Latest news with #HarshalBhuta
Mint
3 days ago
- Business
- Mint
Does an NRI providing consultancy to Indian firms need to file income tax return?
-Name withheld on request As a non-resident providing consultancy services related to China market entry to Indian companies, if your only source of income from India is consultancy fees and the full tax liability has been met through the appropriate TDS in India, then you are not obligated to file an income tax return in India. This applies only if Indian companies deduct TDS at the applicable domestic tax rate of 20% (plus any surcharge and cess), without considering the provisions of the DTAA. However, if you intend to claim the benefits under the India-Hong Kong DTAA, whereunder such consultancy income may not be taxable in India due to the absence of a fixed base or physical presence in India for providing the services, then you will need to file an income tax return in India if your income exceeds the basic exemption limit. To avail the DTAA benefits, you must obtain a Tax Residency Certificate (TRC) from the Hong Kong tax authorities and submit Form 10F along with other necessary documents. -Name withheld on request Under the Indian income tax provisions, self-occupied property is a concept which refers to house properties that are typically occupied by the owners for residential purpose and therefore, the annual value of such property is considered as 'nil' and not chargeable to tax. This benefit is available on two such house properties. Prior to the Finance Act, 2025, this benefit was available only if the property was actually used by the owner as their residence or if the owner was unable to occupy it due to employment, business, or profession being carried out at another location, and the owner resided at the other location. However, following the 2025 amendment, the requirement to justify the non-occupation due to employment, business, or profession has been removed. Now, a taxpayer, including an NRI residing abroad, can claim the annual value as 'Nil' for up to two properties, regardless of the reason for non-occupation. Accordingly, in your case, you may treat both the houses, where your parents reside, and the second vacant property as self-occupied in your Indian income tax return. Therefore, the annual value of both properties will be considered 'Nil', resulting in no taxable income under the head 'Income from House Property'. However, if you acquire a third property, one of the three will be deemed to be let out, and a notional rental income (based on expected rent) will become taxable in India. Harshal Bhuta, partner, P. R. Bhuta & Co. CAs
Time of India
4 days ago
- Business
- Time of India
Banks' 'blind faith' in valuer's word comes under test: Cross-border payments in for more scrutiny
A recent ruling questions banks' reliance on CA certificates for cross-border payments, potentially increasing scrutiny of outward remittances. The appellate tribunal SAFEMA criticized HDFC Bank for blindly accepting a valuation report in a JP Morgan deal. This decision could force banks to more rigorously examine financial documents, impacting individuals, businesses, and professionals involved in foreign exchange transactions. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Mumbai: An NRI takes out money after selling property in India. A corporate house floats a company abroad. A local business repays a foreign lender. And, a private equity fund remits money overseas after an exit. All such deals could come up against finicky bankers-particularly, if a transaction looks faintly banks count on certificates from chartered accountants (CAs) and valuers as they clear funds flowing in and out of the country. The reports on valuation of securities, source of money, and payment of tax are key documents supporting most cross-border payments . And banks rely on them, often blindly. This trust has now come under a message that could impact many individuals and businesses, a quasi-judicial authority deciding on matters involving alleged foreign exchange irregularity and money laundering , recently said that banks cannot merely act as a "post office for onward remittance " and blindly take reports of CAs as the final April 17 ruling by appellate tribunal SAFEMA pertains to a case where the enforcement directorate questioned HDFC Bank 's decision to allow outward remittance of ₹140 crore by the JP Morgan . In 2010 the US bank had invested ₹85 crore in the troubled realty group Amrapali which later bought back the shares for ₹140 crore. The transaction did not require any prior Reserve Bank of India (RBI) cleared the ₹140 crore outflow to JP Morgan based on a valuation report justifying the steep buyback premium. The tribunal said that HDFC should have scrutinised the CA's report as the methodology (discounted cash flow ) to value the shares was based on questionable assumptions. The company did not have distributable profits that justified the high buyback price, said the ruling, unless overturned by a high court, means that banks cannot take CA certificates at face value. If a company's valuation defies logic, banks must dig into the CA's or valuer's report, though HDFC has argued (as most banks would) that it is neither obliged to examine such reports nor seek RBI's to Harshal Bhuta, partner at the CA firm PR Bhuta & Co, "This would impact many, especially those planning outward remittances. Scrutiny of even legitimate transactions will rise. Banks would turn demanding. They would closely examine all documents to avoid violations. Since many certificates and valuation reports could come under scrutiny, professionals like CAs, merchant bankers, and registered valuers must be prepared to explain." He felt the ruling could also jeopardise RBI's plan to give banks more regulatory ruling said the exemption from RBI approval was conditional and under Section 10(5) of the Foreign Exchange Management Act (FEMA), HDFC Bank was required to check the deal's genuineness besides serving as a remittance channel. Under the rules, a valuation arrived by a professional is a floor for inflows but a cap on ruling has caused a flutter among professionals. "If certificates issued by professionals, as required under the law, are viewed with suspicion, it could create an unending chain of uncertainty under FEMA," said Ashish Karundia, founder of the CA firm Ashish Karundia & Co. "While it may be justified to question documentation in cases that appear suspicious, it is unreasonable to expect banks to scrutinise every transaction in depth, including verifying the end-use of funds," said recent years banks have examined outward remittances by individuals under the liberalised remittance scheme (LRS), questioned overseas direct investments by corporates, while RBI has denied many NRIs' requests to remit beyond $1 million a year. "We feel the LRS limits could soon be rationalised. We won't be surprised if it is linked to an individual's income level, so that minors or persons with little or no earnings are stopped from remitting large funds to buy properties and shares abroad. Also, cryptos may be disallowed explicitly under LRS," a banker told ET.
Mint
26-05-2025
- Business
- Mint
Can an OCI holder lend to their Indian company?
I'm a German citizen and an OCI (Overseas Citizen of India) cardholder. I co-promoted an Indian private limited company in 2010 with an Indian business family in a 50:50 shareholding ratio, and all FDI compliance was completed at the time. The company manufactures automobile spare parts and is currently in expansion mode. We plan to lend funds to the company in the same 50:50 ratio. Am I allowed to do this under Indian law, and what would the implications be? —Name withheld on request Yes, under Indian regulations, you may lend to the company, but there are specific conditions you must comply with as a non-resident shareholder. Indian company law permits loans from shareholders, directors, or their relatives, subject to certain conditions. In your case, as a shareholder, you can lend to the company, provided the loan amount does not exceed 100% of the company's net worth. Since you are a non-resident, any loan you extend will be treated as an External Commercial Borrowing (ECB) under India's foreign exchange laws. As you own more than 25% equity in the company, you qualify as an eligible lender. However, ECBs must adhere to specific conditions such as: Minimum average maturity period Caps on interest rates End-use restrictions Reporting and compliance with the Reserve Bank of India (RBI) You'll need to ensure the loan terms align with these RBI regulations before proceeding. If the loan is interest-bearing, the interest you earn is taxable in India at 20% plus applicable surcharge and cess under domestic law. However, as a German tax resident, you can opt to be taxed under the India-Germany Double Taxation Avoidance Agreement (DTAA). Under Article 11 of the DTAA, interest income is taxed in India at a reduced rate of 10%. This is likely more favourable than the standard Indian tax rate. To claim DTAA benefits, the Indian company must obtain from you: A valid Tax Residency Certificate (TRC) from Germany A self-declaration and other relevant documentation If interest income is your only source of income from India and tax has been correctly deducted at source, you are not required to file a tax return in India. However, if you choose to avail the DTAA benefit and your interest income exceeds the basic exemption limit, filing a return becomes mandatory, even if TDS has been deducted. Since the loan is between a resident and a non-resident related party, transfer pricing regulations under Indian tax law may apply. This means the interest rate must be benchmarked against arm's length pricing, and documentation must be maintained to substantiate this. Harshal Bhuta, Partner, P. R. Bhuta & Co. CAs
Mint
12-05-2025
- Business
- Mint
Will cross-border crypto gifts trigger Indian taxes?
I have been residing in the UAE for the past 25 years and carry on my business here. On the occasion of my 50th birthday, a couple of my Indian cousins have gifted me USTD into my private wallet here from theirs in India, after I shared my private key with them. Do I have to pay any tax in India on these gifts? - Name withheld on request Can a non-resident Indian receive cryptocurrency as a gift from cousins in India without attracting Indian tax? The answer lies in a mix of tax law interpretation and cross-border regulatory gaps. India's foreign exchange laws currently do not specifically regulate the cross-border transfer of cryptocurrencies, making it unclear whether such transfers are legally permitted. Under Indian tax law, receiving cryptocurrency as a gift or for less than its fair market value (where the difference exceeds ₹ 50,000) is treated as income under section 56(2)(x). Importantly, cousins are not classified as 'relatives' under this section, so gifts from them typically don't qualify for the exemption available for gifts received from close family members. However, this tax rule only applies if the income is received in India, accrues or arises in India, or is deemed to do so. Since you've been living in the UAE for over 25 years, you're treated as a non-resident under Indian tax laws. To assess whether income accrues in India, it's important to understand what 'accrue' or 'arise' means under tax law. Typically, 'accrue' implies a legal right to receive income—usually based on an obligation from another party. But in the case of a gift, no such obligation exists, since it's voluntary. However, section 56(2)(x) of the Income Tax Act is a deeming provision. This means it can treat the mere receipt of property—without or below fair market value—as taxable income, even if there's no underlying legal right to receive it. The term 'arise' refers to the point when income actually comes into existence. Under this section, income is considered to arise the moment the asset (in this case, cryptocurrency) is received. As you received the USDT outside India, both the arising and receipt occur outside India. Moreover, the deeming provision under section 9(1)(viii), which relates to gifts of money by a resident to a non-resident, would not apply in your case. Therefore, the receipt of USDT from your cousins will not give rise to income taxable in India. Moreover, under Article 22 of the India–UAE Double Taxation Avoidance Agreement (DTAA), any 'other income' (like gifts) is taxable only in the UAE. As a UAE tax resident, you wouldn't owe tax in India on this gift. Harshal Bhuta is partner at P. R. Bhuta & Co. CAs
Time of India
06-05-2025
- Business
- Time of India
No overseas investment if old lapses not fixed: RBI
The RBI is cracking down on corporates with unresolved ODI violations, setting an August 25, 2025 deadline. Companies failing to rectify past lapses face compounding or adjudication before making further foreign financial commitments. This move aims to address non-disclosure of financial details on old ODIs, potentially impacting future overseas deals if compliance isn't addressed promptly. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Corporates will soon be barred from making overseas direct investments (ODIs) unless they come clean on past RBI, in an email in end-April, told compliance heads of banks to alert all corporate clients that if they do not fix the old lapses by August 25, 2025, they will have to either undergo the compounding process or face adjudication by the Enforcement Directorate before they can make "further foreign financial commitments", people in banking circles told contraventions pertain to a company's failure to disclose financial details on old ODIs-either inadvertently, or due to slack compliance, or simply to hold back particulars about shady deals done to move money or bankrolled with undisclosed the regulations, new financial commitments by an Indian company could include a variety of transactions: forming an offshore subsidiary, buying a tiny stake in an unlisted foreign company, acquiring more than 10% in an entity listed on any overseas exchange, giving loans, or even giving a guarantee to an has also spelt out that even a stake sale in a foreign business would be disallowed if the directions are not compounding process entails a company or individual in question admitting the lapse and paying a penalty to the central bank while adjudication under the Foreign Exchange Management Act (FEMA) involves personal hearing before an ED official whose seniority depends on the quantum of the compounding or adjudication process can stretch for six months, a company runs the risk of losing out on an ODI to Harshal Bhuta, partner at the CA firm PR, Bhuta & Co, "Due to the RBI directive, starting August 22, 2025, new overseas investments that otherwise would have been possible upon mere initiation of the compounding procedure for past reporting delays under the earlier regulations, may now be permitted only after the compounding procedure has been fully completed. Interestingly, this approach contrasts with the existing foreign direct investments (FDI) norms where new transactions are generally permitted even if previous reporting delays exceeding three years have not yet been compounded."The regulator has set a deadline of August 21, 2025, when a company pulled up for not reporting financial details on old ODIs (i.e., those before August 22, 2022) can take the quicker route to regularise and settle the matter by paying a late submission fee to RBI. Unlike compounding or adjudication, this is a far simpler process which is typically completed in about a August 25 deadline comes three years after the announcement of the new overseas investment regulations by RBI on August 22, sensitise corporates on the consequence of delaying the process, RBI has cautioned that compounding or adjudication of contravention under FEMA is a comparatively longer process vis-a-vis regularisation by payment of late submission fee. "Therefore, to avoid inconvenience to overseas business operations of residents, you may follow up with all your customers having overseas investments, to regularise all past reporting delays, well within the prescribed timeline," the regulator told to Moin Ladha, partner at the law firm Khaitan & Co, "Now, it's absolutely important to address any past non-compliances or rather complete the ODI compliance audit before August 21. Or else, a company may miss out on an overseas deal as the compounding or adjudication process can go on for months."While unintended errors and reporting lapses can be corrected over the next three months, Indian groups which have bought shares with undisclosed overseas funds or undertook ODIs simply to siphon out money by writing off the investments few years later, would find it tough to resolve the matters.
