International Tax & Compliance Handbook

Special Emphasis on India-U.S. Taxes

Cecil K Nazareth

• Publisher: Pat Creedon Design, Inc.
• Year: 2019
• eBook ISBN: 9780578465241
• Edition: 1
• Topic: Business
• Subtopic: Taxation
• Index: Business

The Handbook is a fountain of knowledge for both tax practitioners and individuals who need a basic understanding of International tax issues or cross-border transactions. Using his unique lens as a global citizen, practitioner, teacher and coach, Nazareth draws on a myriad of practical examples and case studies he has collected from years in the trenches with clients, colleagues, and students. The Handbook also includes forms, templates and checklists and concise explanations of tax treaties that have been carefully curated by Nazareth and his editors.

CHAPTER 11

India–U.S. Tax Issues

Agenda

11.01 Indian tax return—individual
11.02 Indian corporate taxation
11.03 Categories of income
11.04 Property tax guide for nonresident Indians (NRIs)
11.05 Foreign tax credits

11.01 Indian Tax Return—Individual

India follows a March 31 fiscal year as opposed to the U.S. calendar year. If you are converting an Indian tax return to a U.S. tax return, you have to convert it from a fiscal-year basis to a calendar-year basis.

India has an assessment year (AY) and a previous year (PY).

Example: An AY will be 2016–2017, and the PY is 2015–2016.

Carry three months from the previous year and nine months from the current year so you can convert from a fiscal year-end to a calendar year-end. This is important when taking foreign tax credits so that you can align the credits by choosing the same calendar year.

April 1, 2016, to March 31, 2017, and April 1, 2017, to March 31, 2018. Extract three months from January 1, 2017, through March 31, 2017, and combine that with nine months April 1, 2016, through December 31, 2016 (Appendix C—Template India—U.S. tax credit).

In India, spouses file separate tax returns.

Filing Status

1. Individual
2. Partnerships
   • Hindu Undivided Family (HUF)
   • AOP (Association of Persons)
   • BOI (Body of Individuals)
   3. Domestic corporations
   4. Foreign corporations

11.02 Indian Corporate Taxation

Governed by Income Tax Act (1961) and Finance Act (2017).

Corporations are taxed on the following categories of income:

• Profits and gains from business or profession
• Income from house property
• Capital gains
• Income from other sources

Classification of companies

Domestic companies

• Companies incorporated in India
• Companies incorporated outside India but whose control and management are situated in India

Foreign companies

• Companies not incorporated in India
• Companies whose control and management are not situated in India

Tax rates applicable for AY 2018–2019 (FY 2017–2018)

Domestic Companies

*Total Income (INR)	Tax Rate	Surcharge	Cess
Up to 1 Crore	30%	Nil	3%
1 Crore to 10 Crores	30%	7%	3%
Above 10 Crores	30%	12%	3%

Note: If the turnover or gross receipts of the company during fiscal year 2015–2016 did not exceed Rs. 5 Crores, the tax rate will be 25%.

For Foreign Companies

*Total Income (INR)	Tax Rate	Surcharge	Cess
Up to 1 Crore	40%	Nil	3%
1 Crore to 10 Crores	40%	2%	3%
Above 10 Crores	40%	5%	3%

*Total income is calculated by considering applicable categories of income, setoff, and carryforward provisions and deductions.

Dividend Distribution Tax (DDT)

Under Section 115-O, apart from the income tax calculated as above, a domestic company is liable to pay DDT on the dividend proposed/distributed.

Rate of DDT is 15% plus 12% surcharge and Cess 3%.

Note: If a person receives a dividend of more than Rs. 10 lakhs, the taxpayer will be taxed at a rate of 10%.

Minimum Alternative Tax (MAT)

• Under Section 115 JB, MAT will be applicable if the income tax calculated on total income is less than 18.5%.
• It is calculated at 18.5% of the book profits of the company.
• MAT credit can be carried forward and set off against normal tax liability for a period of 15 years from AY 2018–2019.

Back taxes

India allows you to file a tax return for only up to two previous tax years.

11.03 Categories of Income

There are mainly five categories of income in India:

• Income from house property
• Income from business and profession
• Income from salaries
• Income from capital gains
• Income from other sources

The c...

Table of contents

• International Tax & Compliance Handbook
• Acknowledgments
• Foreword
• Why I Am Writing This Book Now
• Table of Contents
• An Overview of International Taxation and Taxing Jurisdiction and Philosophy
• Residency, Filing Status, and Filing Thresholds
• Source of Income Rules and Taxability
• International Tax Allocation and Apportionment
• Foreign Tax Credits
• U.S. Taxation of Outbound (Foreign) Transactions
• U.S. Inbound Transactions
• Real Estate Taxation
• Transfer Pricing
• International Tax Treaties
• India–U.S. Tax Issues
• FATCA, FBAR, OVDI, and Form 8938
• TCJA 2017 Individuals and Pass-Through Entities
• U.S. TCJA 2017—C-Corps and International
• Tax Compliance Challenges in 2018 and Beyond—Real-World Examples
• Appendix