How much money can an Individual transfer out of India?

The Reserve Bank of India (RBI) in its monetary policy review enhanced the limit under Liberalized Remittance Scheme (LRS) to $250,000 per person per year from existing limit of 125,000 USD.

RBI had reduced the eligibility limit for foreign exchange remittances under LRS to $75,000 in 2013 as a macro-prudential measure. With stability in the foreign exchange market, this limit was enhanced to $125,000 in June 2014 without end-use restrictions, except for prohibited foreign exchange transactions such as margin trading, lotteries and the like.

It was in 2004 that the Reserve Bank of India (RBI) announced the Liberalized Remittance Scheme to facilitate the Indian Residents to transfer funds abroad without its prior permission.

Under this scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 (or its equivalent freely convertible foreign currency) per financial year (April – March).

This scheme is applicable to people like you and me; not for NRIs. If you wish to send money abroad for the following purposes, you can do so without the prior approval of RBI

Purpose of remittance:
• For travel, studies, medical treatment etc.
• To acquire shares or debt instruments in listed or unlisted companies or any other assets including acquisition of immovable property directly or indirectly outside India
• To invest in Mutual funds, Venture funds, unrated debt securities, promissory notes, etc
• To gift or to give donations
• To acquire ESOPs in overseas companies (in addition to acquisition of ESOPs linked to ADR/GDR)
• Repayment of loan taken while an individual was a Non Resident Indian
• To open, maintain and hold foreign currency accounts with banks outside India for carrying out any permitted transactions
Prohibited transactions: Some of them are –
• Purchase of lottery tickets/sweep stakes!
• To use as margin money for trading in overseas stock exchanges
• To use for trading in overseas stock exchanges
• To purchase Foreign Currency Convertible Bonds (FCCB) issued by Indian Companies abroad
• For setting up a company abroad ( however, with effect from August, 2013, to set up a Joint Venture or a Wholly Owned Subsidiary outside India is permitted)
• Remittance directly or indirectly to Bhutan, Nepal, Mauritius and Pakistan

Q1: A Resident individual gifts money in Indian rupees to their NRI relatives and such amount is credited to the NRO account of the relative for an onward transfer outside India. Is the overall limit of USD 125000 applicable for this transaction?
Yes. Gift in Indian rupees (by way of crossed cheque or electronic transfer) is also to be considered while calculating the overall limit of USD 125000

Q2: Can Resident Individual give loans to NRIs?
Yes. The resident individual can lend money by way of crossed cheque or electronic transfer within the overall limit of USD 125000 per financial year. However, the loan should not be remitted out of India. Secondly the loan should be interest free and have a maturity of minimum one year.

Q3: Should the interest or dividend earned on overseas investments be remitted back to India?
No. the investment along with interest or dividend can be retained and reinvested abroad.

Q4: Can the resident Individual open bank account abroad?
Yes. Resident Individuals are allowed to open and hold bank accounts abroad.
Source : Simplifiedlaws

Posted in NRI

What happens if I deposit cash my bank account? Is it subject to penalty at 200%

200% penalty on Cash Deposits over 2,50,000 is not 100% true
You are aware about 200% penalty on cash deposits. So, the question is
Does all deposits over Rs.2.50 Lakhs in the account is subject to scrutiny and penalty of 200% of tax?
The answer is NO.

Cash lying at home – Let’s accept the fact that most of the people may be keeping some amount of cash at home. Depositing such amount into bank account won’t attract tax or penalty.

Cash in proportion to Income – Say, your income is Rs.30 Lakhs per year and you have been paying taxes and filing return over many years. Now you are depositing, say Rs.15 Lakhs into your bank account. Does this subject to tax and penalty?
Mostly No. First of all, the cases for scrutiny will be picked up in the case of disproportionate cash deposits to the income earned. In the above scenario, it is quite unlikely to get a notice, even if you deposit over Rs.2.50 Lakhs.

If the case is picked up for scrutiny and the Assessing Officer (AO) is not convinced that the deposits are from the genuine source, then he may levy a tax on it.

The penalty of 200% u/s 270A – The burden of proving misreporting or suppression of facts will be on the Assessing Officer. He can’t just levy a penalty at his will. If he levies irrationally, it can be challenged in Appeals. So, the penalty is not automatic. One needn’t fear of it. If there is a reasonableness in your deposits, such cases won’t fit in 200% penalty.

Source : simplifiedlaws

Are you unable to link Aadhaar with PAN due to mismatch of the name? Here is the solution

Recently income tax department has introduced electronic verification of income tax return. Income tax return can be verified now by generating an Electronic Verification Code or EVC. If you verify your return via EVC, you are no longer required to send signed physical copy of ITR-V to CPC, Bangalore.
At present, if you have total income is more than Rs. 5.00 Lakh or claiming refund, there are three methods of generating EVC
• EVC through Aadhaar OTP
• EVC through net banking
• EVC through ATM

EVC through Aadhaar will require you to link Aadhaar number with PAN. We have been receiving many queries from our clients that they are not able to link Aadhaar with PAN due to mismatch of the name. However before linking you must read article “IT dept plans to map all taxpayer“.
You will not be able to link Aadhaar Card with PAN if the following data of Aadhaar don’t match with PAN data.
• Name including spelling
• Date of Birth
• Gender
If there is a mismatch of name, Date of Birth or gender, first you need to amend either PAN or Aadhaar data before linking with PAN.

PAN Correction:
If you need to change information in your PAN card, you have to apply for change or correction in PAN data. You can submit PAN correction Form 49A along with proof of identity and proof of address.

Aadhaar Correction:
If you have done any mistake in address at the time of filling Aadhaar enrollment application form or you have recently migrated to a new address or there is a mismatch of name, Date of Birth or gender, you can get them changed very easily.
Unique Identification Authority of India (UIDAI) has provided online portal facility to allow people to change incorrect details that are printed on their aadhaar card.
You have two options through which you can change your details. Online method and Offline method. You can update your details through the aadhaar website in online method by following a couple of steps. Other than the online method, you can also use offline method, in which you can use send your corrected details to the UIDAI enrolment centres using the postal service.

Procedure to change Aadhaar Data through Online Method:
Any resident with mobile number can update their profile using UIDAI portal. Mobile Number is mandatory to receive password for login.
Step 1: Visit Aadhaar self service update portal by clicking this link

Step 1: If you have registered mobile number with Aadhaar (provided at the time of enrolment or updated subsequently), enter your Aadhaar Number to get an OTP (One Time Pin) at that mobile.
(If you have not registered your mobile with Aadhaar or you have lost/do not possess anymore, you will have to either visit nearest Update Centre or send your Update request through Post.)

Step 2: Enter OTP and captcha to login to the Update Portal

Step 3: Select the fields you want to be updated /corrected. You can select more than one field also and fill the fields with current details in English as well as your Local Language.

Step 4: Depending on the field to be updated, attach original scanned (with color scanner) copies of supporting documents as per the Valid Documents List. Refer Link for valid documents.
• Name Correction / Update: provide supporting documents having name and photo
• Date of Birth Correction: provide supporting documents having date of birth
• Address Corrections/Change: provide supporting documents having name and address
• Mobile and Gender Change: No documents required to be submitted for Mobile and Gender correction.

Review the data entered for correctness and completeness in English as well as local language. Note that Date of Birth will not appear in local language. Also any numeric figures will not be transliterated in local language.
You do not have to submit all the proof documents. You have to submit only the document/s which is/are required to support the Change/ Correction. For eg. You need not attach an Address proof if you change your Date of Birth or your Name.
Step 5: Submit the request. Note down your Update Request Number (URN) carefully for future reference and tracking. You can also download /Print your Update Request copy.

If you want to track your aadhaar card updation status, you can click here and see the results using your Update Request Number
Aadhaar letter with updates will be delivered at the given address only in case of Update/Correction in Name, Address, Date of Birth and Gender. For Update of Mobile number, the notification will be sent on the given mobile number

Procedure to change Aadhaar Data through Offline Method:
Step 1: First of all download the Aadhaar Update/Correction Form from the link
Step 2: Fill the Update request form in capital letters and mention the Mobile number correctly. Mobile number is mandatory for sending an update request by post
Step 3: Depending upon the field to be updated, send self-signed (self attested) supporting documents as per the valid documents List attached in Annexure I.
• Name Correction / Update: provide one of the Proof of Identity (PoI) having name and photo
• Date of Birth Correction: provide one of the supporting documents having date of birth
• Address Corrections/Change: provide one of the supporting documents having name and address
• Mobile and Gender Change: No documents required to be submitted for Mobile and Gender correction.
In case a child is below five years, parent/guardian can sign the copies of documents. In all other cases, the resident must sign the copies of documents themselves
On each document do mention your 12 digit aadhaar number that is issued to you by UIDAI.
Step 4: Mark the envelope as “Aadhaar Update/Correction” on top. Seal the envelope properly and send the Aadhaar Correction form along with the supporting documents to one of the addresses given below

Address I :
Post Box No. 10,
Madhya Pradesh – 480001,

Address II:
Post Box No. 99,
Banjara Hills,
Hyderabad – 500034,

Conclusion: Linking PAN with Aadhaar is not mandatory though as soon as logging into e-filing portal it asks you to link PAN with Aadhaar No. However If you wish to link Aadhaar with PAN, you can do so after matching name, date of birth and gender. However before linking you must read this article “IT dept plans to map all taxpayer”. Instead of e-verifying your return by generating EVC through Aadhaar OTP, you can always have option to EVC through net banking and verify your return. It is very easy.
Even if you don’t plan to link PAN with Aadhaar, it is advisable to make Correction/ updation of PAN & Aadhaar to match data of both.
Source : Simplifiedlaws

Income Tax Ombudsman ?

Similar to Ombudsman for banking services, the income tax department has its own ombudsman. Ombudsman is an official appointed to investigate the complaints of taxpayers against Income Tax department. So, he acts in an independent capacity to resolve the issues raised by the tax payers.

Who can approach Ombudsman?
Any individual who has grounds alleging deficiency in the working of the Income Tax department may file a complaint with Ombudsman.

What type of grievances?
• Delay in issue of refunds including sending envelops without refund vouchers!
• Non-adherence to the principle of ‘First Come First Served’ in sending refunds
• Non acknowledgement of letters or documents sent to the department
• Lack of transparency in identifying cases for scrutiny and non communication of reasons for selecting the case for scrutiny
• Delay in disposal of rectification applications
• Delay in allotment of permanent account number (PAN)
• Non adherence to prescribed working hours by Income Tax officials
• Unwarranted rude behaviour of Income Tax officials with assessees
• Any other matter relating to violation of the administrative instructions and circulars issued by the Central Board of Direct Taxes in relation to Income-tax administration. The details are given in The Income Tax Ombudsman Guidelines 2010’

How to file the complaint?
• The complaint shall be duly signed by the complainant and his authorized representative, if any, and shall state clearly the name and address of the complainant, the name of the office and official of the Income-tax Department against whom the complaint is made, the facts giving rise to the complaint supported by documents, if any,relied on by the complainant and the relief sought from the Ombudsman.

• But before making the complaint, one should try to find the solution at department level (similar to banks, where the customer should try to find the solution at bank’s level before going to Ombudsman. Read here to know more about banking ombudsman – Can you complain against your bank for poor quality of service?)

Where to complain?
The offices of Ombudsman are located in select cities such as Delhi, Mumbai, Chennai, Kolkata, Hyderabad, Kochi, Bhopal, Bangalore etc.

What happens after you complain?
The Ombudsman will forward your complaint to the concerned officer/authority and will try to resolve the issue through mediation. If the department fails to act within a month from the date of submitting the complaint, the ombudsman is empowered to award a token compensation (Rs.1000) for the loss suffered by the complaint and also persuade the authority to perform his duty.

Will it really works?
Yes. It works, provided you have a real problem (doubly check your records before raising a red flag). Especially, many refund cases have got sorted out through this route.

Frequently Asked Questions -FAQ

Can I complaint for not receiving or delay in receiving Income tax Refund?
If you have not received income tax refund or there is an undue delay in processing your refund claim, you can always approach income tax ombudsman. However, Before you approach the Ombudsman, you should have submitted a written complaint with your income tax officer and marking a copy to income tax authority superior to the jurisdictional assessing officer. If you feel that the complaint has not addressed to your complete satisfaction, or if the officer rejects your complaint, or if no reply is received within 30 days of writing the complaint, only then should the issue be raised to Ombudsman.

I have received an intimation under section 245 of Income tax Act 1961 where in it shows the outstanding demand of Rs. 1,60,694/- pertaining to Assessment year 2009-10. However I have paid all the tax due for the said assessment year. Can I file complaint to income tax ombudsman?

Please check intimation received u/s 245 of income tax whether demand was raised by CPC or uploaded by Jurisdictional AO (Assessing Officer). If it is processed by CPC, request for intimation u/s 143(1) after logging into income tax e-filing portal if you had not received intimation earlier to ascertain demand. Thereafter file rectification can be done online. If CPC fails to process your rectification, you can file complaint to income tax ombudsman. If it is uploaded by jurisdictional AO, write a letter seeking rectification u/s 154 of income tax officer marking a copy to income tax authority superior to the jurisdictional assessing officer with all necessary documents in support of your claim. If assessing officer fails to rectify mistake and delete demand without any valid reason within 30 days filing letter seeking rectification, you can file a complaint to income tax ombudsman.
I had filed my income tax return online for the assessment year 2014-15 on June 2014 claiming refund of Rs. 42500/-. However I have not got refund even after 4 months of filing return. Can I file a complaint to Income tax Ombudsman?
The Return filed online will be processed by Central Processing Centre (CPC), Bangalore. You have to wait CPC to process your return. Income tax department has provided the facility to tax payer to check status of processing income tax return filed online on its e-filing portal. You can check ITR processing status in “My Account” after logging into your account on income tax department efiling portal.
Is there any cost involved in filing complaints with Income Tax Ombudsman?
No. The Income Tax Ombudsman does not charge any fee for resolving assessees’ complaints.

Can I raise complaints to Ombudsman for not giving credit of TDS or advance tax legitimately claimed in the income tax return?
If your return was filed online, before raising complaint you must file a rectification request through online and wait for Central Processing Centre (CPC), Bangalore to process rectification request and thereafter send a letter to CPC asking them to give credit of TDS or advance tax as per rectification request filed online. If CPC fails to process online request, you can raise complaints to Ombudsmen. If your return was physically filed and processed by jurisdictional income tax officer, write a letter seeking rectification of mistake marking a copy to income tax authority superior to the one complained against. If your grievances remain unaddressed even after 30 days raise a complaints to Ombudsmen.

Is there any procedure or standard format for filing the complaint before the income tax Ombudsman?
No. A complainant can file a complaint with the Income Tax Ombudsman simply by writing on a plain paper. Till today no standard format has been prescribed for addressing complaint to the Ombudsman. But one must include the following details while writing the complaint
• Name, address and PAN of complainant.
• Name and designation of the official against whom the complaint is.
• Facts on which the complaint is based along with supporting documents.
• The relief sought from the Ombudsman.

How can I get Income tax Ombudsman office address?
To know your Ombudsman office address you can visit

Can I raise complaint to Ombudsman without making a written representation to the income tax authority superior to the one complained against?
No complaint to the Ombudsmen shall stand unless you have made a written representation to the income tax authority superior to the one complained against and your grievance remains unaddressed.

Is there any Time Limit for Filing Complaint with Ombudsman?
Yes. The complaint should be filed within one year from the date of unsatisfactory reply received or from the date complaint is rejected by Income Tax Official; or if no reply is received within 30 days of sending the application.

Source : Simplifiedlaws

Procedure of E-assessment or Paperless Assessment proceedings

As a part of e-governance initiative to facilitate compliance, a taxpayer friendly measure in the form of a scheme for E assessment through e-mail has been introduced in seven cities of Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Mumbai.

Income tax department has already started seeking consent for use of email based communication for paperless assessment proceeding for AY 2014-15 and AY 2015-16.
Under e-asseement scheme, statutory notice calling for information would be served upon through email. Similarly assessee or his authorised representative can also submit your clarification/ evidence ets to assessing officer through email. On conclusion of scrutiny proceedings assessment would also be sent to you through email.

The prime objective of this scheme is to eliminate the need to visit the income tax office. If you give consent for E Assessment, the department would not insist on your personal appearance for such proceedings. However, you always retain the option to appear personally or through authorised representative if you so desire at any stage of the proceedings.

Presently e-assessment is applicable only in case of taxpayers whose Income-tax jurisdiction falls in the cities of Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata or Mumbai

Advantage of opting e-assessment or Paperless assessment
• It will not only save precious time of the taxpayer but also provide a 24/7 anytime/anywhere convenience to submit a response to the queries of the Department under scrutiny proceedings.
• It Facilitate a simple way for communication between the department and the taxpayer through electronic means without the necessity to visit the Income Tax Office.
• It will reduce compliance burden on tax payers.
• Taxpayer can track complete information of all the e-submissions made during the course of assessment proceedings
• The taxpayer can at any time at his discretion opt out of this scheme with prior intimation to the assessing officer

Step by Step procedure on e-assessment or Paperless assessment:
• Income Tax Officer will send email the signed and scanned copy of notice under section 143(2) of Income tax Act 1961 in pdf format using his designated email address (official email address under the domain
• Notice received under section 143(2) clearly mention nature of scrutiny as “Limited Scrutiny”, “Complete Scrutiny” along with issues identified for examination ie. Reason for selection of Assessing Officer will have detailed description related to the case collected from AIR, CIB and other sources.
• The email will be sent to the taxpayer’s email address as provided in his/ her income-tax return of the relevant tax year or in the last income tax return furnished. In case, taxpayer wish to communicate through any other alternative email id, the same may be informed to officer.
• Along with notice u/s 143(2) or separately, Income tax officer will send Email letter seeking consent for use of email based communication of paperless assessment proceedings.
• Based on detailed information available with the assessing officer, further communication in the form of notice under section 142(1) of the Income Tax Act, 1961 will be sent with detailed questionnaire in PDF format requiring taxpayer to submit specified documents in the notice.
• Response should be submitted in PDF format as attachments and the size of attachments in a single email cannot exceed 10MB.
• In case total size of the attachments exceeds 10 MB then the tax payer shall split the attachment and send in as many emails as may be required to adhere to the limit of the attachment size of 10MB per mail.
• If tax payer fails to respond to the notice mentioned earlier, reminder notice will be sent under section 142(1) of income tax act. Showcase notice will be sent giving final opportunity in case any adverse view is contemplated.
• All emails sent or received will be displayed on the assesses “My account” on the e-fling portal which can be accessed by the taxpayer after login.
• The submission of the above documents by email will be treated as compliance of the notice received under section 142(1) of income tax Act.
• All email communications between the tax officer and taxpayer shall also be copied to e-assessment@incometax. for audit trail purposes.
• Once the scrutiny is completed, the tax officer shall pass the Assessment Order under section 143(3) of Income Tax Act and email it in PDF format to the taxpayer.

Source : Simplifiedlaws

Can Non Resident Indian (NRI) invest in Partnership firm or a proprietary concern?

The applicable rules for investment in a partnership firm or a proprietary concern under FEMA are summarized below –

Automatic route –
As per FDI policy of India, A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can invest by way of capital of a firm or a proprietary concern in India on non-repatriation basis, provided
• the amount is brought in by inward remittance or out of NRE/FCNR(B)/ NRO account
• the amount should come as capital of the firm. No loan or grant is permitted.

Approval route –
In case NRI/PIO wants to repatriate the funds from the firm, then prior permission of Reserve Bank of India (RBI) has to be sought before investing the amount in the firm.

Prohibited sectors
The firm where the investment to be done should not be engaged in any agricultural or plantation or real estate business or print media sector.
The list of prohibited sectors –
• Business of chit fund, or
• Nidhi company, or
• Agricultural or plantation activities, or
• Real estate business, or construction of farm houses, or
• Trading in Transferable Development Rights (TDRs).
• It is clarified that “real estate business” means dealing in land and immovable property with a view to earning profit or earning income there from and does not include development of townships, construction of residential / commercial premises, roads or bridges, housing, hotels, resorts, educational institutions, recreational facilities, city and regional level infrastructure, townships.
However, the construction of small commercial building is not covered in the above permitted activity for foreign investors! (means the below conditions are not applicable to NRIs) The investment will be subject to the following conditions –

Condition A: Minimum Area under development
• In case of development of serviced housing plots, a minimum land area of 10 hectares
• In case of construction-development projects, a minimum built-up area of 50,000 sq.mts
• In case of a combination project, any one of the above two conditions would suffice.

Condition B: Minimum amount to be invested in the project
• 10 Million USD for wholly owned subsidiary
• 5 Million USD for Joint Venture projects
• The entire amount should be brought in within 6 months of commencement of business of the company

Condition C: Restriction on Repatriation, completion of the project:
• The entire amount brought into the project can’t be repatriated before 3 years from the date of last installment of remittance into India.
• At least 50% of the project must be developed within a period of 5 years from the date of obtaining all statutory approvals.

Source : Simplifiedlaws

Posted in NRI

Paying Rent Over Rs 50,000? Here Are The Rules For Deducting Tax

This article explains a recent Notification dated June 8, 2017, issued by the central government notifying the rules for withholding tax on rent payment exceeding Rs 50,000 to a resident by an individual or Hindu Undivided Family (HUF).

Prior to the amendment by the Finance Act 2017, the Indian tax laws required any person liable to pay rent to residents for use of any land/building exceeding an annual amount of Rs 1,80,000 to withhold tax at the rate of 10 percent. However, individuals and HUF not liable to tax audit under the tax laws, were excluded from the obligation of withholding tax.

In order to widen the scope of withholding tax, Finance Act 2017 has introduced a new provision in the tax laws to provide that individuals or HUF (other than those liable for tax audit under the tax laws) responsible for paying to a resident, on or after June 1, 2017, any income by way of rent exceeding Rs 50,000 for a month or part of month during the tax year, shall deduct an amount equal to 5 percent of such income as income tax thereon.

In order to reduce the compliance burden, Finance Act 2017 provides that the deductor is not required to obtain a Tax Deduction Account Number (TAN) and is liable to deduct tax only once in a tax year. The tax should be deducted at the time of credit or payment (whichever is earlier) of rent for the last month of the tax year or last month of the tenancy if the property is vacated during the year, as applicable.

Additionally, where the tax is required to be deducted at a higher rate in the absence of the Permanent Account Number (PAN) of the payee, such deduction is not to exceed the amount of rent payable for the last month of the tax year or the last month of the tenancy, as the case may be.

In order to harmonise the new provision with the existing rules, the Central Board of Direct Taxes (CBDT) has amended the existing rules to provide for the time and mode of payment of tax deducted at source to the central government account as well as the manner in which the certificate of tax deducted at source and the statement of deduction of tax are to be furnished by the payer.

The new provision which cast a tax deduction obligation on individual and HUF who are not liable for a tax audit, under the provisions of the tax laws, has come with effect from June 1, 2017. Such payers will need to ensure withholding tax compliance on payment of rent to residents in excess of Rs 50,000 per month within the timelines and in the form prescribed under the new rules to avoid any adverse consequences by way of additional fees, interest, penalty or prosecution.

Posted in TDS