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NRI Problems:

Please let me know whether the return form has been amended or modified from what it was last year.

I have taxable income in India and returns have been filed for the past five years. For the year ended March 31 2015, I will be filing my return. Please let me know whether the return form has been amended or modified from what it was last year.

C.R. Ganesh, Sharjah

On April 15 this year, the Central Board of Direct Taxes has notified Forms ITR-1 and ITR-2 for the assessment year 2015-16, relevant to the financial year ended on March 31, 2015. For those who file return in Form ITR-1, the Aadhar Card number will have to be mentioned in the return of income. It will also be necessary to give particulars of bank accounts, including IFSC Code and the account number. The balance on March 31, 2015 will have to be provided. Particulars will also have to be given in respect of accounts which have been closed during the financial year 2014-15.

For those who are required to file the return in Form ITR-2, the details of foreign travel will also have to be provided. This requirement is applicable to both resident and non-resident Indians. If a non-resident has income chargeable to tax at a special rate provided in the Double Tax Avoidance Agreement, the assessee will be required to furnish details setting out the name of the country, relevant Article of the DTAA and the rate of tax applicable. It will also be necessary to mention whether a Tax Residency Certificate has been obtained by the assessee.

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My father who is living in India would like to earn maximum rate of interest on his bank deposits because that is the only source of his income. Since interest rates are coming down, I want to know how best he can protect his future income.

B.R. Lakhani, Doha

It is true that interest rates are showing a downward trend and will continue to do so. However, the Reserve Bank of India has now announced that banks will have the discretion to offer higher interest rates if the depositor exercises the option not to withdraw the deposit prematurely. At present, all depositors have the option to withdraw prematurely subject to a lower rate of interest being given by the banks in respect of such premature withdrawal. Under the proposed scheme, higher rate of interest can be offered to those depositors who agree not to withdraw their deposits before the due dates. This benefit will be available on term deposits in excess of Rs1.5 million.

Banks will be required to disclose in advance the schedule of interest rates payable on all deposits mobilised. It will also be necessary to ensure that the interest rates offered are reasonable, consistent and transparent. The board of directors of banks will have to approve the policy with regard to interest rates on deposits.

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I am going back to India later this year. I want to start a car rental business. Initially, I will be hiring cars from owners and will be paying them fixed charges per car. I want to know whether these hire charges paid to the car owners can be claimed as a set-off from the income which I earn.

T.R.S. Chandra, Dubai

You will certainly be entitled to claim as a deduction the monthly charges which you will be paying to the car owners whose cars are used by you in your car rental business. However, it would be necessary for you to deduct tax at source under section 194-C of the Income-tax Act, 1961 from the monthly charges which you will pay to the car owners. Further, the tax so deducted will have to be deposited with the Government within the prescribed time. You will also have to file an annual return with the tax department in respect of the tax deducted at source giving the relevant particulars. A certificate will have to be issued to the car owners showing the amount of tax deducted.

If you fail to comply with these provisions, the amount which you have paid as rental/monthly charges to owners of the vehicles will be disallowed from your taxable income under section 40(a)(i-a). Further, you will be liable to pay to the Income-tax Department the amount of the tax deductible at source together with interest and penalty. In short, the withholding tax provisions will have to be strictly complied with.

 

The writer is a practising lawyer specialising in tax and exchange management laws of India.

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