FREQUENTLY ASKED QUESTIONS

Q. What is a TRC certificate?

Ans :

1.     A person who qualifies as a ‘Resident and Ordinarily Resident’ (ROR) is required to offer to tax all his income earned across the globe. Both his Indian and foreign income will be subject to tax. Also, such foreign income may be taxed in the source country as well. You will end up paying tax on the same income twice- once in the source country and once in the country of residence. 

2.     To avoid such situations, the nations enter into DTAA to provide benefits to the taxpayers. The taxpayers can claim DTAA benefits at the time of paying taxes in such countries. Such DTAA benefit can be claimed only after he proves his domicile in such country, and in order to do so, a TRC helps in establishing the tax residency of such person. 

3.     In essence, TRC is a document/certification issued by the tax authorities of the country of the person, confirming that such person is a resident of such country in that particular financial year. In brevity, TRC is proof of residency.

Q. What if Form 10F ?
Ans.

1.     Any taxable income earned by a NR taxpayer in India is subject to withholding taxes (otherwise known as a tax deduction at source) under the Indian Income-tax Act, 1961 (Act).   

2.     In order to avail the Double Taxation Avoidance Agreements benefits, a NR taxpayer is required to furnish certain specified documents including certain specific information in the Form 10F with the Indian payer along with a valid Tax Residency Certificate (Certificate) obtained from the tax authorities of their country of residence. 

3.     In case where any of the required information of Form 10F (such as nationality, status, tax period, tax identification number and address of the NR taxpayer) is available in the TRC (which is otherwise available in most cases), a stand can be taken that furnishing of Form 10F is not mandatory in such cases for claiming the treaty benefit. However, it is pertinent to note that while a position may be taken that e-filing Form 10F is not mandatory, for practical purposes and to avoid any litigation with revenue authorities, the tax deductors/payers do insist for e-filed Form 10F for applying the withholding tax rate 

Q What is difference between Capital Expenditures and Revenue Expenditures ?

Ans.

Description	Capital Expenditures	Revenue Expenditures
Nature of Expense	Involves significant investments in assets with long-term benefits, such as buying equipment or property.	Relates to ongoing operational costs, like utilities or repairs, which are consumed within the current accounting period
Duration of Benefits	Yield benefits over an extended period, contributing to future revenue generation.	Provides immediate benefits but is consumed within the current accounting period
Recording in Financial Statements	Typically recorded as assets on the balance sheet and depreciated over time.	Immediately expensed on the income statement
Impact on Profitability	May not impact current profitability significantly but influences future earnings through depreciation.	Directly affects current profitability as these are immediate expenses.
Examples:	Building renovations, purchasing machinery, or acquiring long-term assets.	Routine maintenance, salaries, and utility payments

 

Q:  Is GST Registration for export of services upto Rs 20 lakh of turnover ?

Ans.

In the realm of GST, understanding the nuances is crucial for seamless business operations.
One common question I often encounter is whether businesses mandatorily required to take GST Registration for export of services for taxable supply less than Rs 20 lakh. Let's delve into the specifics.

GST Registration Mandate:
According to Section 22 of the CGST Act, 2017, businesses with aggregate turnover exceeding the threshold limit must obtain GST registration. However, Section 23 provides an exemption for those exclusively engaged in supplying goods or services not liable to tax or wholly exempt.

Interplay of Sections:
Section 24 overrides Section 22, necessitating GST registration for those making inter-state taxable supplies, regardless of turnover. But here's where it gets interesting:

Export Dynamics:
However, a person making inter-state supply of services is not required to register under GST if his aggregate turnover is less than ₹ 20/10 lakhs (Notification No. 10/2017-IT dated 13-10-17).