
Reg. Office: B-94/9, Dharni Chamber, Joshi Colony, IP Extension, New Delhi-110092.
+91-9560084833 [Cell]
Know your tax benefits on home loan:
1 Home loan borrowers are entitled to tax benefits under Section 80C and Section 24 of the Income Tax Act. These can be claimed by the property's owner.
2 In the case of co-owners, all are entitled to tax benefits provided they are co-borrowers for the home loan too. The limit applies to each co-owner.
3 A co-owner, who is not a co-borrower, is not entitled to tax benefits. Similarly, a co-borrower, who is not a co-owner, cannot claim benefits.
4 Housing companies usually require all co-owners to be joint borrowers to a home loan. Loan providers specify who can be a joint borrower for a home loan.
5 The tax benefit is shared by each joint owner in proportion to his share in the home loan. It's important to establish the share for each co-borrower to claim tax benefits.
6 The certificate issued by the housing loan company, showing the split between principal and interest for the EMIs paid, is required for claiming tax benefits.
Please don't hesitate to call us for any suggestion/clarification .
With regards,
Bipul Kumar
Wisdom Management Consultancy Private Limited
--------------------------------------------------
Reg. Office: B-94/9, Dharni Chamber, Joshi Colony, IP Extension, New Delhi-110092.
+91-9560084833 [Cell]
Monday, October 3, 2011
NRI PROPERTY INCOME
Dear friends,
Property is a favorite Indian asset class and one of the main reasons for this is its ability to generate regular cash flows through rent. In this article, various aspects on renting out property in India by NRI are examined.
Can NRIs earn rental income?
An NRI can rent out property that he owns in India. The rent proceeds can be credited to the NRE or NRO account. Rent proceeds received in these accounts can be freely repatriated. If you do not have an NRE or NRO account, the proceeds can also be directly remitted abroad but you would need an appropriate certificate from a chartered accountant certifying that all taxes have been duly paid.
Is rental income taxed in India?
Yes, since this income is earned in India, tax will be payable by the NRI in India. In fact, tax will be deducted at source by the payer of the rent. The payer of the rent, in this case, must obtain a TAN number and deduct TDS of 30 per cent from the rent amount. He must also provide a TDS certificate to the NRI.
The onus of deducting tax is on the payer. So in case the payer does not deduct tax and the NRI too fails to declare the income and pay the tax, the income tax authorities can hold the payer responsible.
If the tenant does not deduct tax at source, it is prudent to file your tax returns and pay the taxes thereof.
Is rental income taxed in the country of residence?
When you are an NRI, you are obviously a resident of another country for tax purposes. And in most cases, countries levy tax on residents on their global income. So it may happen that as per provisions of the Indian Income Tax laws, tax will be deducted at source on income earned in India, as is in the case of rent. But at the same time, that income will be subject to tax in your country of residence. In such cases, we need to refer to the Double Taxation Avoidance Agreements that India has entered into with various countries.
The India-US DTAA for instance provides that rent from immovable property will be taxed in the country in which the property is situated. So NRIs who are residents of US would have to pay tax on rental income in India. While they would still have to declare that income while filing their tax returns in the US, they would get a credit for taxes paid in India.
It is prudent to check the tax laws of the country that you are resident of or consult an expert in that country.
What is deemed rental income?
According to the Indian Income Tax Act, if a person (resident or NRI) owns more than one house property, only one of them will be deemed as self-occupied. There will be no income tax on a self-occupied property. The other one, whether you rent it out or not, will be deemed to be given on rent. If you have not given the second property on rent, you will have to calculate deemed rental income on the second property (based on certain valuations prescribed by the income tax rules) and pay the tax thereof.
Now, the Income Tax Act does not specify if either or both these properties must be situated only in India. At the time of drafting the Income Tax Act, one did not envisage a situation where an Indian would own properties overseas. But now, more and more Indians are settling abroad. So from the reading of the Act, the rule of 'more than one property' will apply to global properties.
What this means is that if you are an NRI and own only one property globally and that property is in India, you would not have to pay any income tax on the 'deemed rental income' in India.
However, let us say you are an NRI resident in USA. You own and live in a house in USA. You also own a house property in India. Even if you do not give the property in India on rent, you would have to pay income tax on deemed rent in India. The deemed rent is determined by certain valuation rules prescribed in the Income Tax Act.
Remember that even if you have inherited a property in India and that is not your only property, you would have to pay tax on deemed income.
Is deemed income from house property taxed in foreign country?
You would need to look at the tax code in your country of residence. In the case of NRIs in the United States, the US tax code does not tax deemed income. However, you would still have to show the property if it is an investment property in your tax return in the US (even though you do not have any rental income). If you do not show this investment property, the problem will arise at the time of sale of property. Suppose you sell a property on which you had no rental income for US tax purposes but had deemed income as per India Tax code, then the amount spent on the maintenance, repairs and renovations and depreciation on this property which may be eligible for deduction or addition to your cost basis while calculating capital gains would become difficult to establish. However, if you have not declared the property in your tax returns, the US tax code may challenge the cost basis (purchase + improvements + suspended losses) to claim a tax deduction at the time of sale.
.
Any investment properties with rental income and related expenses must be reported on Form Schedule E in the US tax returns and rental activities by nature are always treated as 'passive' investments with restrictions on deductibility of the net rental losses. Always consult a tax expert as passive activity rules are quite cumbersome.
Income tax exemption, possible?
If your total income in India, including rental income is below the basic exemption limit of Rs 1.6 lakh, you can get a TDS exemption. But the process can be complicated. You would need to apply to the tax authorities for a tax exemption certificate and submit the certificate to the tenant. The issue of the certificate is at the discretion of the tax officer and he needs to be convinced about your case.
Alternately, an easier way would be to file your returns and claim refund of the TDS paid.
In such cases however, the rental income may be taxed fully in the country of your residence (based on the tax laws in that country.) So if you are a resident of the US, even though your income is below the basic exemption limit in India and you pay no taxes in India, this income will be added to your income in the US and taxed according to US laws.
Contact us for any query.
With regards,
Bipul Kumar
Senior Executive – Taxation
Wisdom Management Consultancy Private Limited
--------------------------------------------------
Property is a favorite Indian asset class and one of the main reasons for this is its ability to generate regular cash flows through rent. In this article, various aspects on renting out property in India by NRI are examined.
Can NRIs earn rental income?
An NRI can rent out property that he owns in India. The rent proceeds can be credited to the NRE or NRO account. Rent proceeds received in these accounts can be freely repatriated. If you do not have an NRE or NRO account, the proceeds can also be directly remitted abroad but you would need an appropriate certificate from a chartered accountant certifying that all taxes have been duly paid.
Is rental income taxed in India?
Yes, since this income is earned in India, tax will be payable by the NRI in India. In fact, tax will be deducted at source by the payer of the rent. The payer of the rent, in this case, must obtain a TAN number and deduct TDS of 30 per cent from the rent amount. He must also provide a TDS certificate to the NRI.
The onus of deducting tax is on the payer. So in case the payer does not deduct tax and the NRI too fails to declare the income and pay the tax, the income tax authorities can hold the payer responsible.
If the tenant does not deduct tax at source, it is prudent to file your tax returns and pay the taxes thereof.
Is rental income taxed in the country of residence?
When you are an NRI, you are obviously a resident of another country for tax purposes. And in most cases, countries levy tax on residents on their global income. So it may happen that as per provisions of the Indian Income Tax laws, tax will be deducted at source on income earned in India, as is in the case of rent. But at the same time, that income will be subject to tax in your country of residence. In such cases, we need to refer to the Double Taxation Avoidance Agreements that India has entered into with various countries.
The India-US DTAA for instance provides that rent from immovable property will be taxed in the country in which the property is situated. So NRIs who are residents of US would have to pay tax on rental income in India. While they would still have to declare that income while filing their tax returns in the US, they would get a credit for taxes paid in India.
It is prudent to check the tax laws of the country that you are resident of or consult an expert in that country.
What is deemed rental income?
According to the Indian Income Tax Act, if a person (resident or NRI) owns more than one house property, only one of them will be deemed as self-occupied. There will be no income tax on a self-occupied property. The other one, whether you rent it out or not, will be deemed to be given on rent. If you have not given the second property on rent, you will have to calculate deemed rental income on the second property (based on certain valuations prescribed by the income tax rules) and pay the tax thereof.
Now, the Income Tax Act does not specify if either or both these properties must be situated only in India. At the time of drafting the Income Tax Act, one did not envisage a situation where an Indian would own properties overseas. But now, more and more Indians are settling abroad. So from the reading of the Act, the rule of 'more than one property' will apply to global properties.
What this means is that if you are an NRI and own only one property globally and that property is in India, you would not have to pay any income tax on the 'deemed rental income' in India.
However, let us say you are an NRI resident in USA. You own and live in a house in USA. You also own a house property in India. Even if you do not give the property in India on rent, you would have to pay income tax on deemed rent in India. The deemed rent is determined by certain valuation rules prescribed in the Income Tax Act.
Remember that even if you have inherited a property in India and that is not your only property, you would have to pay tax on deemed income.
Is deemed income from house property taxed in foreign country?
You would need to look at the tax code in your country of residence. In the case of NRIs in the United States, the US tax code does not tax deemed income. However, you would still have to show the property if it is an investment property in your tax return in the US (even though you do not have any rental income). If you do not show this investment property, the problem will arise at the time of sale of property. Suppose you sell a property on which you had no rental income for US tax purposes but had deemed income as per India Tax code, then the amount spent on the maintenance, repairs and renovations and depreciation on this property which may be eligible for deduction or addition to your cost basis while calculating capital gains would become difficult to establish. However, if you have not declared the property in your tax returns, the US tax code may challenge the cost basis (purchase + improvements + suspended losses) to claim a tax deduction at the time of sale.
.
Any investment properties with rental income and related expenses must be reported on Form Schedule E in the US tax returns and rental activities by nature are always treated as 'passive' investments with restrictions on deductibility of the net rental losses. Always consult a tax expert as passive activity rules are quite cumbersome.
Income tax exemption, possible?
If your total income in India, including rental income is below the basic exemption limit of Rs 1.6 lakh, you can get a TDS exemption. But the process can be complicated. You would need to apply to the tax authorities for a tax exemption certificate and submit the certificate to the tenant. The issue of the certificate is at the discretion of the tax officer and he needs to be convinced about your case.
Alternately, an easier way would be to file your returns and claim refund of the TDS paid.
In such cases however, the rental income may be taxed fully in the country of your residence (based on the tax laws in that country.) So if you are a resident of the US, even though your income is below the basic exemption limit in India and you pay no taxes in India, this income will be added to your income in the US and taxed according to US laws.
Contact us for any query.
With regards,
Bipul Kumar
Senior Executive – Taxation
Wisdom Management Consultancy Private Limited
--------------------------------------------------
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