Good News For NRIs - Capital Gains Tax Exemption On Sale Of Mutual Fund Units In India.

Summary

In this episode of 'NRI Clinic,' Dr. Chandra Khan and Chartered Accountant Mr. Sriram Rao discuss strategies for Non-Resident Indians (NRIs) to reduce their capital gains tax in India. They explore the misconceptions around NRE and NRO accounts, clarify that capital gains from investments in India are taxable, and delve into the specifics of double taxation avoidance agreements (DTAAs) between India and various countries. The discussion highlights the importance of obtaining a Tax Residency Certificate (TRC) to claim tax exemptions and emphasizes the voluntary nature of availing DTAA benefits, suggesting that NRIs should consult with professionals to make informed decisions.

Takeaways

• 📚 The program discusses methods for Non-Resident Indians (NRIs) to reduce their capital gains tax in India.
• 👨‍🏫 Dr. Chandra Khan introduces the NRA Clinic with expert Mr. Sriram Rao, a chartered accountant specializing in direct tax and international taxation.
• 🏦 Investments made from NRE or NRO accounts are not exempt from capital gains tax in India if the investment generates income.
• 📉 Capital gains from future and options trading are not considered capital gains but are treated as business or speculative income.
• 💡 Profits from cryptocurrency are not classified as capital gains but are taxed separately under a specific section for virtual digital assets.
• 🤝 Double Taxation Avoidance Agreements (DTAAs) can provide tax relief for NRIs, depending on the provisions between India and their country of residence.
• 🏠 Immovable properties and certain business-related assets held in India are generally taxable in India, regardless of the NRI's country of residence.
• 🛂 To claim tax exemptions under DTAAs, NRIs must obtain a Tax Residency Certificate (TRC) from their country of residence.
• 📋 The TRC is essential for availing benefits under DTAAs and must be obtained annually for the relevant financial period.
• 💼 It's optional for an NRI to claim tax exemptions under DTAAs; they can choose based on which is more beneficial, considering the costs involved.
• 🔔 The program encourages viewers to consult with chartered accountants or research DTAAs to understand the tax implications for their specific situation.

Q & A

What is the main topic of discussion in the 'NRI Clinic' episode?

The main topic of discussion in the 'NRI Clinic' episode is the possibility of how Non-Resident Indians (NRIs) can reduce their capital gains tax in India.

Who is the financial guide for the 'NRI Clinic' program?

Dr. Chandra Khanna is the financial guide for the 'NRI Clinic' program.

What is the role of Mr. Sriram Rao in the episode?

Mr. Sriram Rao is a practicing chartered accountant and a partner at Nitin Jay Shetty and Co, who specializes in direct tax and international taxation. He is the eminent faculty on the channel, simplifying tax codes for NRIs.

What is considered as a capital asset in India for taxation purposes?

Capital assets in India include all kinds of property, especially immobile properties, and movable properties that are not stock in trade or personal effects. It also includes shares, securities, mutual fund units, unit insurance policies, jewelries, drawings, paintings, works of art, archaeological collections, and sculptures.

How is capital gain taxed in India for non-resident Indians?

Capital gains are taxed as part of the income tax form in India. The income earned from the transfer of any capital asset is liable for capital gains tax as per Indian tax laws.

What is the misconception about investments made from NRE and NRO accounts in India?

The misconception is that any income or capital gains from investments made from NRE and NRO accounts are tax-free, which is not true. Capital gains from the sale of assets invested in from these accounts are taxable in India.

How are profits from future and options trading treated for taxation purposes?

Profits from future and options trading are not considered capital gains. If dealt in a recognized stock exchange, it is considered as normal business income, and if it is other than a recognized stock exchange, it is considered as speculative income.

What is the tax treatment of profits made from cryptocurrencies in India?

Profits from cryptocurrencies are not considered as capital gains. They are treated as a separate category under the tax law, specifically as virtual digital assets, with a specific rate of tax given for them.

What is the importance of the Double Taxation Avoidance Agreement (DTAA) for NRIs?

The DTAA is important for NRIs as it provides provisions to avoid double taxation on the same income. It allows NRIs to claim benefits and potentially reduce their tax burden in India based on the specific terms of the agreement with their country of residence.

What are the four categories of assets for which capital gains are always taxable in India, irrespective of the NRI's country of residence?

The four categories of assets for which capital gains are always taxable in India are: immovable properties, mobile properties held in a business in India, shares held in an Indian company, and shares held in a company outside of India that derives its value substantially from immovable properties situated in India.

What is the significance of a Tax Residency Certificate (TRC) for NRIs claiming tax exemptions under DTAA?

A TRC is a must for NRIs to avail the benefits of the DTAA. It serves as proof that the NRI is a tax resident of a particular country for a specific period, which is a precondition for claiming exemptions under the DTAA.

Can an NRI claim tax exemptions under DTAA if they are unable to obtain a TRC due to reasons beyond their control?

In exceptional cases where an NRI is unable to obtain a TRC due to reasons beyond their control, such as the country not having a system for issuing TRCs, they may be able to claim exemptions under the DTAA if they can substantiate this with documentary evidence and convince the tax authorities.

How often does an NRI need to obtain a TRC to claim tax exemptions under DTAA?

An NRI needs to obtain a TRC for each financial year for which they wish to claim tax exemptions under the DTAA. The TRC is valid only for the specific period it covers and must be re-applied for each year.

What should an NRI consider when deciding whether to claim tax exemptions under DTAA or pay taxes in India?

An NRI should consider the costs associated with obtaining a TRC and compare it with the potential tax savings from claiming exemptions under the DTAA. If the cost of obtaining a TRC exceeds the tax benefit, it may not be financially beneficial to claim the exemption.

Outlines

00:00

📚 Introduction to NRI Tax Relief Strategies

This segment introduces the weekly expert speaks program, focusing on tax relief for Non-Resident Indians (NRIs) in India. Dr. Chandra Khan, the host, welcomes viewers and sets the stage for a discussion on reducing capital gains tax. The guest expert, Chartered Accountant Mr. Sriram Rao, is introduced as a specialist in direct tax and international taxation with experience in assisting NRIs. The conversation aims to clarify misconceptions and explore legitimate ways for NRIs to minimize their tax burden in India.

05:01

🏦 Understanding Capital Gains Taxation for NRIs

The second paragraph delves into the specifics of capital gains taxation for NRIs in India. It defines capital gains, explains the types of assets considered for taxation, and clarifies that capital gains are part of the income tax form. Mr. Sriram Rao dispels the myth that investments made from NRE or NRO accounts are tax-free, emphasizing that capital gains from the sale of assets are taxable in India, regardless of the source of investment funds.

10:02

📉 Capital Gains from Investments in Futures, Options, and Cryptocurrencies

This section addresses the tax implications of profits from futures, options trading, and investments in cryptocurrencies for NRIs. It clarifies that these profits are not considered capital gains but are treated differently under tax laws. While futures and options traded on recognized stock exchanges are considered business income, cryptocurrencies are taxed under a separate category as virtual digital assets, distinct from capital gains.

15:02

🔍 Exploring Tax Relief Opportunities for NRIs through DTAA

The fourth paragraph explores opportunities for NRIs to reduce their tax burden using Double Taxation Avoidance Agreements (DTAA). It explains that while capital gains are generally taxable in India, certain provisions in DTAA with various countries may offer exemptions. The discussion highlights the importance of understanding the specific articles of DTAA that apply to different types of assets and the conditions under which capital gains may be taxed in the country of residence rather than India.

20:06

🌐 Specific DTAA Provisions and Their Implications for NRIs

This segment provides an in-depth look at the provisions of DTAA between India and various countries, particularly those popular among the NRI population. It outlines the conditions under which capital gains from certain assets are taxable in India and others are not, depending on the specific terms of the DTAA. The paragraph emphasizes the need for NRIs to consult the DTAA of their country of residence to understand their tax obligations and potential exemptions.

25:06

📄 Documenting Tax Residency for DTAA Benefits

The sixth paragraph discusses the importance of obtaining a Tax Residency Certificate (TRC) to claim benefits under DTAA. It outlines the conditions that must be met to avail of these benefits, including being a non-resident in India and a resident in a country with a DTAA with India. The paragraph also addresses scenarios where obtaining a TRC may be challenging and the potential for exceptions under certain circumstances.

💼 Cost-Benefit Analysis of TRC for Tax Exemptions

In the final paragraph, the discussion centers on the cost-benefit analysis for NRIs considering obtaining a TRC to claim tax exemptions under DTAA. It highlights that the decision to obtain a TRC is optional and should be based on whether the potential tax savings outweigh the costs and efforts involved. The conversation concludes with a reminder of the importance of professional advice and due diligence in navigating tax laws and DTAA provisions.

Keywords

💡Capital Gains Tax

Capital Gains Tax refers to the tax levied on the profit made from the sale of an asset such as stocks, real estate, or cryptocurrencies. In the video, this term is central as it discusses ways for Non-Resident Indians (NRIs) to reduce their tax burden on capital gains in India. The script mentions that any profit from the transfer of a capital asset is subject to capital gains tax under Indian law.

💡NRI

NRI stands for Non-Resident Indian, which defines individuals of Indian origin who hold Indian nationality but reside outside of India. The video is tailored for this demographic, discussing their unique tax situations and how they can navigate capital gains tax in India. The script emphasizes that NRI tax liabilities are affected by their residential status and the source of their capital gains.

💡NRE and NRO Accounts

NRE (Non-Resident External) and NRO (Non-Resident Ordinary) are types of bank accounts in India for NRIs. The script clarifies a common misconception that any income or capital gains from investments made through these accounts are tax-free. It is explained that capital gains from the sale of assets bought with funds from these accounts are still taxable in India.

💡Tax Residency Certificate (TRC)

A Tax Residency Certificate (TRC) is a document that certifies the tax residency status of an individual for a specific country. In the context of the video, obtaining a TRC is crucial for NRIs to claim benefits under the Double Taxation Avoidance Agreement (DTAA) between India and their country of residence. The script highlights that without a TRC, NRIs cannot avail of tax exemptions provided by DTAAs.

💡Double Taxation Avoidance Agreement (DTAA)

DTAA is a bilateral agreement between two countries to avoid double taxation on the same income. The video script discusses how DTAAs can provide tax relief to NRIs by exempting certain types of capital gains from taxation in India, depending on the specific provisions of the agreement with their country of residence.

💡Immovable Properties

Immovable Properties refer to real estate or land that cannot be moved from one place to another. The script specifies that capital gains from the sale of immovable properties in India are taxable in India, even for NRIs, as per the DTAA provisions. This is an important consideration for NRIs owning property in India.

💡Mutual Fund Units

Mutual Fund Units are shares in a pooled investment vehicle managed by a financial company. The video script uses mutual funds as an example of an investment where NRIs might earn capital gains. It explains that depending on the DTAA, the capital gains from mutual funds might not be taxable in India if the NRI is a tax resident of a country that has a specific DTAA provision with India.

💡Cryptocurrencies

Cryptocurrencies are digital or virtual currencies that use cryptography for security. The script clarifies that profits from cryptocurrencies are not considered capital gains in India but are taxed separately as per a specific section of the Indian tax law, thus they do not fall under the usual capital gains tax provisions.

💡Tax Relief

Tax Relief in the context of the video refers to reductions or exemptions from tax liabilities. The script focuses on strategies and provisions under DTAAs that can offer tax relief to NRIs on their capital gains tax in India. It underscores the importance of understanding and availing these provisions to minimize tax burdens.

💡Foreign Tax Credit

Foreign Tax Credit is a tax benefit that allows taxpayers to抵扣已在外国缴纳的税款. In the video, it is mentioned that NRIs can claim foreign tax credit for taxes paid in India on their capital gains, which can help reduce their overall tax burden in their country of residence.

Highlights

The program discusses how Non-Resident Indians (NRIs) can reduce their capital gains tax in India.

Dr. Chandra Khan introduces the NRA Clinic and the expert guest, Chartered Accountant Mr. Sriram Rao.

Mr. Sriram Rao specializes in direct tax and international taxation, assisting NRIs with tax-related issues.

Capital gains tax in India applies to the transfer of any capital asset, including properties and securities.

NRE and NRO accounts are commonly misunderstood to provide tax-free income or capital gains, which is incorrect.

Futures and options trading profits are not considered capital gains and are taxed differently.

Cryptocurrency profits are taxed separately under a specific section and are not classified as capital gains.

NRIs can claim benefits from double taxation avoidance agreements (DTAA) between India and their country of residence.

Certain assets like immovable properties and shares in Indian companies are taxed in India regardless of the DTAA.

Other assets, not covered by the first four categories, may not be taxed in India under specific DTAAs.

NRIs must be tax residents of another country to claim DTAA benefits and cannot be stateless for tax purposes.

Documentary evidence, such as a Tax Residency Certificate (TRC), is crucial for claiming tax exemptions.

Obtaining a TRC may be challenging for residents of countries without a tax system, but exceptions can be made.

The TRC must be obtained annually and is valid only for the specific period it covers.

NRIs have the option to claim tax exemptions under DTAA or pay taxes according to domestic law, whichever is more beneficial.

The program encourages viewers to consult with chartered accountants or research DTAA provisions for their specific situation.

The video concludes with a reminder to subscribe and engage with the channel for more informative content.

Transcripts

dear viewers this is our weekly expert

speaks program

this week I have brought some good news

for you we are discussing the

possibility of how nris can reduce their

capital gains tax in India this is NRA

clinic for you and I am Dr Chandra Khan

but your financial guide for a happy

living

[Music]

an arrival to make through hype just the

right advice

[Music]

dear viewers to get the idea of how you

can get relief from the capital gains

taxes that you have to pay in India you

have to watch this program till the end

there are a lot of finer points that we

are going to discuss with the faculty of

the day dear viewers to help you with

your taxation matter I have brought to

the studios my eminent faculty charted

accountant Mr SRI ram ram Mr sriram Rao

is a very popular faculty on this

channel he has appeared on several

subjects he has simplified a lot of tax

codes for the benefit of nris

Mr sriram Rao is a practicing chartered

accountant a partner at nitin Jay Shetty

and Co a man who specializes in direct

tax and the international taxation he

has helped lot of nris in solving their

taxation related issues welcome to the

show Mr SRI ram ram

thank you

Mr Shira I have chosen the topic how can

nris reduce the tax burden with respect

to Capital against tax

before we start can I ask you a few of

the basic questions so that the audience

can understand what capital gains is how

it gets computed or which can be

categorized as capital gains let's spend

some time on that then we'll move to the

main topic of the day how NRI scan

reduce their tax burden with respect to

the capital gains definitely my first

question to you is how the capital gains

will be taxed in India for non-resident

Indians okay now when somebody says

capital gains taxation it is part of

income tax form

so now this capital gains is taxed at

specific rates Etc as per Indian tax law

and as per the Indian tax laws on

transfer of any Capital asset

the income earned there from will be tax

liable for capital gain taxes

herein if one need to check what is

transfer it is like if you sell if you

redeem if you running push any rights or

if you extinguish any rights in any or

say if there is a compulsory acquisition

Etc so all these are considered as

transfer further if one need to check

what is the definition of capital asset

it will be including all kinds of

property especially the properties which

are like immobile properties and in

respect of movable properties any

property which is not a stocking Trader

and a personal effect but it will always

include certain properties such as

shares and securities mutual fund units

unit insurance policies which has been

recently added therein ellipse u-lips of

course there are certain conditions

apart from that jewelries drawings

paintings work of art archaeological

collections sculptures all these are

considered as capital asset so on

transfer of any of this if there is a

sale Etc or even exchange of that will

trigger capital gain indexes okay Mr

sriram nras use the NRE accounts and nro

accounts to invest in India correct

there is a general feeling in the minds

of nris that they invest any money from

NRE account and whether it's an income

or a capital gains both are tax free how

true is this assumption and can they

rely on paying only from NRE to get the

tax relief no the assumption is totally

not true at all so any funds which are

infused directly from outside of India

or which are directly you know invested

from their NRE accounts or nro accounts

whatever it may be

if it is invested in a asset or an uh

property and also sale of that

particular property definitely the

capital gains will be taxable in India

the concept is simple

maybe funds have been infused from

outside of India but the income is

generated out of that particular

investment is in India so definitely the

capital gains will always be taxable

India as per Indian domestic tax laws so

whether they invest from an nro account

or a resident Indian invest from his

resident account or NRA account if it is

a capital gains it is liable to be paid

next as per the whatever the tax codes

that are applicable yes the rules are

one in the same right what is the status

with respect to people making profits

using the future and options trading

whether that's also a capital means no

future end options will never be a

capital gains future and options if it

is dealt in a recognized Stock Exchange

it will be considered as a normal

business income if it is other than any

recognized Stock Exchange other Stock

Exchange that will be considered as a

speculative income so intradays will

always be speculative income as per tax

loss so it will never be a capital gain

okay these days everybody is talking

about cryptos

it is the fashion of the day correct

recently government has put a Draconian

taxation clause on that let's not get

into the debate of yes whether that's

too much too less my first question is

if somebody makes some profits out of

the cryptos is it a capital gains no it

will not be considered as a capital in

because it is separately brought into

law or statute what we can say is as a

virtual digital asset and it is out of

the computation mechanism of capital

gains it is separately a separate

section is there wherein a specific rate

of tax is given so there is no linkage

of this particular definition of virtual

digital asset crypto or nfts Etc with

the capital gains so in my view it will

never be a capital gains it is taxes

other incomes other income yes okay

you just now said that any investment

which comes from NRA account if it is a

capital gains so there is no relief it

is not an income it's not an NRE every

interest which has been given an

exception right

any taxpayer will look forward to Ways

and Means how he can minimize his

taxation how he can bypass the taxation

in a legally correct way correct is

there any provisions in the law books or

the tax course which gives any chance

for the nris to reduce their tax burden

with respect to capital gains uh what

does your practice say what does your

research is saying in this as per Indian

domestic loss I have explained already

any asset whether it's held by a

resident a non-resident Pio ocia foreign

National whoever it may be if it is

appreciating in its value and you are

transferring it of course the capital

gains will be always taxable in India

and invariably

for a non-resident or a Pio or OCA or a

foreign National who are non-resident in

India

there is a benefit what they can claim

out of double taxation about s agreement

the double taxation avoidance agreement

normally it will for the purpose of

capital gains it provides a Provisions

under Article 13 or article 14 sometime

so

invariably in those also it says that

wherever the capital gains are sourced

the tax has to be paid in that country

and of course the Russian country will

also wants its share of taxes so in

recent country also you have to pay tax

and whatever taxes you paid you can

claim as foreign tax credit so in the

country of residence however

if you go into certain dtas in

particular the Article 13 of it for some

of the assets it gives certain benefits

okay so let us try and get into the

deeper and finer points of this double

tax system awareness agreement

especially with a countries with which

India has double taxes around a segment

and normally India has I mean Indian

expats relate there so normally or live

there so only those countries I will

concentrate upon okay and I will explain

the provisions if you consider the

Middle East and the U.S I think

two-thirds of the NRA population gets

covered I think looks like probably I

will I will try to you know I will

definitely I will include at least U.S

Etc but of course but here the final

point is if you are a non-president in

India you must be a resident in some

other country

so thereby you are not a stateless

person for tax purposes for that

particular year that's it so you should

be a tax resident is one or the other

country one or the other country so if

that is then if you are a resident of

say UAE and you are a non-resident in

India you are earning capital gains in

India then there is a double taxation

awareness between India and UAE which

can come into picture right you can

Avail the provisions right so how to

avoid I will just explain uh one by one

so if one goes through certain

provisions of whatever taxation between

India and countries like UAE Qatar

Kuwait Oman and Saudi Arabia which are

Gulf countries and uh France Germany

Netherlands Austria Italy Hungary Sweden

Switzerland these are European countries

South Africa and Sri Lanka Japan

Mauritius Malaysia and Singapore like

African and Asian countries so all these

double taxation avoidance agreement and

there might be many more I have included

only few

so all these double taxes from Wireless

agreement invariably has the following

Provisions the following Provisions I

will explain properly okay at least

understand because it is very important

otherwise one will miss out

all these countries wherein double

testing awareness agreement I have

explained they say that the immovable

Properties or any mobile properties held

in a business in India

or any shares held in a Indian company

or shells held in a company outside of

India shares held in a company outside

of India but that company which is

outside of India having many immovable

properties in India and it derives its

value company's Share value is derived

from this immovable properties which is

situated in India

so in all these circumstances

the income of capital gains

will be taxable in the country of source

which is India which is India right so

so it is yes invariably it will get

taxed in India correct

any asset other than these four what I

have already mentioned

if it is held in India say for example

it can be mutual fund units or jewelry

archaeological collections or drawings

paintings sculptures so on and so forth

which I've already explained so unless

they are categorized in the first four

yes unless they are categorized in first

four right any other assets held by you

in India and if you earn capital gains

they're from

that will not be taxable in India it

will be taxable only in the country

where you are a resident for that

particular year

Okay so I will explain once again the

four assets which I have told immovable

properties mobile properties held in a

business or a Indian company shares held

or a chair of a company which is held

outside of India which is having its

value of shares substantially from an

immovable property held in India apart

from these four assets any asset which

is held in India which which has earned

you capital gains during that period

that will be exempt from taxation in

India because the double tax environment

is a pro agreement provides that

these incomes of capital gains will be

taxable only in the country where you

are a resident right right so you must

be a referend in some other country okay

dear viewers let's look at like this now

if you have a capital gains then you

have to First Look at

where the capital gains has come from

correct if it is the four heads of

accounts which Mr sriram referred if the

capital gains has come from that then it

becomes taxable in India as per the dtaa

provision yes if the capital gains is

coming from any other heading other than

these four then for the specified

countries what he mentioned most of the

countries in Middle East and the list of

countries which he spoke just now then

the capital gains cannot be paid in

India or it is Exempted to be cannot be

charged in India yes rather it has to be

charged in the country where you live as

per the tax code of that particular

country correct of course right yes

that's what my understanding is correct

absolutely correct now here there are

certain final points which I have to

explain okay now out of Gulf country's

name which I have taken I think Bahrain

is a country which I have left out but

unfortunately India doesn't have a

comprehensive

agreement with the Bahrain oh

interesting yes that is why you will not

get this exemption if you are a resident

of Bahrain okay okay and apart from this

the car India has got a double lessons

agreement with USA Canada UK Australia

China Hong Kong so it has with most of

the countries

it's really strange that Bahrain doesn't

have a comprehensive DTA can't I mean

it's a government policy they have to

come together and but uh yeah now what I

mentioned is these countries like USA

Canada China Hong Kong and UK and

Australia so with those countries even

though India has Robitussin awareness

agreement the taxation of capital gain

Provisions that article 13 or 14 what I

mentioned

they doesn't have this exemption

provision what it says is either all the

assets will be taxable as per the

domestic law so if that is the case then

automatically it will be taxed in India

or they will say that it may be taxable

in the Contracting state where the asset

is situated so at that time also it will

be taxable in India so if you are a

resident of U.S Canada and UK Australia

Hong Kong China Etc you mean you will

not be eligible for this exemption okay

so the best weight for the viewers to

look at is talk to your chartered

accountant or check through the DTA

agreement between India and the country

where you live correct go to section

1314 of the particular class correct try

to understand yourself what it has been

mentioned if you cannot understand take

the help of the chartered accountant

what nevertheless a lot of nris leaving

the countries which Mr shiram has

mentioned that means this benefit will

not go only for few there's a large

chunk of nris who can derively fit uh

from these tax treaty yes I mean I

mentioned only few countries right now

there are so many countries also yeah

India is uh yes DTA agreement with more

than 150 countries if I am not wrong or

maybe it could be a few uh dense

countries yes about 100 actually but yes

most of the countries it covers right

right right okay

uh Mr sriram you gave the good news that

a lot of nris can get benefited and the

tax savings can be substantial quite a

huge okay everyone should see this

possibility for themselves

uh one of the things that comes to my

mind is yes you said that they can get

this benefit nothing comes to you

without the documentary evidence correct

right so if you have to claim something

you have to have a documentary evidence

correct if an NRI has got such capital

gains and the dtaa provides them that

there it need not be taxed in India what

is the documentary evidence or the

preconditions that they have to satisfy

the assessing officer at the time of

filing tax returns or other assessment

of the case correct now here in

um a couple of conditions I have already

explained you must be a non-resident in

India

um so that is the first condition at the

same time for the same period you must

be a resident in some other country and

with that country India should most have

a double access numberdance agreement

and in that double taxation abundance

agreement this condition should be there

four conditions so there are

non-resident you should be a

non-resident you should be a resident in

another country that country should have

a DTA agreement in India and that DTI

agreement should highlight this

particular Clause where such assets

should be Exempted from taxation in

India correct so these are the basic

principle so in order to get or Avail

the benefit of double taxation agreement

in India section 90 subsection 4 which

says that there must be a TRC that is

tax residency certificate obtained by

that non-resident from the country of

its research it is very explicitly

telling that you must have a TRC

certificate tax residency certificate

okay so tax residency certificate is a

must so this is the major precondition

to Avail the entire benefit of double

tax system under segment okay so in the

absence of TRC

in a normal course of time it is not

possible for you to make a claim is that

the fair statement yes it is a fair

treatment okay one follow-up question

for you there can be instances where uh

person because this involves two

countries and it involves movement of

persons if there were to be a condition

where in which a person is not able to

obtain a TRC for genuine reasons like

that particular state does not have a

system or this person got stuck

somewhere else because of which he is

not able to go there is there any

relaxation in the law

or are there any what are the prior

examples of the exemptions have been

given in without a TRC yes

um it's a it should be like something

like a condition of impossibility of

performance from the either from the

point of view of that particular

individual or say as you explained from

the point of view of that particular

government which doesn't have the system

of providing TRC but that has to be

substantiated with the documentary

evidence before the Appellate

authorities or the assessing authorities

they if they are satisfied they will

provide the relaxation of not obtaining

a TRC and then availing the DTA

Provisions so there are couple of

instances where the tribunals in India

have provided this leeway from for that

particular individual or a particular

SSE

for not obtaining a TRC still they

allowed him to Avail the benefit of

double taxational model settlement but

these are mostly exceptions yes and it

is litigious religious means it is prone

to litigation you have to face the

authorities you have to fight with them

uh say you have to file an appeal Etc

and then might be you might get the

benefit so its a chance and depends on

your convincing the authorities the

easier way is follow the law get the TRC

put those papers in front of the

assessing officer yes and get the

exemptions correct right correctly one

thing which comes to my mind

you spoke about this exemption being

made available to countries in the

Middle East correct right

will those countries issue TRC I'll tell

you why I am asking this question

they do not have an income tax over

there right so you go to Eurozone USA

Canada it is soaked in income tax yes

whereas you come to Middle East it is

tax Heavens correct so when they don't

have an income tax regime over there

will they issue TRC are the rules is

same for them are there any exemptions

for this there is no exemption for these

rules the rules is same and in my

clientele many of residents of UAE

and the residence of Oman have obtained

DRC from federal tax authorities of

course in UAE if I'm not wrong it's the

online process entirely so you will have

to of course you have to upload certain

documents Etc which is your own

documents and if the authorities are

satisfied then federal tax authorities

they will issue a TRC of course there

will be certain fee for this obtaining a

TRC same way no one also the TRC can be

obtained my clientele have obtained so

it is not correct to say that in Middle

East because they don't have a tax law

it is not possible to obtain a TRC it is

possible to obtain a TRC from Middle

East countries also so as long as those

countries have the practice of issuing a

tier yes the SSC has to obtain it yes

right yes but if some country you feel

is not giving TRC and if you are able to

prove yes that the country where I live

does not have this particular system

nobody has given till now and if you are

able to convince the authorities

probably it can pass without a yes you

might have to make an effort say for

example say in Kuwait you just go and

approach the authorities tax Authority

or Ministry of Finance and apply to them

they acknowledge you are accepted and

then say that you know we don't have

that system of providing TRC if they

write it and give it to you that itself

is a proof for you right impossibility

of performance right right uh you told

about this one question that could be

there in the mind of viewers is

I will get a TRC this year and file my

tax return I'll get an exemption correct

this PRC Affair is it a one time Affair

is it that you have to get it every year

how does the the practice Works in this

case yeah DRC means a tax relationship

certificate I have already explained it

means state it says that your tax

resident of that particular country and

for that particular period so you have

to apply to the authorities for which

period you want your TRC

so for that period they will look into

your records and they will satisfy

themselves whether you are a tax

resident of this of that particular

country if you are tax resident then

they will shoot ERC and it is varied

only for that particular period every

year you might have to reapply and

obtain if you have to obtain the TRC so

it is just like it's a it has a validity

period yes so you have lived in this

particular country from such and such a

period or the financial year what it

represents in that particular country it

is valid only for that only for that so

every New Year where you have to apply

you have to apply freshly and get it

collect it and keep it yes probably if

you don't have any capital gains

exemption to be claimed in that

particular year you need not apply for a

TRC and keep it in your

files yes but if there is a capital

gains tax and you have to claim an

exemption at that point of time you have

to obtain TRC for that particular year I

I hope that suffice to say that add on

to it I can I can say that you know to

clean the entire benefit of DTA so it

may not be capital gains also if it

might be some interest income dividend

income which I have already explained in

one of the videos earlier right to claim

reduced rate of taxes as per double tax

and awareness agreement it is a must for

you to obtain a TRC okay so you obtain

one TRC it can be applied to all if you

have all these incomes right like that

right Mr Shira I will put across one

situation that could be there see for

example I will tell you some NRI lives

in UAE ok ok he has a capital gains tax

okay incidence in India let's let's take

the case of mutual fund okay and the

capital gains tax is 10 000 rupees okay

right to claim an exemption he has to

get a TRC correct and to claiming the

TRC let's assume the cost is more than

ten thousand let's say it is twenty five

thousand fifty thousand whatever I

understand now is it mandatory for that

investor

claim an exemption because it is

mentioned in detaa or he can just think

okay I will pay 10 000 tax year to get a

refund of that I have to spend much

bigger amount there correct I just don't

care I'll better pay taxes in India and

he can just sit there or he's obliged to

take a TRC

availing the benefit of double taxation

number and settlement is an option

option it is section 90 subsection 2 is

clear right if it is beneficial you

obtain that right otherwise if the

domestic law is beneficial that you

obtain right whichever is beneficial to

your facts and circumstances you obtain

right so

ah if you are ah cost of getting a TRC

is more than the benefit what you are

going to gain then it makes sense yes

whereas it might be a case of other way

around say you you have two different

type of streams of income where one is a

loss say for example capital gains or

loss OK you do not want to apply the

double taxation number disagreement

Provisions because this loss is there

but another income is that you want to

offset it so if you apply the

doublelation awareness agreement since

the income is not taxable loss also

cannot be offset right right so if you

don't apply this loss can be offset so

at the same time same year for some

other income you may apply TRC and uh

double taxi number is agreement

Provisions it is totally optional it is

quite income

the addition to apply a relief under DTA

or what is purely at the discretion of

SSH or the assessee of course they have

to some due diligence is there they have

might have to take some professional

help but yes it is optional right

uh Mr sriram thank you very much for

this awesome piece of research which

will probably give relief to so many

nris living in these particular

countries

a big thank you from the bottom of my

heart on behalf of my viewers and Beyond

behalf of my channel we remain in

gratitude you for your time research and

help that you are extending to the NRA

Community thank you very much for your

time and uh thank you thank you dear

viewers hope the video that we have done

today help you to understand how you can

save taxes using the double taxation

avoidance agreements between different

countries please like this video if you

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