A recent ruling of the Mumbai bench of Income Tax Appellate Tribunal(ITAI) will aid non-residents and employees who travel globally and are unable to file an overseas Tax Resident Certificate(TRC) and IT returns until the assessment stage owing to genuine reasons.
In accordance to the India-US treaty, the ITAT has held denial of the lower rate of tax for US tax resident on their India source income, calling it “absolutely misconceived and misplaced” solely because a TRC from US authorities was not presented to the I-T official during the specific period of time but it was presented later on.
Non-residents are generally subject to tax in India only for their India source incomes and the taxpayer can opt for the Indian Income Tax Act or the tax treaty as per benefits.
In the aforementioned case in FY14, Haresh C Seth, a nonresident had earned bank interest and interest on FD upto Rs 17.9 lakh. However, the I-T official did not apply the lower tax rates as available under the India-US treaty. The appeal concluded that Seth had failed to file his TRC and form 10F (provides details of overseas tax residency) during the course of the assessment.
The ITAI looked into the matter and decided to work on it. They found challenges like very short period of time provided for furnishing the TRC to the I-T official into consideration.