Tax Exemption Certificate (TEC)

1. What is Tax Exemption Certificate?

In Most of the cases the prescribed rate for deduction of tax at source for NRI's is the maximum rate (i.e. 30% at present). However, there are number of provisions under the income tax act which allows special exemptions for NRI's and thus intends for lower tax outgo. However, on account of dedcution of tax at source in advance by the payer of the income, only in very few cases such benefit is being utilised by the NRI's as they don't claim the refund by filing their Return of Income.

2. Who is eligible to apply for such Tax Exemption Certificate?

Any person from whose income the tax is likely to be deducted at source is eligibe to apply for tax exemption certificate. Exemption certificate is granted at the discretion of the assessing officer and is generally given in cases where it can be proved that likely income of the applicant in the financial year would be below the maximum amount exempt from tax or tax applicable would be lower than the rate specified for deduction of tax at source.

3. How to apply for Tax Exemption Certificate?

Any person residing abroad and expecting to receive any income on which tax is likely to be deducted at source in India can apply for exemption certificate. The procedure involved is lenghty and involves co-ordinating with multiple departments. However, NriTaxhelp can help such person in obtaining tax exemption certificate by co-ordinating all the matters on behalf of its client. Generally it takes 10-12 working days to get a certificate issued which is valid for a period of 1-3 years. E-mail at info@nritaxhelp.com for more information.

4. What are the cases in which Tax Exemption Certificate is useful?

Although Certificate can be used in all the cases in which tax has to be deducted from source. However, following are the few common instances:

  Setting off of accumulated and carried forward losses from current year's income

  Interest earned on NRO account on which tax has to be deducted (however, total income is below maximum amount not chargeable to tax)

  Re-investment of Capital Gains earned during the year

  Shot term capital gains earned during the year

  Rental income earned during the year (where total income is below maximum amount not chargeable to tax)

5. What is the other alternative option available to get the money back in case of failure to obtain such Certificate?

If such certificate has not (or Cannot) be obtained, refund can be claimed by filing return of income on the basis of certificate received for tax deduction at source.

In case you want any further information or want to obtain tax exemption certificate for any of your income on which tax is likely to be deducted, please mail us at info@nritaxhelp.com.