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Photo: iStock
Photo: iStock

NRI whose income isn’t fully taxable can file Form 13 for nil or low TDS certificate

  • If the payee qualifies as an NRI during the relevant financial year, the payer is required to deduct TDS at a specified rate on the taxable income of the payee
  • It is advisable to document the gift through a gift deed. The taxability of receipt of gift in the US may need to be analyzed separately

What is the procedure for applying for a nil or low TDS (tax deducted at source) certificate on a non-resident Indian’s (NRI) income? Will I need the help of a tax expert?

—Dolly Moga

Under the India income tax law, if the payee qualifies as an NRI during the relevant financial year, the payer is required to deduct TDS at a specified rate (plus applicable surcharge and health and education cess) on the taxable income of the payee. The payer or payee may approach the income tax officer to apply for lower or nil TDS certificate under the following provisions:

(a) If the payer believes that his income is not fully taxable in India, he may file an application with the income tax officer. There has been an amendment to prescribe the form for such application (with effect from 1 November 2019). However, the form has not been prescribed yet.

(b) If the payee believes that his income is not fully taxable in India, he may file an application in Form 13. This form can be filed online through the income tax TRACES website (www.tdscpc.gov.in).

You will need to submit additional documents to substantiate the claim of nil or lower taxability in India. Once the application is processed, the tax officer will issue a nil or lower TDS certificate.

Given the technical aspects of international taxation, it is advisable to approach a tax expert.

I recently sold my ancestral property and a few other assets. I have close to 40 crore. I wish to transfer 15 crore to my daughter who is in the US and 5 crore to my son who lives in Bengaluru. What will be the tax liability for my daughter and me?

—Dhruv Ahluwalia

Under the Income-tax Act, 1961, tax is levied on any sum of money, movable property (specified property such as shares, jewellery, work of art, bullion and so on) or immovable property received in excess of 50,000 by an individual without consideration (without a quid pro quo) or for inadequate consideration, except gifts received from a “relative" or on marriage or by way of inheritance or other specified exclusions.

Assuming that the transfer of the amounts to your daughter and your son is by way of gift, it may be noted that any gift received by a daughter or son from their father (relative) is covered by exclusion provided under the provision and, hence, will not be taxable in their hands in India.

Thus, while sale of ancestral property and other assets can trigger capital gains tax implications in your hands as an independent transaction, there will be no tax implications in India on gift of money by you to your daughter and your son in India.

However, it is advisable to document the gift through a gift deed. The taxability of receipt of gift in the US may need to be analyzed separately.

Sonu Iyer is tax partner and people advisory services leader, EY India.

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