Opening bank account of executor

When a person writes a “will”, he nominates a person to as the “executor” of the will. The responsibility of the executor is to divide the property and other assets (“estate”) of the deceased among legal heirs or successors of the deceased. On death of the person, the executor has to approach the court and get the will probated. A copy of the will certified by a court is called “probate”. After obtaining the probate, the executor will take necessary action to execute the will. For this purpose, he may need to open a bank account in to which the balance of the deceased will be transferred. Accounts may be opened in the name of executors in the following manner: “XXXXX, Executor to the estate of YYYYY deceased.” Caution: (i) If more than one executor is appointed, they have to do it jointly. They may jointly authorize one of them to operate bank accounts. (ii) An executor cannot borrow on behalf of the estate. Hence, care should be take not to allow any overdraft in the account of an executor. (iii) Bank should exercise caution allow transfer of money from such account to the personal account of the executor.

Withholding Tax in India

I. INTRODUCTION:

Withholding tax is a government requirement for the payer of an item of income to withhold or deduct tax from the payment, and pay that tax to the government.

II. WITHHOLDING TAX IN INDIA:

Chapter XVII-B of the Income-tax Act provides for deduction of tax at source on payments made by any assessee. These provisions are also applicable in case of payment made to non-residents.

Section 195 casts an obligation on the person responsible for payment to non-resident to deduct tax at source at the time of payment or at the time of credit of the sum to the account of the non-resident.

III. WITHHOLDING TAX FOR NRIS AND FOREIGN COMPANIES:
Withholding Tax Rates for payments made to Non-Residents are determined by the Finance Act passed by the Parliament for various years. The current rates are:

1. Interest - 20% of Gross Amount
2. Dividends - 10%
3.Royalties 20%
4.TechnicalServices20%
5. Any other Services - Individuals - 30% of net income

Companies/Corporates - 40% of net income

The above rates are general and in respect of the countries with which India does not have a Double Taxation Avoidance Agreement (DTAA).

IV. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)
Statutory functions in respect of taxation of foreign companies and non-residents and withholding tax on remittances abroad are performed by Director of Income Tax (International Taxation)
There are five DITs (International Taxation) located at Delhi, Mumbai, Kolkata, Chennai and Bangalore.

V. PAN & FILING OF RETURN

The amendment made applicable from 1st April 2010 relates to the requirement of a foreign company to obtain a Permanenet Account Number (PAN) i.e. to register with the Indian Tax authorities.

Now, the foreign company is required to furnish a Permanent Account Number (PAN) to the payer in India. If the recipient fails to provide the PAN, withholding tax rate would be the higher of the existing rate as per the ITA or treaty, or 20%. This would result in additional withholding taxes in India, for which there may not be any credit available in the foreign Country.

Also, in the absence of a PAN, the Indian tax authorities will not entertain an applicationfrom the recipient for a lower withholding tax rate.

Currently though, the Indian law requires all the foreign companies to file return of income, with respect to income being earned from India– even if the applicable taxes have been paid in India.

It would thus be advisable for foreign companies to initiate the process for obtaining PAN especially if they arereceiving certain royalties / fees / interest from their Indian group companies / collaborators.


VI. TAXABILITY OF TECHNICAL, MANAGERIAL OR CONSULTING SERVICES PROVIDED BY FOREIGN COMPANIES TO THE INDIAN CLIENTS PERFORMED OUTSIDE INDIA

Another important amendment relates to the taxability of technical, managerial or consulting services provided by foreign companies to the Indian clients; when such services are performed outside India. Foreign companies were taking a stand that such services should not be taxable in India, since they were not performed in India and had no territorial nexus with India. Their stand was vindicated by the Supreme Court (SC) in the case of Ishikawajima Harima Heavy Industries (288 ITR 408), where the apex court held that services should be rendered as well as used in India for being taxed in India. It therefore held that if both conditions were not fulfilled, the fees for technical services was not chargeable to tax in India.

VII. RECENT DEVELOPMENT

Samsung case:

In this Case the Karnatake High Court observed that every overseas payment would be liable to withholding tax, whether or not that payment was ultimately taxable as income in India.


Prasad Productions case

A special bench of the Chennai tribunal ruled that tax needs to be withheld only on those payments made overseas that are taxable in the hands of the non-resident. That goes against November's Karnataka High Court decision in the Samsung case, which said that every overseas remittance had to withhold tax unless it had a nil withholding order from the Revenue Department.

The Chennai Tribunal further observed that the taxpayer can decide whether a transaction is taxable and if not, there is no need for a nil withholding order.

Van Oord case

In this case, the Delhi High Court also ruled that withholding tax applies only to payments which are taxable in India

India Singapore tax Treaty

The Authority for Advance Ruling (AAR) has recently held that the fees paid by Indian Company for technical services of a foreign Company will not be taxed in India under the India-Singapore Treaty (“Treaty”). The rationale given behind this decision is that advisory services such as comments and suggestions do not fall within the purview of the term ‘Fee for Technical Services’ under Article 12 of the treaty.

This ruling of AAR came in the wake of the application filed by the Bharati AXA General Insurance Co. Ltd. (“BAGICL”) to know that if the foreign Company AXA ARC has any liability to pay tax in India in respect of the fee received from the BAGICL.

This ruling has come as a relief to those foreign companies who render support services so as to ensure uniformity and flawless quality in the business dealings of the group entities. Further, this ruling can provide some respite to the companies which do not have a permanent establishment in India as this ruling also state that the payment received by the companies having no permanent establishment in India cannot be taxed as business profits under the Treaty.

VIII. CONCLUSION

Tax Treaties: The non‐resident can yet take shelter under the tax treaty, especially India’s tax treaties with countries like Singapore, USA, UK, etc. that have a restricted/narrow definition of fees for technical services.

AAR: Although advance ruling authority (AAR) is binding to the parties appear before the authority and the transaction in relation to which the ruling was given because the ruling was rendered on a set of facts and cannot be of general application. However, it may have persuasive value.

Write us for more information on any assistance related to tax laws in India.

Project Visa for expats in Power & Steel Sectors

The Government of India has introduced a separate visa regime -- called `P' (Project) Visa -- within the employment visa regime for foreign nationals coming to India for execution of projects in the power and steel sectors. Initially the project Visa will cover only Power & Steel Sectors.

Project Specific Visa:

(i) Visa would be project Specific. A specific endorsement of Visa sticker would indicate the name & location of project.
(ii) The Project Visa would be issued only for skilled/highly skilled persons.
(iii) Only those the foreign nationals employed in the power and steel sector shall be allowed to take advantage of this Visa.

Multiple Entry facility:

(i) The guidelines for `P' Visa clearly say that its validity will initially be for the duration of the project/contract with multiple-entry facility. "It, however, cannot exceed one year.

Period of ‘P’ Visa:

(i) The period of Visa would be determined on case to case basis.
(ii) The period of visa would be initially for a period of one year or for the actual duration of the project / contract, whichever is less.
(iii) P Visa can be extended only with the prior approval of MHA.

Required documents and information:

(i) The Project visa would be issued based on submission of the relevant documents clearly establishing that the project/contract has been assigned to the particular foreign company by the Indian company/organization concerned.
(ii) A separate application form for Project Visa has been devised. The same may be obtained from the website of Ministry of Corporate affairs or alternatively our offices may be contacted in this regard.

Time:

(i) Project Visa will be issued only after approval from concerned authorities in India, the processing of which may take 45-50 days

Conditions for grant of ‘P’ Visa:

(i) A Project Visa holder cannot engage in another project either of the same company or of a different company and his or her work will be restricted to the location of the project.
(ii) In no circumstances would the person be allowed to be engaged in another project either of the same company or of a different company.
(iii) A person coming on Project Visa will not be allowed to take up employment in the same Indian company for a period of two years from the date of commissioning of the project.
(iv) The foreigner coming on Project Visa will have to register himself/herself with the FRRO/FRO concerned within 14 days of arrival if the validity of visa is for more than 180 days. If the validity of visa is for a period of 180 days or less, registration would not be required.
(v) The Indian Company engaging the foreign national for executing the project / contract would be responsible for the conduct of the foreign national during his/her stay in India and also for the departure of such foreign national upon expiry of visa.

Comparison between Liaison Office & Branch Office

It a comparison between Liaison office and Branch office in India on various aspect. Click on the picture for large view.

Write us for more information on setting up Liaison office or Branch office in India.

New Class of Visa: "E" category

The Government has decided to issue a special class of visa “E” category only for the power or Steel projects. It is to be remembered that visa norms for employing foreign personnel were tightened last year citing security concerns over the presence of large number of Chinese personnel in various projects.

Later, it was observed that power and steel projects using equipment from China had not been able to achieve their targets as visa restrictions forced Companies to hire local unskilled or semi-skilled workers to fill gaps.

The ministry of home affairs has now decided that under the sector-specific dispensation, new power and steel projects may have foreign skilled manpower up to 10% of the workforce employed per million tone or megawatt capacity, or 300 persons, whichever is lower. For expansion projects of existing plants, this number will be 5%, or 150 persons.

Power and cement projects will now also be allowed to employ two foreign chefs and translators/interpreters under the `E' category. Foreign experts or skilled workers will now also get business visa if they are coming for commissioning of a project. However, a person coming on project visa will not be allowed to take up employment in the same Indian company within two years of the commissioning of a plant.

India Briefing (October 2010): An Expatriate Manager’s Introduction to India

In this issue of India Briefing, we provide an expatriate manager’s introduction to India. From key country facts and figures to the country to cultural etiquette and communication issues, we take a look at one of the fasting growing destinations for foreign investment. India today represents a great investment opportunity. Knowledge of India business practices and an understanding of Indian culture are priorities to success in this market. We analyze the top reasons to invest in India, cover basic business etiquette and cultural issues such as making appointments and negotiating a deal, and discuss some of the communication challenges that expatriates experience when working in India.

In This Issue:
(i) An Introduction to India, Key Facts and Figures;
(ii) Top Reasons to Invest in India Now;
(iii) Indian Business Etiquette and Culture; and
(iv) Communication Challenges when Working in India

You may purchase the October 2010 issue of India Briefing, which can be found in the Asia Briefing Bookstore. Companies requiring assistance may contact any Dezan Shira & Associates' five national offices at india@dezshira.com for advice or visit www.dezshira.com.

REVISED CONSOLIDATED POLICY ON FDI

The Government of India has issued consolidated FDI Policy vide circular 2 of 2010 effective from October 1, 2010. The Consolidated FDI Policy makes all information on FDI policy available at one place and subsumes Government’s policy on FDI announced through earlier Press Notes/ Press Releases/ Clarifications issued by the DIPP, which were in force and effective as on date.

Earlier the Government of India has issued released the Circular 1 of 2010- Consolidated FDI Policy on March 31, 2010, effective from April 01,2010 and It was decided that the consolidated FDI Policy would be issued every six (6) months to update the FDI policy.

The Circular has been issued with the sunset clause of six months. A new Circular consolidating all amendments to the FDI Policy shall be issued on March 31, 2011 superseding the present Circular.

GIST OF NEW CONSOLIDATED POLICY:

(i) Wholesale cash-and-carry trading: It has been decided to remove the restriction on internal use.

(ii) Non-banking finance companies (NBFCs): NBFCs with 100 per cent foreign investment and a minimum capitalization of $50 million (around Rs 225 crore), can set up subsidiaries for specific NBFC activities, without bringing additional capital towards minimum capitalization.

(iii) Construction development projects: It has been clarified that the lock-in period of three (3) years will be applied from the date of receipt of each tranche of FDI or from the date of completion of minimum capitalization, whichever is later.

(iv) Downstream investments: Downstream investments through internal accruals are now permissible.

(v) Tobacco product manufacturers: Manufacturing of tobacco products has been formally included in the list of activities in which FDI is prohibited.

Please click here to read the revised consolidated Policy.