NRI PROBLEMS

I am liable to file a tax return this year. Can I do so online?



By H. P. Ranina

Published: Mon 29 Jun 2015, 9:54 PM

Last updated: Wed 8 Jul 2015, 2:52 PM

A British company has set up a subsidiary in India.  I am likely to be appointed as a non-executive director in that company.  I want to know what remuneration can be legally paid by the Indian company to its non-executive directors and what procedure is to be followed for the same.  Do I have to pay tax in India on the remuneration earned from the company, though I will continue to remain non-resident under Indian tax laws?

 — P K Chitnis, Abu Dhabi

The Indian company’s board of directors will have to constitute a Remuneration Committee in compliance with the provisions of the Companies Act, 2013.  This committee will have to formulate and adopt a comprehensive compensation policy for non-executive directors.  Sitting fees can be paid upto the limits laid down under the law for every meeting attended by the directors.  Commission not exceeding one percent of the net profits for all directors put together can also be paid in addition to the sitting fees.  Reimbursement of all travelling expenses is also permissible.The fees, including commission, would be liable to tax in India as such amount is earned for rendering services in India.  The company will deduct tax at source while paying the fees.  Thereafter, the director will have to file a tax return in respect of such income and any other income taxable in India.

 

I am liable to file a tax return this year. Can I do so online? I am also entitled to claim a refund.  Will there be a delay in obtaining the same?

— T R Raju, Doha

Individual tax payers are now permitted to file e-returns. After you have filed the same and the acknowledgement is received, the income-tax return verification form has to be sent by Speed Post to the Central Processing Centre.  However, if you give your Aadhar Number while filing the income-tax return, you need not submit the ITR-V form to CPC Bengaluru.

The process for granting refunds has also been streamlined.  If the Aadhar Number and Permanent Account Number match, a one-time password will be sent by the tax department and the refund will be granted without delay.  The OTP will be needed to validate the retun.  Corporates and individuals who have a certain level of taxable income are required to sign electronically.  However, for other individuals, the downloaded verification forms can be signed and sent to the CPC.  For the current assessment year 2015-16, the last date for filing the return has been extended to August 31, 2015.

 

My son is working for an information technology company in   India.  Apart from his remuneration, he will be entitled to receive stock options from his company.  Are these options legally valid and are they free from tax as I have been told?

— D C Ruia, Dubai

Stock option plans are legally valid and are recognised under the Companies Act, Sebi regulations and the income-tax law.  Under these plans, employees can avail of the option of acquiring shares of their own company.  The company will have to devise a comprehensive plan which will have to be sent to the relevant authorities, and thereafter there can be no deviation. 

Sebi has provided that companies will have to disclose the description of each scheme which exists during the year.  Information which will have to be disclosed will include date of shareholders’ approval, pricing formula and whether the shares can be acquired from the company or from the secondary market.  Employees welfare trusts are also permitted to purchase shares from the secondary market subject to certain safeguards.

Under the income-tax law, tax is chargeable on the perquisite value as and when an employee exercises his option to acquire the shares allotted to him.  The difference between the market value of the shares on the date on which he exercises his option and the offer price of the company will be treated as perquisite value. The company will withhold the tax in the month following the date on which the option is exercised.

 

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


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