From this month entire industry hit by restrictions of 20% of ITC

GST Latest update circular 123/42/2019 dt.11.11.19

Now there are lots of confusions arrised? how to avail ITC in form 3B by filling this month by 20th November. I tried to give clarity:-

This being a new provision, the restriction is not imposed through the common portal and it is the responsibility of the taxpayer to calculate ITC on its own while filling form 3B on the basis of form 2A at each month interval.
This means going forward, it will be mandatory for the buyers to match the ITC claimed with the details uploaded by the vendors. For example, say in the month of April, the input tax credit available (as per books) is Rs 1,500. Out of this, certain vendors wherein input tax credit involved is say Rs 500 have not filed their GSTR-1. Now, due to amendment, the buyer can avail ITC only to the extent of Rs 1,200 (i.e. 120% of R 1,000) and not 1,500.



This restriction will actually mean that the Companies need to monitor whether the suppliers are uploading their returns on regular basis. Most Companies are likely to feel the pinch of the amendment.

In respect of purchases from vendors having turnover exceeds 1.50 cr. GSTR-1 for October month is over for turnover more than Rs.1.5 crore, hence whatever ITC reflected in 2A form as on 11 Nov. get ITC not exceeding 20% of that in form 2A.

And in respect of SME purchases, i.e. Suppose purchases of goods from the small SME suppliers whose required to files quarterly GSTR-1 than; Restriction of 20% is to be reckoned as on the due date of filing of returns in FORM GSTR-1 of the suppliers for the said tax period. Taxpayer may have to ascertain the same from his auto populated FORM GSTR 2A as available on the due date of filing of FORM GSTR-1 under Section 37(1). It means if buying from SME vendors, whatever ITC reflected in 2A on 11th of the month get 120% of total ITC. Its may happen SME suppliers purchase ITC not reflected on monthly basis as those are required to file quarterly GSTR-1. Hence in that SME purchases situations cash flow of GST payments going to be hits monthly on industries. So government should allow to SME vendors to keep updates their invoices on regular monthly basis eventhough GSTR-1 filling due on quarterly basis. Presently if SME vendor want to update his october month invoices he can't do that, since October month portal is disable for him, it will enable once quarter end i.e. in the month of December? Here GSTN should atleast thinks about SME vendors to atleast allow them to regular updates their invoices enable to take ITC by the big industries/ company, otherwise those SME kept out from the market. Suppose during the month of October a company entire purchases  from SME suppliers, while calculating ITC on 11 November from form 2A found nothing reflected ITC in auto population in form 2A, since those suppliers required to fill quarterly GSTR-1, although if company give directions to suppliers to file GSTR-1 in order to get ITC, SME suppliers can't do so since portal not allow to upload invoices by those suppliers who have choosen quarterly options. Hence the company have to pay GST even though ITC available in books but not populated in monthly 2A rather in quarterly.
In view of ambiguity, we can take a stand to take entire ITC of those suppliers (SME also) who are regularly files their GSTR-1, restrictions of rule 36(4) can be checked at year end March for GST audit purpose.
In order to smooth functioning of main objective of restriction imposed in rule 36(4) of CGST rules, government should immediately implement e-invoice to SME so that above situation not arrise. What the purpose government came out this notification w.e.f. 9.10.2019, can be fruitful!

Now understand FAQ of ITC with the help of examples:-

Restriction in availment of input tax credit in terms of sub-rule (4) of rule 36

In the illustrations, say a taxpayer “R” receives 100 invoices (for inward supply of goods or services) involving ITC of Rs. 10 lakhs, from various suppliers during the month of Oct, 2019 and has to claim ITC in his FORM GSTR-3B of October, to be filed by 20th Nov, 2019.

Refer case 1/2/3 in link.

Balance ITC in subsequent month

Full ITC of balance amount may be availed, in present illustration by “R”, in case total ITC pertaining to invoices the details of which have been uploaded reaches Rs. 8.3 lakhs (Rs 10 lakhs /1.20). In other words, taxpayer may avail full ITC in respect of a tax period, as and when the invoices are uploaded by the suppliers to the extent Eligible ITC/ 1.2.

Download link for examples-

http://globaltaxation.in/sd-uploads/files/Example_ITC_restrictions.pdf

Thanks & Regards

CA. Ashwani Rastogi

Partner, ARJS & Associates

M.Com, FCA, ACS, FAFD

Chartered Accountants 

​​​011-42137042, +91 9990999281

Office:- 2029, Bank Street, Karol Bagh, 

New Delhi 110005 (India)

Buying property from NRI; buyer is resident, seller NRI.

Things To Keep In Mind Before Buying Property From NRIs
Tax should be deducted only on capital gains and not on the sale price, but buyer is liable to deduct TDS on entire sale proceeds. Hence advisable to NRI seller, get lower rate TDS certificate in advance!
Payment only make to NRI even resident have special power of attorney.
TDS deduction varies as per the deal value.
Calculator
Biggest Mistakes as Buyer Should Avoid it!
If you plan to buy a property from a non-resident Indian (NRI), you must know that the process is complicated. More stringent rules are imposed. As a buyer, you have been while making such deals. Here are some key points that you should be aware of when you go for home purchasing from NRI Owner.
1. Buyer liable to pay Higher rate TDS
While purchasing a property from Non-Resident Indian, the rules are different.
In such cases, tax has to be deducted before making the payment to the seller which is commonly referred to as TDS (tax deducted at source). It is section 195 of Income tax act, 1961 which deals with the case of tax deducted at source on payment to non-resident Indians.
The seller must have Permanent Account Number (PAN) to execute the transaction. The buyer must have a Tax Deduction and Collection Account Number (TAN), without which tax (TDS that you as a buyer need to pay) will not be able to be deducted. If you do not have it yet (for both parties), then you must apply for it immediately. If you are planning to buy a NRI property as a co-owner, then your spouse must also have TAN. The same goes with the seller in case there is more than one seller.

All these deductions in on the capital gains that the seller makes, although you should deduct the amount on the total deal value unless the seller goes forward to present a certificate establishing lower tax liability. This is issued by an income tax officer to help and proceed with the standard practice. The TDS must be deposited within seven days of the month of transaction. Then file a TDS return in form 27Q and issue Form 16A to the seller. Delays levy ₹ 200/- per day late fee for late filing return and interest on delayed payment TDS.

Ensure that you deposit the amount in an NRE or an NRO or FCNR account only of the seller.

Illustration:- I will try to keep this illustration very simple as there is a common perception that this subject matter is complex!
This post is dedicated to my NRI friends who would like to know about their TDS liability at the time of sale of Property in India.
Mr. NRI who leave in India having a residential accommodation in Gurgaon!
Now he want to sell his Gurgaon flat which is long back investment property at a sale consideration INR 2.50 crore and want to invest in another Flat in Bangalore!
Therefore 1st task is to calculate long term capital gain of Mr. NRI. Indexed cost of acquisition of property is approx INR 1.50 Crore and he is selling it for 2.5 Cr. Long Term Capital Gain from property sale is approx 1 Crore and corresponding Long Term Capital Gain Tax at 26% is 26 Lakh.
If in case of Mr. NRI, buyer deduct TDS at 26% u/s 195 then TDS will be deducted on sale consideration value i.e. 2.5 Cr. TDS u/s 195 will be approx INR 65 Lakh against Mr NRI Long Term Capital Gain Tax liability of 26 Lakh. In short, u/s 195 excess TDS to the extent of INR 44 lakh will be deducted assuming Mr NRI decided not to re-invest capital gains from property sale.
Further suppose he invested sale proceeds of Gurgaon flat into Bangalore Flat than excess TDS on account of LTCG of Gurgaon flat for which exemption u/s 54 is available in this context of excess TDS u/s 195 to the extent of INR 26 lakh deducted can be save by applying NIL/ Lower rate TDS Certificate from Income tax department.
Buyer Liable to deduct TDS on entire sale consideration. Now anomaly in this rule is that NRI is liable to pay Capital Gain Tax only on the Capital Gain arising out of sale of the property but unfortunately TDS is deducted on the total Sale Value of the property. Therefore in most of the cases there are no GAINS as such from the sale of property and actually NRI incur LOSS from the sale of the property if TDS refund is not claimed. As a result, NRI has to go through the process of claiming TDS refund from Income Tax Department.
2. Payment to SPOA Holder: It is always advisable that during the sale of NRI property the NRI seller should be physically present in India. Sometimes it is not possible due to unavoidable circumstances. In such cases, A Special Power of Attorney or SPOA is executed in favour of a person present in India. Typically SPOA holder is a relative of an NRI Seller. A power of attorney is called Special Power of attorney. if it is executed for a particular purpose as the sale of the property. A General Power of Attorney is multi-purpose like authorization to carry out any financial transaction in India. POA, GPOA and SPOA are used interchangeably. For NRI property, any reference to POA from my end precisely means SPOA.
In the case of NRI property, it is preferred that POA should be SPOA i.e. executed only for the purpose of sale of NRI property. The SPOA should specify property details and also the complete details of SPOA holder i.e. relation, PAN No, etc. Now in many cases, i observed that SPOA holder demands that payment should be made to the SPOA holder. There can be multiple possibilities like the intent of fraud, avoid TDS, family dispute, etc. Whatever be the reason a buyer should follow the natural law of any financial transaction. For an NRI property, the payment should be made only to the NRI Seller in his/her bank account. SPOA holder is only a representative of NRI seller to execute the NRI property transaction. SPOA holder is not the beneficiary of the property transaction.
In one of the case, SPOA holder told that as he is resident India, therefore, TDS applicable is 1%. It is not correct. As you are making payment to NRI seller, therefore, TDS is applicable according to residency status of a seller.
3. RBI Approval if seller from specific mentioned country
Every Non-Resident Indian [NRI] has a right to sell off his/her property in India to an Indian. But, an approval from the Reserve Bank of India [RBI] to sell a property to the NRIs living in the countries likes Afghanistan, Bhutan, China, Nepal, Pakistan, and Sri Lanka is mandatory. RBI’s approval is also essential for selling agricultural land. Hence, the buyer must ask for the document related to the selling approval from RBI to the NRI seller before finalizing the deal.
4. PAN, Citizenship and Residency Status: It is the complex web. I come across various interesting cases to avoid TDS. An NRI seller told my client that address on his PAN is Indian therefore TDS of 1% is applicable. Quite interesting. This option is suggested by the CA of an NRI seller. Let’s take an example, I shifted to self-occupied property six years back, and my address will remain Indian Address in PAN records. Meanwhile, i moved abroad and decided not to changes my address in PAN. My status change from resident Indian to NRI. After that i decide to sell my property and based on my PAN address, can i avoid TDS?. Can’t stop laughing.
Another case study was interesting. An Indian Citizen surrendered the citizenship and obtained citizenship of USA. Govt of India does not allow dual citizenship. If i opt for citizenship of some other country, then i need to surrender Indian Citizenship. Now this guy shifted back to India by his company. The residency status changed to Resident Indian after a stay of more than 182 days. He told my client that property cannot be classified as NRI property because of his residency status as Resident India. At the same time, he is governed by rules and regulations of FEMA. In short, a resident Indian, who is foreign national or PIO/OCI with non-Indian citizenship are treated at par with NRI’s. The TDS is applicable in all such cases.
In the event of doubt, a buyer can include relevant clauses in the sale deed to safeguard financial interest.
Certain things to consider before buying a property from an NRI i.e. the Non-Resident India. So, don’t fall for a wrong deal as we here list the essential things every home buyer should know before purchasing a property from an NRI:
Proceedures for making payment to NRI
1. Apply TAN No. of Buyer.
2. Deduct TDS
3. Pay TDS by 7 day of following month.
4. File for 27Q within due date of relevant quarter.
5. Issue form 16A.
6. Get CA Certificate in form 15CB, if NRI do not provide certificate u/s 197

The person making the payment will obtain a certificate from an accountant in form 15CB.
Then NRI has to upload the remittance details electronically to the department in form 15CA which should be filled using the information contained in form 15CB. He can then take a print-out of the filled form 15CA with system generated acknowledgement number.
He then has to sign the undertaking 15CA and the certificate 15CB will in turn be submitted in duplicate to Reserve Bank of India/authorized dealer who will forward each copy to Assessing Officer concerned.
In the case where a certificate has been obtained from the Assessing Officer regarding the rate at which tax is to be deducted, certificate from the accountant in form 15CB is not to be obtained.

Selling property BY NRI; Seller is NRI, buyer is resident

NRI Exclusive!! TDS on NRI Sale of Property- Here’s How to Get Your Lower rate TDS Certificate and More!!! Immovable property situated in India hence situs to tax in India even though you are NRI
Presuming you are an NRI seller, read this article to clear all your doubts on TDS on sale of property by NRI.
Tax should be deducted only on capital gains and not on the sale price, but buyer is liable to deduct TDS on entire sale proceeds. Hence advisable to get lower rate TDS certificate in advance!
TDS deduction varies as per the deal value.
Calculator
Normally TDS rate on sale proceeds of property is 1 % if you are resident in India, whereas if you are NRI in India the highest TDS as calculated above applies. So well in advance plan for your lower rate of TDS deduction certificate, otherwise buyer will deduct higher rate TDS. Unnecessary your tax deducted at higher rate you go for income tax refund, which is tricky situation.
@ Procedures for getting Income tax refund.
1. Apply 197 certificate.
2. Get TDS deduction certificate from buyer in form 16A.
3. File income tax return within due date
4. Get your income tax refund, in excess of higher deduction made by buyer over and above liable to pay capital gain tax in India.
@ Procedures for getting 197/ Lower rate TDS certificate
1. Get digital signature certificate DSC.
2. Apply to Income tax an application for lower TDS rate in respect of selling of property.
3. Scanned copies of Documents;
A. Seller PAN
B. Buyer PAN, TAN
C. Agreement to sell
D. Sale deed of property, actually brought.
E. Evidence of payment made for buying property, prefer bank statement highlighted payments.
F. Your OCI passport for last four years, showing date of arrival, departure in/ from India. Nos. of days actually stayed in India
Selling of a property has never been an easy job. Being an NRI can only mean the trouble is twice the amount. Even if you find the right buyer to seal the deal, the complexities involving the TDS is unappealing.
If you don’t follow the procedures of TDS with care, you could end up paying a lot on tax. And if you don’t, Income Tax dept. will be on your back demanding even more.
Today, we’ll see what is behind these so called “complexities” and procedures of TDS on your Long Term Capital Gains (LTCG).
Are they really complex to understand for others, other than professionals?
@ What is LTCG on real-estate for NRI?
Let’s get with the basics first. (LTCG stands for Long Term Capital Gain) is the gain (or profit) arising from the sale of immovable property by NRI, held for 2 years or more.
Ownership period lesser than 2 years is brought under STCG (Short Term Capital Gain).
@ Why TDS on Sale of Property for NRI?
TDS on sale of property is mandatory for everyone.
TDS must be deducted on all sale of properties regardless of Short Term or Long Term (Property value) Indian or NRI sellers.
As said above, in this article we will focus on NRI sellers and the TDS deducted on their sale of property.
Since it is not easy to make an NRI comply the tax rules of India, the Income Tax Department introduced the TDS method for LTCG.
What Every NRI Seller Must Do on Sale of Property
Prompt the buyer to deduct TDS before the sale of property.
You, an NRI seller, must inform the buyer the Capital Gain arising from the sale of this property.
The buyer will then deduct TDS on the Capital Gain amount which you informed.
Nevertheless, you should not come up with a figure of Capital Gain arising on the sale of property by yourself. The exact amount of Capital Gain arising must be calculated by an Income Tax Officer.
You should request the Income Tax Officer under whose jurisdiction your PAN comes, for the appropriate Capital Gain amount.
The Income Tax Officer in turn will calculate the Capital Gain from the available legitimate information you provide. The required information include: Sale Value of Property, Expenditure Incurred, Indexed Cost of Acquisition, Indexed Cost of Improvement and Exemptions (if any).
After calculating the Capital Gain, the Income Tax Officer will issue a TDS certificate describing the calculations of Capital Gain.
The NRI seller is supposed to give this certificate to the buyer to intimate the amount on which the TDS should be deducted. The buyer will deduct the TDS on Capital Gain as prescribed in the certificate.
@ Provision for getting permission for lower/nil TDS.
In the case of property owned by non-resident Indians, there is provision for applying to the Assessing Officer for permission for lower/nil TDS. This provision is not applicable for property owned by resident Indians.
The NRI seller may also apply in the prescribed form under section 195(3)/ 197 for grant of a certificate authorizing him to receive the sum with lower/nil TDS. If such a certificate is granted, the person responsible for paying the amount can make the payment with lower/nil TDS.
@ How to get the refund of TDS under section 195?
Now let us come to the procedure of getting refund of the tax deducted. India has entered into Double Tax Avoidance Agreements with several countries. DTAA and the provisions of the Indian I-T Act, whichever is more beneficial to the taxpayer will apply.
NRIs in those countries may avail of the lower rate, provided they have a valid tax residency certificate.
In the case of sale of property by an NRI, TDS has to be deducted by the purchaser.
Illustration:- I will try to keep this illustration very simple as there is a common perception that this subject matter is complex!
This post is dedicated to my NRI friends who would like to know about their TDS liability at the time of sale of Property in India.
Mr. NRI who leave in India having a residential accommodation in Gurgaon!
Now he want to sell his Gurgaon flat which is long back investment property at a sale consideration INR 2.50 crore and want to invest in another Flat in Bangalore!
Therefore 1st task is to calculate long term capital gain of Mr. NRI. Indexed cost of acquisition of property is approx INR 1.50 Crore and he is selling it for 2.5 Cr. Long Term Capital Gain from property sale is approx 1 Crore and corresponding Long Term Capital Gain Tax at 26% is 26 Lakh.
If in case of Mr. NRI, buyer deduct TDS at 26% u/s 195 then TDS will be deducted on sale consideration value i.e. 2.5 Cr. TDS u/s 195 will be approx INR 65 Lakh against Mr NRI Long Term Capital Gain Tax liability of 26 Lakh. In short, u/s 195 excess TDS to the extent of INR 44 lakh will be deducted assuming Mr NRI decided not to re-invest capital gains from property sale.
Further suppose he invested sale proceeds of Gurgaon flat into Bangalore Flat than excess TDS on account of LTCG of Gurgaon flat for which exemption u/s 54 is available in this context of excess TDS u/s 195 to the extent of INR 26 lakh deducted can be save by applying NIL/ Lower rate TDS Certificate from Income tax department.
Buyer Liable to deduct TDS on entire sale consideration. Now anomaly in this rule is that NRI is liable to pay Capital Gain Tax only on the Capital Gain arising out of sale of the property but unfortunately TDS is deducted on the total Sale Value of the property. Therefore in most of the cases there are no GAINS as such from the sale of property and actually NRI incur LOSS from the sale of the property if TDS refund is not claimed. As a result, NRI has to go through the process of claiming TDS refund from Income Tax Department.

.

Nidhi Company & NBFC Company in Karol Bagh

#Nidhicompany #NBFCcompany #Activeform

Looking to Incorporate company in India! let us help you in taking care of your legal business needs taking your hassle away and let you concentrate on your core business needs

Company Incorporation	Private Limited	Public Limited
(Cost Inclusive Of Taxes)	16,000/-	30,000/-
Authorized Capital	Rs100,000	Rs 500,000
DIN Application (Director Identification No )	2 Directors	3 Directors
DSC (Digital Signature of Director )	2 Director	3 Director
Application Of Name	Yes	Yes
Drafting MOA & AOA	Yes	Yes
Certificate Of Incorporation	Yes	Yes
Certificate Of Commencement	Yes	Yes
Total Time Taken	15 working days (Approx)	15 working days (Approx)
PAN & TAN Application	Yes	Yes
1 Year Corporate Advisory	Yes	Yes
	SUBMIT REQUEST	SUBMIT REQUEST

Steps

Legal Structure of Company in India

In India incorporation of company is governed as per the Provisions of Companies Act 2013 and authority approving the company registration is Registrar of Companies.

In India Company existence can be in the form of Private limited or Public limited

	Private Limited	Public limited
Minimum authorized capital required	RS 100,000	Rs 500,000
Registered Office	Must be in India	Must be in India
Minimum and Maximum Number of  Share holder	Minimum 2 and Maximum 200	Minimum 7 and Maximum No limit
Minimum and maximum no of Directors	Minimum 2 And Maximum 15	Minimum 3 and Maximum 15
Foreign Investment	Yes as per the FDI policy **	Yes as per the FDI policy **
Corporate Taxation rate (for upto Rs. 10 crore income)	33.063%	33.063%
(However, from AY 2017-18, basic tax rate is 29% if turnover does not exceed Rs. 5 crore.)
Audit requirement	Yes Yearly	Yes Yearly
Filing of Financial Statements with the Registrar Of Companies	Yes Yearly	Yes Yearly
Acceptance of deposits	No	No
Restriction On transfer Of shares	Yes	No
Board Meeting	Once in Every Qtr	Once in Every Qtr
Annual General Meeting (Shareholders)	Once in a Year	Once In a Year

**Foreign Direct Investment (FDI) in any form is prohibited in any Indian entity, whether incorporated or not, which is engaged or proposes to engage in the following activities:

1. Lottery Business including Government/private lottery, online lotteries, etc.
2. Gambling and Betting including casinos etc.
3. Business of chit fund.
4. Nidhi company.
5. Trading in Transferable Development Rights (TDRs).
6. Real estate business (However, FDI is permitted in development of townships, construction of residential/commercial premises, roads or bridges educational institutions, recreational facilities, city and regional level infrastructure, townships), or construction of farm houses
7. Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
8. Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).

Documents Required Company Formation

We will need following details/ documents

1. PAN card copy for proposed directors for Indian resident, for Non-resident copy of Passport (self-attested).
2. Address proof for proposed directors, (self-attested).
3. PAN card copy for proposed shareholders for Indian resident for Non-resident copy of Passport, (self-attested)
4. Address proof for proposed shareholders, (self-attested)
5. One photograph of each proposed director and shareholders,
6. Valid mobile No. and mail id,
7. Name of the company proposed, 6 names in order of priority,
8. Proposed state in which the registered office will be situated for the Company,
9. Address of registered office & proof of registered address (i.e. Electricity Bill, Telephone/Mobile Bill, Gas Bill),
10. Address of the police station in whose jurisdiction registered address of the company lies,
11. Authorized share capital of the proposed company
12. Main object for the proposed company.
13. Digital signature of any one of the director.

Thanks & Regards
CA. Ashwani Rastogi

Partner, ARJS & Associates

M.Com, FCA, ACS, FAFD

Chartered Accountants 

Address- 2029, Bank St, Near Shreem Jewellers, Block 47, Beadonpura, 

Karol Bagh, New Delhi, Delhi 110005
Mobile Number- +91-9990999281

Office Number: 011-42137042 | Website- www.globaltaxation.in
More Details- http://www.globaltaxation.in/nidhi-company.html, http://www.globaltaxation.in/nbfc-registration.html

Nidhi Company & NBFC Company in Gurgaon

#Nidhicompany #NBFCcompany #Activeform

Looking to Incorporate company in India! let us help you in taking care of your legal business needs taking your hassle away and let you concentrate on your core business needs

Company Incorporation	Private Limited	Public Limited
(Cost Inclusive Of Taxes)	16,000/-	30,000/-
Authorized Capital	Rs100,000	Rs 500,000
DIN Application (Director Identification No )	2 Directors	3 Directors
DSC (Digital Signature of Director )	2 Director	3 Director
Application Of Name	Yes	Yes
Drafting MOA & AOA	Yes	Yes
Certificate Of Incorporation	Yes	Yes
Certificate Of Commencement	Yes	Yes
Total Time Taken	15 working days (Approx)	15 working days (Approx)
PAN & TAN Application	Yes	Yes
1 Year Corporate Advisory	Yes	Yes
	SUBMIT REQUEST	SUBMIT REQUEST

Steps

Legal Structure of Company in India

In India incorporation of company is governed as per the Provisions of Companies Act 2013 and authority approving the company registration is Registrar of Companies.

In India Company existence can be in the form of Private limited or Public limited

	Private Limited	Public limited
Minimum authorized capital required	RS 100,000	Rs 500,000
Registered Office	Must be in India	Must be in India
Minimum and Maximum Number of  Share holder	Minimum 2 and Maximum 200	Minimum 7 and Maximum No limit
Minimum and maximum no of Directors	Minimum 2 And Maximum 15	Minimum 3 and Maximum 15
Foreign Investment	Yes as per the FDI policy **	Yes as per the FDI policy **
Corporate Taxation rate (for upto Rs. 10 crore income)	33.063%	33.063%
(However, from AY 2017-18, basic tax rate is 29% if turnover does not exceed Rs. 5 crore.)
Audit requirement	Yes Yearly	Yes Yearly
Filing of Financial Statements with the Registrar Of Companies	Yes Yearly	Yes Yearly
Acceptance of deposits	No	No
Restriction On transfer Of shares	Yes	No
Board Meeting	Once in Every Qtr	Once in Every Qtr
Annual General Meeting (Shareholders)	Once in a Year	Once In a Year

**Foreign Direct Investment (FDI) in any form is prohibited in any Indian entity, whether incorporated or not, which is engaged or proposes to engage in the following activities:

1. Lottery Business including Government/private lottery, online lotteries, etc.
2. Gambling and Betting including casinos etc.
3. Business of chit fund.
4. Nidhi company.
5. Trading in Transferable Development Rights (TDRs).
6. Real estate business (However, FDI is permitted in development of townships, construction of residential/commercial premises, roads or bridges educational institutions, recreational facilities, city and regional level infrastructure, townships), or construction of farm houses
7. Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
8. Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).

Documents Required Company Formation

We will need following details/ documents

1. PAN card copy for proposed directors for Indian resident, for Non-resident copy of Passport (self-attested).
2. Address proof for proposed directors, (self-attested).
3. PAN card copy for proposed shareholders for Indian resident for Non-resident copy of Passport, (self-attested)
4. Address proof for proposed shareholders, (self-attested)
5. One photograph of each proposed director and shareholders,
6. Valid mobile No. and mail id,
7. Name of the company proposed, 6 names in order of priority,
8. Proposed state in which the registered office will be situated for the Company,
9. Address of registered office & proof of registered address (i.e. Electricity Bill, Telephone/Mobile Bill, Gas Bill),
10. Address of the police station in whose jurisdiction registered address of the company lies,
11. Authorized share capital of the proposed company
12. Main object for the proposed company.
13. Digital signature of any one of the director.

Thanks & Regards
CA. Ashwani Rastogi

Partner, ARJS & Associates

M.Com, FCA, ACS, FAFD

Chartered Accountants 

Address- 2029, Bank St, Near Shreem Jewellers, Block 47, Beadonpura, 

Karol Bagh, New Delhi, Delhi 110005
Mobile Number- +91-9990999281

Office Number: 011-42137042 | Website- www.globaltaxation.in
More Details-http://www.globaltaxation.in/nbfc-registration.html

TDS on Sale of Property in Karol Bagh

#TDSforNRIsellingproperty #TDSonsaleofpropertybyNRI #TDSfrombuyingpropertyfromNRI#LowerrateofTDS #TDScertificate197 #TDSoncapitalgainforNRI

Know your TDS obligations if you are buying a property from NRI

When an NRI sells a property in India, the buyer needs to deduct TDS on the payment of purchase consideration.

• In the recently announced Union Budget 2019, the surcharge on income-tax for individuals has been increased to a maximum of 37%.
• The rate of TDS can be as high as 28.50% of the sale value on long term capital gain (property held for more than 2 years).
• The rate of TDS can go up to 42.74% of sale value on short term capital gain (property held for less than 2 years), if the property value is more than INR 5 Cr.
• Income tax law provides that a lower TDS certificate can be obtained from income tax authorities, considering the actual profit earned by NRI on the deal. Lower TDS certificate can be obtained at a rate as low as 3.12% of the sale value (as per present guidelines - July 2019)

Let me clarify most common confusion first, TDS of 1% u/s 194IA is not applicable if seller is NRI. TDS u/s 194IA is only applicable for resident Indian sellers.

Taxation on Sale of Property by NRI’s (Non Resident Indians) is bit confusing subject. This confusion is caused due to lack of information and improper explanation. Sometimes it is in the interest of few professionals to complicate things and confuse NRI clients to maximize their gains. In most of the cases, I observed that neither buyer nor NRI seller are aware of what to do.

Tax deduction at Sourse (TDS) on Sell of Property by NRI- Non Resident

Let me admit that Income Tax Act is not that complicated but it is in the hands of people who interpret it to make it complicated or simplified. To start with, Selling of property by NRI is taxable under u/s 195 of the Income Tax Act, 1961. I will discuss how to deduct TDS u/s 195!

NRIs who want to sell any house property that they may have in India. As the property situated in India, hence situs to tax in India this article elaborate how much tax is payable and TDS deductible in case of NRIs who want to sell property in India.

NRIs who are selling house property which is situated in India have to pay tax on the Capital Gain. The tax that is payable on the gains depends on whether it’s a short term or a long term capital gains.

When a house property is sold, after a period of 2 years from the date it was owned – there is a long term capital gain. In case it held for 2 years or less – there is a short term capital gain.

Tax implications for NRIs are also applicable in the case of inheritance. In case the property has been inherited, remember to consider the date of purchase of the original owner for calculating whether it’s a long term or a short term capital gain. In such a case the cost of the property shall be the cost to the previous owner.

Buying property from NRI check consequences of non deduction of tax (TDS) ?

How much tax is payable and deductible by buyer?

As per the Indian Income Tax Act, when a resident purchases any property from a non resident, he has to deduct income tax (TDS) and pay the balance amount to the seller.

Not many people know that Capital Gain Taxation is same for both Resident Indians and NRI’s but only difference is in calculation and deduction of TDS. Since NRI is staying outside India therefore it is very difficult to ensure capital gain tax compliance after the property transaction is completed. In order to ensure compliance, Income Tax Department came out with an innovative idea to ensure that buyer deduct TDS at the time of making payment to NRI seller. TDS u/s 195 is deducted only to ensure capital gain tax compliance.

When an NRI sells property, the buyer is liable to deduct TDS at the rate of:-

• Long term capital gains are taxed at 20% {22.88%}, He has to deduct 20% of the sale consideration as tax before making the net payment to seller. and
• short term gains shall be taxed at the applicable income tax slab rates i.e. 30% (31.20%)

Procedure aspect

Buyer should first obtain TAN under section 203A of the Income Tax Act, 1961 before deducting TDS. TAN can be obtained by applying buy filling up the Form 49B.

TDS must be deducted at the time of making the payment to the NRI. The information about the TDS being deducted and the rate at which it was deducted should be mentioned in the sale deed between the NRI seller and the buyer.

The TDS deducted by the buyer should be deposited through Form number or challan for TDS payment on or before the 7th of next month in which the TDS is deducted.

The TDS can be deposited through banks that are authorised by government of India or the Income Tax Department to collect Direct Taxes. The deposit has to be made by the buyer!

TDS Refund by NRI’s

You can claim TDS refund if can show proof of reinvestment of capital gains in India. You can either buy another house in India or invest in capital gains bonds u/c 54EC. You should submit an affidavit stating that you will invest the capital gain amount in capital gain bonds. For property purchase you can produce allotment letter or payment receipts of the builder.

Instead of claiming refund which is more tedious process it is always advisable to apply for NIL Tax Deduction / Tax Exemption / Lower Tax Deduction Certificate. It require some intelligent planning before sale of property and proactive approach.

197 NIL/ LOWER TDS Certificate by NRI Property Seller

How NRI’s can lower TDS on Property Sale?

As we discussed above basics of TDS on Property Sale by NRI. Now we understand how my NRI friends can lower the TDS on Property Sale. Before you decide to go ahead with property sale following 2 points should be considered

Type of Capital Gain from Property Sale i.e. Short Term Capital Gain or Long Term Capital Gain

Whether i am willing to pay capital gain tax or would like to save capital gain tax by Re-investment of capital gains- claiming exemption u/s 54/ 54F

Once these 2 points are clear then we are ready for property sale in India.

Illustration:- I will try to keep this illustration very simple as there is a common perception that this subject matter is complex!

This post is dedicated to my NRI friends who would like to know about their TDS liability at the time of sale of Property in India.

Mr. NRI who leave in India having a residential accommodation in Gurgaon!

Now he want to sell his Gurgaon flat which is long back investment property at a sale consideration INR 2.50 crore and want to invest in another Flat in Bangalore!

Therefore 1st task is to calculate long term capital gain of Mr. NRI. Indexed cost of acquisition of property is approx INR 1.50 Crore and he is selling it for 2.5 Cr. Long Term Capital Gain from property sale is approx 1 Crore and corresponding Long Term Capital Gain Tax at 22.88% is 22.88 Lakh.

If in case of Mr. NRI, buyer deduct TDS at 22.88% u/s 195 then TDS will be deducted on sale consideration value i.e. 2.5 Cr. TDS u/s 195 will be approx INR 57.20 Lakh against Mr NRI Long Term Capital Gain Tax liability of 22.88 Lakh. In short, u/s 195 excess TDS to the extent of INR 34.32 lakh will be deducted assuming Mr NRI decided not to re-invest capital gains from property sale.

Further suppose he invested sale proceeds of Gurgaon flat into Bangalore Flat than excess TDS on account of LTCG of Gurgaon flat for which exemption u/s 54 is available in this context of excess TDS u/s 195 to the extent of INR 22.88 lakh deducted can be save by applying NIL/ Lower rate TDS Certificate from Income tax department.

Buyer Liable to deduct TDS on entire sale consideration. Now anomaly in this rule is that NRI is liable to pay Capital Gain Tax only on the Capital Gain arising out of sale of the property but unfortunately TDS is deducted on the total Sale Value of the property. Therefore in most of the cases there are no GAINS as such from the sale of property and actually NRI incur LOSS from the sale of the property if TDS refund is not claimed. As a result, NRI has to go through the process of claiming TDS refund from Income Tax Department.

The buyer of the flat liable to deduct 22.88% TDS on sale consideration i.e 22.88% of INR. 2.50 crore!

But for saving point of view he can claim Indexation benefit for which he NRI Seller can apply for Nil Tax Deduction or Lower Tax Deduction with Income Tax Assessing Office. In case, NRI seller is planning to re-invest capital gain as i mentioned earlier then he can apply for tax exemption certificate. Based on assessment by Income Tax Department, certificate will be issued to NRI seller for property sale. In this case, buyer will not deduct TDS u/s 195 on sale consideration value. In above example, if Mr NRI get certificate from Income Tax Department then buyer will pay full consideration i.e. 2.5 Cr to Mr. NRI without deducting any TDS. NRI seller can handover original Nil Deduction Certificate to the buyer for his reference. In short, buyer need not to file any TDS in seller’s name as TDS will not be deducted in this case. Income Tax Department will issue separate certificate to NRI seller for TDS on capital gains. For Tax Exemption Certificate, NRI seller can submit application in Income Tax Department under whose jurisdiction his / her PAN belongs to. To know the jurisdictional IT office of PAN.

In few cases I observed that TDS is not applicable on property sale as NRI seller obtained NIL Deduction or Tax exemption certificate but then buyer deducted TDS u/s 194IA just for the sake of deducting TDS. In such cases, full payment should be released to NRI seller for property sale and buyer should obtain Nil deduction certificate / Tax Exemption Certificate from NRI seller.

After point 1 i.e. calculation of capital gain, there are 3 possible scenarios

(a) Capital Gain is Zero or there is Capital Loss on Property Sale: In this case NRI Seller can apply for NIL Tax Deduction Certificate.

(b) NRI Seller is willing to pay Actual Capital Gain Tax i.e. if Actual Capital Gain Tax liability is less than TDS u/s 195: In this scenario, based on capital gain tax calculation NRI seller can apply for Lower tax Deduction Certificate. In above example, Mr. NRI can apply for Lower Tax Deduction Certificate as actual long term capital gain tax liability is only 22.88 lakh against TDS of 57 lakh u/s 195.

(c) NRI seller is willing to re-invest capital gain to save capital gain tax: In this case, NRI Seller can apply for Tax Exemption Certificate.

How to apply for Nil / Lower Tax Deduction Certificate or Tax Exemption Certificate on Property Sale

Documents Required:

(a) Passport and PAN

(b) Sale Agreement / Sale Deed

(c) Income Tax Returns

(d) Bank Statement

(e) Any other document deemed relevant

Entire process may take upto 1 MONTH time! In case, there is no tax liability then NRI can file form 15CA and 15CB online. These forms can be filed by CA. After filing form 15CA and 15CB, money can be transferred to country of residence else money can be retained in NRO account in India.

Disclaimer: The opinion given in the articles is the individual opinion of the author and it is up to the readers to evaluate their position taking the provision of law and applicable facts of their case and take the decision on the subject matter. Subject to taxability of capital gain rates, surcharge, cess or available of exemption u/s 54, 54F, 54EC etc. and DTAA provision. The author or me cannot be held liable for any of the decisions taken based on the above article. Before taking any decision it is best to hire professional advice.

Last but not the least, in many cases I observed that NRI seller insist buyer to not to deduct TDS. In specific cases, TDS is not deducted due to ignorance at buyers end. In all such scenarios, hefty penalty can be imposed on buyer or on NRI seller. It is always advisable to pay all taxes on time to buy peace of mind which is priceless.

Thanks & Regards
CA. Ashwani Rastogi

Partner, ARJS & Associates

M.Com, FCA, ACS, FAFD

Chartered Accountants 

Address- 2029, Bank St, Near Shreem Jewellers, Block 47, Beadonpura, 

Karol Bagh, New Delhi, Delhi 110005
Mobile Number- +91-9990999281

Office Number: 011-42137042 Website- www.globaltaxation.in
More Details- http://www.globaltaxation.in/nri-tds.html