What is a tax exemption certificate?
An Assessing Officer issues the TEC certificate to benefit Assesse, addressed to the income payer. TEC approves the payer to deduct tax at a minimal rate from the income of the NRI
Repatriation
Repatriation and Immovable Property
Repatriation is a process where a Person of Indian Origin or an NRI transfers funds from their balances held in NRO a/c to their NRE a/c.
Sources of funds or assets in India.
- Assets held during migration from India
- The amount earned on these assets in India
- Assets or funds that have been gained from overseas remittances for investment and other purposes.
However, the Government of India has liberalized remittances of assets and income.
Which things are repatriated?
Income
It may be a salary, dividend, pension, and rent from any deposits, properties, or investments.
Sale revenues of assets repatriation
Balance in the NRO account, assets in India (inherited or obtained by other means), and other sale proceeds can be repatriated. Properties that you have gained from Forex should also undergo repatriation. Repatriation also covers the amount that has been paid in inward remittance. Besides, it considers residential accommodation that has been bought with funds raised through a loan, according to Foreign Exchange Management.
Important things that you should remember
Repatriation is related to the payment of taxes in the country. It is also essential to go through the repatriation process for the income that you have earned in a year. NRE funds are repatriable, and there is no limit. Your NRO account balance arises from legitimate dues that you have received in India. It does not refer to the amount you have borrowed from others. There are some restrictions regarding the sale proceed repatriation.
Foreign nationals and special provisions
Some foreign nations can remit their assets in particular situations
• They have retired and are no longer employed in India.
• They have inherited the property from those who have resided outside India.
• They are non-resident widowers or widows and have acquired assets from the deceased spouse (who was an Indian resident)
The remittance must not be higher than $1 million in a financial year. However, the limit does not include sale profits on assets. For the remittance made in multiple installments, you will be able to do it through the Authorized Dealer Bank.
Remittance is also related to the balance in the foreign student’s bank account.
The fund remitter has to submit the essential documents to the bank to remit the funds to the NRE and foreign bank accounts.
The first thing to be undertaken by remitters is Form 15CA. They can choose an electronic or physical signature and submit the form to the tax department.
Another important document is form 15CB, which has to confirm the taxes on remittances.
Form A2 is also known as the Outward Remittance Form, which is needed to transfer an amount from the NRO account to an account in a different country.
FEMA Declaration is another important thing for fund transfer to the NRE account.
RBI offering a special approval
Repatriation that is beyond the mentioned limit can be approved by RBI. RBI also grants permission for different purposes, including education, medical, and home purchase.
Some common problems
• If the annual limit ($1 million) has not been used, the amount cannot be utilized in the next years.
• According to RBI, gifts obtained from residents can reach the NRO account. The amount should not be more than USD 250,000. It indirectly limits the repatriation of the receipt up to the limit.
Know about the rules related to immovable property
Immovable properties refer to a house, flat, commercial property, or any plot of land. Income-tax Act, 1961 is about the Capital Assets. Even Rural Agricultural Land falls under the category of immovable property. Regarding the capital gain computation, you have to note down some important thin
Acquisition cost
It indicates the consideration amount that has been paid for buying property. The cost represents the capital expenditure caused by modifications of the immovable property.
Indexed acquisition cost
- In some cases, when the immovable assets are held for over 2 years, indexation will be beneficial to you. The indexed acquisition cost is a concept that allows a large amount of deduction.
Capital Gains
The Capital Gains on selling immovable properties are of 2 types- The capital asset refers to any type of immovable property, including the buildings and lands. Taxes are applicable on the asset. The short-term capital asset is held for 24 months, while the long-term asset exceed this period. For short-term, the tax is up to 30%. On the contrary, for long-term, the tax is up to 20%.
How to obtain a TEC ?
To get this certificate from the ITD, we have to check the NRI’s jurisdiction regarding the Income Tax. After the transfer of PAN to the Income Tax ward, the TEC application process will be initiated.
You can use the TRACES portal to send your application online.
Documents needed for the process are
- An application letter
- Form No. 13
- Letter of Authority
- Undertaking-cum-Declaration
As an NRI, you will receive these documents for review. After obtaining the relevant documents, we will submit Form-13 on the TRACES website. It takes 2 to 3 days to process the TEC application.