With the passing of the Finance Invoice 2019 in Parliament, some modifications have been made within the rule relating to taxation of presents given by resident people to non-resident Indians (NRIs).

In keeping with modifications made on the time of passing Budget 2019, solely money paid by a resident particular person to a ‘individual outdoors India as a right will probably be thought-about as taxable within the palms of the receiver’.

Amendments on the time of passing of Funds 2019 have particularly outlined the ‘individual outdoors India’ as non-resident or international firm.

Shalini Jain, Tax Associate, Individuals Advisory Providers, EY India says, “As in comparison with the Funds proposal, the modification of supply rule for presents at enactment stage of Finance (No2) Invoice 2019 restricts itself to financial presents made on or after July 5, 2019 and extra exactly clarifies applicability to taxpayer being non-resident or international firm. The taxation of non-monetary presents will probably be decided by present supply guidelines which require nexus with India.”

Earlier, Funds 2019 proposed that if any sum of cash paid or property located in India is transferred by a resident particular person to an individual outdoors the nation as a right, then it will likely be thought-about as taxable within the palms of the receiver. Nonetheless, on the time of passing of the Invoice, the reference to property located in India was omitted. Subsequently, solely cash transfers made by resident people to non-residents or international firms will probably be handled as taxable as a substitute of each cash and property switch as initially proposed.

Keep in mind, cash transfers made as a right on or after July 5, 2019 will probably be handled as taxable from FY 2019-20.

The modification within the guidelines relating to such presents has been made to plug the loop-hole which earlier gave tax-free standing to such presents.

“As per taxation guidelines relevant on presents, any cash paid to a different individual apart from specified individuals talked about within the Earnings Tax Act will probably be taxable if it exceeds Rs 50,000 in a monetary 12 months. Presents are taxed within the palms of the recipient. Nonetheless, presents to NRIs had been claimed to be accrued overseas and therefore remained outdoors the tax internet. With the passing of Finance Invoice 2019, NRIs should disclose such presents acquired from India and pay tax on it as per the tax guidelines relevant”, provides Jain.

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