The top 10 Tax Tips for 2019 for NRI investors

The top 10 Tax Tips for 2019 for NRI investors

The top 10 Tax Tips for 2019 for NRI investors

The top 10 Tax Tips for 2019 for NRI investors.While it is no secret that resident Indians have to pay taxes for a fiscal year. However,  all NRI  investors must also pay taxes for a fiscal year if applicable. Irrespective of whether they earned the money directly or indirectly, if they are liable, they must pay taxes on the same. As long as the income is generated in India.

Any income that is generated as a part of their investments or assets or business interests, is liable to taxes. The presence of tax laws means that there are different avenues to save money from tax liabilities as well. If you are an NRI and are looking for tax-related tips, here are some that you might find to be quite useful.

Section 80C

Just like resident Indians, NRIs also can benefit from investing in Section 80C. You can invest as much as INR 1.5 Lacs for a fiscal year in Section 80C as per the Income Tax Act of 1961 and enjoy a reduced tax liability.

Section 80CCD

Apart from the most common and obvious investment mode of Section 80C, there are a few additional ways to save money and taxes as well. You can invest in NPS instrument (Section 80CCD) and save additional money on the top of Section 80C. however, NRIs cannot invest in PPF, National Savings Certificate or any other senior citizen schemes.

Pan Number

Annual income exceeding a certain limit is subject to TDS. Section 206AA governs the taxes that an NRI is liable to pay. An NRI must furnish their Pan card details when they are investing in India. Failing to do so would result in you paying higher TDS amount.

Maintaining Status

The income tax liability of an individual depends on their annual income and residential status. Thus, it is essential to maintain your residential status as NRI. If you have any trips for India, ensure that they do not hamper your NRI status.

Home Loan

NRIs having any home loans in India can use it to claim deductions for their income tax. Under Section 24, NRIs can claim up to INR 2 Lac per year which they pay in interest towards their home loan.

Property Tax

If an NRI is paying any property tax for properties that they own, they can claim the amount as well. Depending on their tax liability they can save taxes.

Selling Property

As an NRI if you wish to sell any properties in India, you would have to pay applicable capital gains tax. It is usually split into short-term and long term capital gains. If you sell your property within 24 months of buying, it is short-term capital gain. And if you sell it after 24 months of buying, it qualifies as long term capital gain.

Health Cover

Most NRIs wish to come back to India to post their retirement. It would be a good idea to buy a health insurance plan. Buying it while being out of the country will help you overcome the waiting period of pre-existing diseases and offer tax cuts.

Mutual Funds

There are several mutual funds which can offer you tax deductions under Section 80C. The lock-in period of mutual funds is lower than other investment instruments as well.

NRE Account

Holding your savings in an NRE account can be beneficial as well. Since the interest earned is tax-free and the benefits would be available for two years after you shift back to India.

The above would help you better plan and manage your taxes.

5 Tax Benefits you should claim if you OWN A VEHICLE

5 Tax Benefits you should claim if you OWN A VEHICLE

5 Tax Benefits you should claim if you OWN A VEHICLE

Tax Benefits of vehicle and driving are imperative for Americans to get to their workplaces.

You own a vehicle, then you must be aware of the tax deductions and write-offs you can do at the time of filing for tax returns.

When you own a car

  • oil
  • Gas
  • Repairs
  • Licenses
  • Insurance
  • Parking

If you are travelling more than 50 miles away for a job, then the miles travelled can be deducted. However, driving your car for any personal reasons, commuting to and from work, certain meagre tasks by employers like picking up mails on the way etc. are not eligible for any claims.

  1. If you are driving a car for any volunteer work, then definitely you can claim the gas & mileage for driving to and from the place along with the parking charges & other tolls.
  2. If you are driving a car for employers with commuter benefits program, then there are benefits available to you in the form of transit passes that include tokens, fare cards or vouchers for mass transit, Vanpooling, parking charges etc.
  3. If you are driving a car fora business like a food truck or a mobile travelling photo studio or a mobile car-wash etc. then you can claim expenses as well.

When you own SUVs or trucks

  • If you are self-employed& you purchase an SUV or a truck, then the entire purchase price can be written-off during filing for tax returns.
  • You can also apply the bonus depreciation deduction for the vehicle while paying taxes.

While discussing tax write-offs on auto expenses, there are two major methods to be listed down.

Mileage method

In this method, your total business mileage covered by the vehicle is multiplied with the Standard Mileage Rate (SMR) which is fixed by the IRS to obtain the deduction. Different rates are set by IRS for categories like vehicles for medical or other moving purposes, vehicles used for charity purposes etc.

Actual Expenses method

Here, we sum up the total cost spent in the operation of the vehicle and then multiply it with the percentage of business use of the vehicle. While we calculate the total operation cost of the vehicle, we can include gas expenses, Insurance expenses, Maintenance expenditure, Licensing, Registration fees, Vehicle depreciation value (i.e. the depreciation value applicable to the business use of a vehicle) etc.

However, both of these methods produce different results each year. So, it is generally advisable to follow the Mileage method in the first year of purchase of the vehicle and later on, you can calculate the tax deductions yielding from both the methods & chose the one with larger deductions.

Hence to summarize, the major 5 tax benefits you can claim if you are the owner of a vehicle are:-

  1. The entire vehicle’s purchase price can be written off while filing for tax return if you have bought a new SUV or truck by the end of 2017, specifically, the vehicle should be above 6000 pounds.
  2. The depreciation deduction for a new SUV or a truck depends on the amount of time it has been used for business purposes. Suppose, an SUV has been purchased for $80,000 and has been used 90% for business activities then the deduction will be around $74000.
  3. If a car has been bought by the end of the year 2017 & the registration fees have been paid by the last day of the year, then the registration fees are deductible. Also, the sales tax on the purchase is deductible if you are going to use the vehicle for business purposes.
  4. Having a home office is an additional advantage for entrepreneurs while calculating tax deductions. If you are using a vehicle for business & you have a home office, then the percentage for which vehicle is used for business is increased &a major part of the automobile expenses of the owner are deductible.
  5. If you have purchased a passenger car towards the last 3 months of 2017, and you are using it 90% for business purposes, then you can file for a deduction of up to $11,160 of the purchase price.
How is the Interest Income from NRE and NRO accounts taxed in US?

How is the Interest Income from NRE and NRO accounts taxed in US?

How is the Interest Income from NRE and NRO accounts taxed in the US?

For NRIs who have shifted to the United States of America, there are usually two options when it comes to keeping their bank accounts active. They can either convert them into NRE or NRO accounts. Needless to say, your money in either of these accounts earns interest over a period of time. Thus, the first and foremost question that would crop into the mind of anyone is, whether or not this income is taxable. If yes, how to go about the same? Here are some easy steps that you can follow to ensure easy compliance and avoid being labelled as a tax evader.

Calculate Income

Income generated from any of the following means would qualify to be taxed in the United States of America.
  • Interest earned on NRE accounts.
  • Interest earned on NRO accounts.
  • Interest earned on NRE FD accounts.
  • Interest earned on NRO FD accounts.
  • Income generated from Mutual Funds in India, including any SIP’s (Systematic Investment Plan) that you might have.
You are liable to pay taxes on the above counts if you belong to any one of the following categories.
  • A holder of Green Card.
  • A Legal resident i.e. working on either an H1B, L1B, H4 EAD or any other work permits in the USA.
  • You are a PIO.
  • You are an OCI.

Dollar Amount Calculation

Once you have identified the income that might be taxed in the USA, it is now important to convert the same into dollars. The IRS publishes exchange treasury rates in the year-end. You can use these exchange rates to calculate your Indian income in dollars.

Taxes in India

If you hold an NRE account, you can breathe easy since Indian tax laws do not levy any taxes on the interests earned. Thus, banks will not deduct any amount from the interest earned. However, the interests earned on an NRO account is taxable at 30% along with applicable taxes.

Form 1040

To file your taxes in the USA, you need to fill Form 1040 and file it. You can either file your taxes on your own or take the help of professional services to do the same. The important thing to keep in mind during such transactions is to fill the Schedule B on your Form 1040. This includes the income that you have earned in India. You need to find out the total amount of tax (TDS in India) that banks have deducted from your accounts. Banks usually send a Form 16 in India which collates all this information.

Do Indian Banks Issue Form 1099-NT?

None of the Indian bank’s issue Form 1099-NT for the interest earned on your NRE or NRO accounts. Thus, you diligently have to file the information correctly in your Form 1040. As a matter of fact, none of the banks in the USA also issue Form 1099-NT, unless the interests earned is more than $10.

Do I have to Pay Taxes In the USA for the interests earned?

The simple answer is yes. You would need to pay taxes on the interests earned on your NRE or NRO accounts. Yet, if your bank has already deducted TDS from your account in India, you can claim the amount. You would need to declare that you have paid taxes to the Indian Government in your tax returns. If you wish to know the amount of interest that you have earned in your respective bank accounts, you should ask for bank statements. Indian banks usually credit interests once every quarter.
Help the NRI in the US for global income tax filing

Help the NRI in the US for global income tax filing

Help the NRI in the US for global income tax filing

The deadline for filing your taxes is approaching fast. For the current assessment year, the deadline is the 15th of April.The deadline of filing your taxes for 2018. The entire income tax filing and return process can be a bit overwhelming for some.

However, if you are aware of the different steps and take a more structured approach, it won’t seem as daunting as it does now. Here are some simple steps and tips to help you get through the tax season.

Global Income

Irrespective of whether you are a US resident or citizen (includes NRI, OCI or PIO), you are liable to pay taxes on your global income.

Salary

US Citizens who earn a part of their income in India are liable to pay the taxes in the USA. If you earn a salary in both the countries, you will have to pay taxes for the country where your current residence is at.

However, if you had earned your salary before moving to the USA and have paid the liable taxes, you can take tax credits and adjust the taxes with your US income. You can use the Form 1040 to declare your salary and Form 1116 for any tax credits.

Freelancing or contracts

For consultants who are working in the USA and earn money in India from their respective company, must pay taxes as well. It doesn’t matter if you have a bank account in India or the USA, you are liable to pay taxes. Such income must be reported in Schedule C of Form 1040.

Rent

For NRIs who have rental properties back home, the income generated from it will be taxed in the USA. But the question arises should you pay taxes in India as well? This is where the DTAA or the Double Taxation Avoidance Agreement comes into the picture. As per the agreement, you will have to pay taxes in India for the income generated in India by renting your house.

You must report the income from renting properties in your Form 1040 and claim for tax credits. The Schedule E of Form 1040 is where this declaration would go. For availing tax credit, you will have to fill up the Form 1116.

Capital gains

The capital gains are applicable to various assets such as shares, mutual funds, lands, selling of properties etc. Any gains that you make on these assets are under the purview of capital gain taxation. It usually is split into short-term capital gains and long-term capital gains.

When it comes to land, property or any other physical assets, if you hold them for three years and then decide to sell, long-term capital gains would be applicable. Should you decide to sell these assets within 3 years of buying them you will have to pay short-term capital gains.

For mutual funds and shares, the holding duration is lower at 1 year. If you plan to sell shares or redeem any mutual fund units post the completion of a year, you will have to pay long term capital gains on them, if the gains exceed INR 1 lac. For instruments sold before that, short-term capital is applicable.

All these incomes should be declared in Schedule D of your Form 1040. And if you have paid any taxes, you can claim for tax credits by filling up Form 1116.

These are some of the major income sources and their implications on your tax filing and returns. Being aware of them will ensure that you can make the most of tax returns.