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Submitted in partial fulfilment of the requirements of Post Graduate Programme

B y Rajat Khullar Batch: 2011-13 Roll No. FT-111021

IILM Graduate School of Management Greater Noida

I hereby declare that the Project work entitled International Expatriate services- Taxation submitted by me for the Summer Internship during the Post Graduate Program to IILM Graduate School of Management, Greater Noida is my original work and has not been submitted earlier either to IILM or to any other Institution for the fulfilment of the requirements for any other course of study. I also declare that no chapter of this manuscript, either in whole or in part, is copied from any other document.

Signature of Student: Name of Student:

Signature of Company Mentor: Name of Company Mentor: Designation:

Date: Place:

Date: Place:

The satiation and euphoria that accompany the successful completion of task would be incomplete without the mention of the people who made it possible. I would like to express my sincere gratitude to my project guide Ms. Aarti Pathak and My Team members -Ms.Taranjeet Kaur, Mr. Pankaj Goel & Mr. Abhishek Gupta for their assistance, motivation and being a continual source of encouragement and guiding me to complete this project successfully. Her professional advice given throughout the completion of this project will not be forgotten. I would like to thank my Team manager Mr. Akhil Chadana for believing in me and his continuous support and guidance during my stay there. I would also like to offer my sincere thanks to my faculty guide, Dr. Meena Bhatia for guidance. his benevolent and expertise

Table of Contents 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Particulars Company Profile Introduction to the Project Objective Methodology Income tax Rules for FY(11-12) Computation and tax slab rates Analysis Risk Compliance Conclusion Learning From SIP References 27 37 40 41 42 24 Page no. 5 8 11 12 13 Remarks

Company Profile

KPMG is one of the largest professio nal services networks in the world and one of the Big Four auditors, along with Delo itte, Ernst & Young (EY) and PwC. Its global headquarters is located in Amstelveen, Netherlands. KPMG was formed in 1987 with the merger of Peat Marwick International (PMI) and Klynveld Main Goerdeler (KMG) and their individual member firms. Spanning three centuries, the organization's history can be traced through the names of its principal founding members - whose initials form the name "KPMG."

K stands for Klynveld. Piet Klynveld founded the accounting firm Klynveld Kraayenhof & Co. in Amsterdam in 1917. P is for Peat. William Barclay Peat founded the accounting firm William Barclay Peat & Co. in London in 1870. M stands for Marwick. James Marwick founded the accounting firm Marwick, Mitchell & Co. with Roger Mitchell in New York City in 1897. G is for Goerdeler. Dr. Reinhard Goerdeler was for many years chairman of Deutsche Treuhand-Gesellschaft KPMG. and later chairman of

KPMG was established in India in September 1993, and has rapidly built a significant competitive presence in the country. The firm operates from its offices in Mumbai, Pune, Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Kochi, Chandigarh and Ahmedabad. In India, KPMG has a client base of over 2700 companies. The firm's global approach to service delivery helps provide value-added services to clients. The firm serves leading information technology companies and has a strong presence in the financial services sector in India while serving a number of market leaders in other industry segments. Our differentiation is derived from a rapid performance-based, industry-tailored and technology-enabled business advisory service delivered by some of the leading talented professionals in the country. KPMG professionals are grouped by industry focus and our clients are able to deal with industry professionals language. who speak their

KPMG Global Services is a joint venture between KPMG International, KPMG in the UK & US and KPMG in India. Set-up in 2008 as a global capability centre, KGS provides professional services to KPMG member firms. With its broad portfolio of services and cross- functional capabilities, KPMG Global Services delivers on both immediate and long-term business imperatives for the global member firms by harmonizing its core Advisory services with the various Centres of Excellence to provide services using a flexible delivery model. Over 1300 high performing individuals work together to respond to complex business challenges facing our clients by offering informed member firms have perspectives, and delivering clear solutions by working with us, competitive strength, and an expanded global footprint.

successfully driven business value through acquisition of new capabilities, increased

Mission of KPMG
KPMG combines a multi-disciplinary approach with deep, practical industry knowledge to help clients meet challenges and respond to opportunities.

What WE Do
KPMG in India provides tax and advisory services and industry insights to help organizations negotiate risks and perform in the dynamic and challenging environments in which they do business TAXManagements have realized that taxes (direct and indirect, domestic and international), should be viewed as a dynamic item of cost. An effective tax-cost management provides a distinct competitive advantage. This requires the application of appropriate tax strategies proactively identified and surgically implemented. We have developed a total tax management capability which encompasses the entire spectrum of direct, indirect and personal taxes. Our approach to tax planning is multi-jurisdictional. We, together with other member firm's offices spread across the globe, can provide quality national and international tax advice. 6

Our professionals are drawn from a wide variety of backgrounds. Industry specialization, service line specialization, international exposure and advanced training equip them to work with our clients and be their advisors in a wide spectrum of their business processes.

AdvisoryThe challenges of international competition and increasing complexity of information flows have widened the financial and business risks faced by companies. With increasing regulatory requirements, the need for greater transparency in operations, and disclosure norms, stakeholders require assurance beyond the tradit ional critique of numbers. Hence assurance is being increasingly required on industry issues, business risks and key business processes. KPMGs management consultancy services are now combined to help enable a 360 view of challenges faced by our clients, which helps in achieving sustainable efficiency improvement on operations. Risk management is not the responsibility of a single department it is the responsibility of everyone, from the chief executive downwards. Past corporate failings have been attributed to lack of accountability, strategy and transparency. Tougher expectations by regulators and other stakeholders now mean that corporate and financial institutions should demonstrate better discipline, control and responsibility.

Introduction to the Project International Expatriates/Executive Services

KPMG in Indias International Executive Service (IES) team has a well established presence across the global network of KPMG member firms, with effective global assignment management techniques and delivery structure. We provide advisory and compliance services on tax and regulatory matters to internationally mobile executives. We have a dedicated team of experienced professionals with extensive knowledge of various issues relating to global mobility assignments. The KPMG advantage Executive taxation is an important and critical area which requires adequate planning. We aim at providing services that meet the expectations of our clients across the globe and be the tax advisors of choice. By its very nature of being personal, executive taxation draws significant attention amongst senior executives and high net worth individuals. We recognize this fact and have worked towards meeting their expectations through:

A team of professionals fully dedicated to the IES practice Standardized service to improve client delivery Global network Strict confidentiality of information

Immigrat ion / Visa Types of visas and tax

Social securit y regime Applicability establishment Support on compliance of social

implications Support in respect of visa requirements

security regulations on an


Emplo yee (ESOPs)

equit y

incent ive

Expatriate assignments

Conceptualize and design the equity linked incentive and compensation schemes Review existing plans vis-vis industry practices, regulatory norms etc.

Plan the Indian assignment considering commencement date, tenure etc. to optimize tax benefits and administrative efficiencies Review contracts of secondment and other

compliance requirements

Outbound assignments Design and implement global mobility policies Advise on cross-border tax issues and tax credit mechanism

Emplo yee compensat ion structuring Design packages compensation in line with

industry practices and tax optimization Advise on related

documentary requirements

Foreign exchange regulat ions Advise on exchange control requirements leaving India Advise on exchange control regulations various in respect of investment for foreign nationals coming to India or

Payro ll diagnostic Review existing employee compensation policies and methodologies to identify any inefficiencies/issues Recommend 'leading practices' on payroll policies

opportunities in India



To study the taxation of International Expatriates To analyze the pay slips and come out with some conclusion To compute the taxation To give advices to international expatriates as how they can save on their taxes by investments. To do counseling of the expatriates Implementation of tax equalization agreements Advice on Pension plans Compliance with employment and payroll taxes Advice on social security agreements


Methodology for the Project-

Arrival of the expat

Preparation of Counseling Notes

Applying PAN & FRRO Registration

Sending In tax Organizers

Preparation of Form-16

Details of pay slips

Determination of Residential Status

Getting back of Filled in Questionnaire

Creating of ITR-1

Uploading the XML file over the net

Completion of the Process


Income tax rules for the expats (FY 2011-12)Residential Status in India (Section 6) An individual is taxable in India based on his residential status. Residential status is determined on the basis of physical stay/ presence in India. Basic Conditions The residential status of an individual could be that of a Resident or a Non Resident (NR). An individual is said to be a Resident in India during the tax year, if he satisfies any of the following two basic conditions: He has been in India for 182 days or more, during the relevant tax year; or He stays in India for 60 days or more during the tax year and 365 or more during the 4 tax years immediately preceding the relevant tax year Exceptions: In the following cases, 60 days shall be substituted by 182 days a) In case of an Indian citizen who leaves India during the tax year for the purpose of employment outside India or as a member of the crew of an Indian ship; b) A person being a citizen of India or person of Indian origin, who being outside India comes on a visit to India during the relevant tax year. An individual is treated as a Non-resident, if he does not satisfy any of the basic conditions mentioned above. Resident is further divided into: a) Resident and Ordinary Resident (ROR) b) Not Ordinary Resident (NOR) Additional Conditions A resident individual is said to be a Not Ordinarily Resident if he satisfies either of the following additional conditions He has been a Non-resident in India in 9 out of the 10 tax years preceding the relevant tax year; or He has been in India for a period of 729 days or less during seven tax years preceding the relevant tax year. 13

If none of the additional conditions mentioned above are satisfied, an individual is said to be a Resident and Ordinary Resident (ROR). INCOM E ALARIES UNDER HEAD S

Sections 15 to 17 of the Act cover the provisions of income under the head Salaries. Broad overview of the provisions relating to Salaries Salary is liable to tax on due or receipt basis, whichever is earlier. In this connection, an income is considered as salary only if it results from an employer-employee relationship as opposed to that of a principal-agent. As per Section 9(1) (ii) of the Act, the income shall be deemed to accrue or arise in India, if the income is earned in India in respect of services rendered in India. Further, salary is generally divided into 3 key heads -

- Wages and allowances [Section 17 (1)]- this generally includes all monthly cash remuneration paid by an employer to the employee like base salary, bonus, housing allowance, conveyance allowance, etc. These components are chargeable to tax in full except to the extent specifically exempt (like house rent allowance)

-Perquisites [Section 17 (2)]- this includes various benefits/amenities provided by an employer to the employee like company leased accommodation, reimbursement of personal expenses, free education, etc. These perquisites are offered to tax based on the valuation prescribed in the Income- tax Rules, 1962 (Rules). - Profit in lieu of salary [Section 17 (3)]- this includes non-recurring, one-off payments received by the employment, etc. employee eg Joining bonus, compensation for termination of


INCOME FROM HOUSE PROPERTY Sections 22 to 27 of the Act cover the provisions of income under the head Income from House Property. Broad overview of the provisions relating to Income from House Property (Section 22) Income is chargeable to tax under the head Income from House Property if the following conditions are satisfied: The individual owns a property that consists of buildings or lands appurtenant (i.e., attached) thereto; and The property should not be used by the owner for the purpose of any business or profession carried on by him, the profits of which are chargeable to tax. Therefore, ownership triggers taxability and not renting of a property.

INCOME FROM CAPITAL GAINS Sections 45 to 55A of the Act cover the provisions of income under the head Capital Gains. Charge of capital gains - Section 45 Any profits or gains arising from the transfer of a capital asset are chargeable to tax under the head Capital gains in the year in which the transfer takes place. The Capital Gains are specified as short-term or long-term depending on the period of holding. In this connection, the following terms are important to understand a. Capital asset 2(14) Section

Property of any kind held by an assessee (whether or not connected with his business or profession) but does not include the following - Stock in trade, raw materials, consumable stores held for the purpose of business or profession; - Personal effects i.e. movable property held for personal use, (excluding jewellery, archaeological collections, drawings, paintings, sculptures, any work of art); - Agricultural exceptions); land in India (with certain

- Other specified deposit or bearer bonds


b. Short-term capital asset Section 2(42A) A short-term capital asset is defined as a capital asset held by an assessee for not more than thirty six months immediately preceding the date of its transfer. Exception Shares of a company or any other security listed in a recognised stock exchange in India, units of UTI, units of a mutual fund are considered as short-term capital assets if held for not more than twelve months immediately preceding the date of transfer. c. Long-term capital asset 2(29A) Section

Any asset that is not a short-term capital asset is a long-term capital asset. d. Transfer 2(47) includes - Sale, exchange or relinquishment of the asset; - Extinguishment of any rights in the asset; - Compulsory acquisition of an asset under any law; INCOME FROM OTHER SOURCES Sections 56 to 59 of the Act cover the provisions of income under the head Income from other sources. Interest Interest income (other than that exempt under Section 10) from any source is fully liable to tax in India. Dividend Dividend from shares in Indian companies and from specified mutual funds and units is Section

The term transfer is a very vide term and does not only mean sale. The term transfer

exempt from tax as per Section 10(34) and 10(35) respectively. Dividends from foreign companies are fully chargeable to tax. 16

Miscellaneous income like lottery receipts, etc Gross winnings from lotteries, crossword puzzles, races including horse races (other than income from the activity of owning and maintaining race horses), card games and other games of any sort or from gambling or betting of any nature whatsoever are chargeable to income tax at a flat rate of 30% (plus applicable cess and surcharge). No allowance or expenditure is allowed to be claimed as a deduction from the gross winnings. Deductions from Income from other sources Deductions from Income from other sources are covered under Section 57, as under Any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realizing dividend (other than dividend covered under Sec. 115-O) and interest on securities. Current repairs, depreciation, insurance premium in case of letting out of plant, machinery, furniture and building. In case of income in the nature of family pension, amount deductible is Rs 15,000 or one- third of the income whichever is lower. Any other expenditure (not being capital expenditure) laid out or expended wholly or exclusively for the purpose of earning such income. Any sum of money received by an individual or HUF as a gift without any consideration form any person in excess of Rs. 50,000 in a Tax Year. However, money received from prescribed persons (including relatives) or under specified circumstances is not taxable in the hands of the recipient.

DEDUCTIONS FROM GROSS TOTAL INCOME (Chapter VI-A) Pursuant to calculating the Gross Total Income, based on the income heads discussed above, the assessee is allowed deductions under Section 80A to 80U, in respect of specified investments/contributions made by him during the respective tax year. The total amount of deduction, as calculated under these Sections, is limited to the Gross Total Income and the unclaimed/unutilized amount is not permitted to be carried forward. I have discussed below,

few important deductions expats-

for the 17

- 80C Contribution to employee provident fund, public provident fund, life insurance premium, subscription to certain mutual funds, national savings certificate, principal repayment of housing loan, tuition fees etc. - 80CCC Contribution to pension fund up to Rs 10,000 per annum. Aggregate deductions under Section 80C, 80CCC and 80CCD (contribution to pension fund of central government) should not exceed Rs 100,000. - 80D Payment of medical insurance premium by cheque up to Rs 15,000 or if taken for senior citizens up to Rs 20,000. - 80E Interest paid on loan taken for from any financial institution or approved charitable organization for all field of studies (including vocational studies) after passing the senior secondary education or its equivalent from any school, board or university, as prescribed. - 80G Donations made to charitable organizations, certain funds like Prime Ministers National relief fund, National Defence Fund etc. MODES OF PAYMENT OF TAXES The Act prescribes three modes of payment of tax for an individual - Tax Deduction at Source (and Tax Collection at source for prescribed transactions); - Advance tax; and - Self-assessment tax. Tax Deduction at Source 206A Sections 192 to

The Act prescribes that at the time of making specified payments (or credit in the books), the payer is required to deduct/withhold tax from the amount payable and deposit the same with the Government treasury. In this connection, the following points should be noted - The rate of tax deduction varies depending on the nature of payment, the residential status as well as the person type of the payee and the payer. - The Payer needs to obtain a specific registration with the Revenue authorities for Tax Deduction and deposit. The registration is known as Tax Deduction Account Number.

- The Payer is required to furnish a certificate to the payee specifying that tax has been deducted at source, the rate and the amount of tax deducted, etc. Such certificate is generally issued following the end of the tax year (by April 30). 18

- The Payer who has deducted taxes at source is required to file a Quarterly e-tds (withholding tax return) return, by the prescribed due date, detailing the amount paid/credited and details of taxes deducted and deposited. In this connection, specific time limits have been prescribed for: Advance Tax - Section 207 to 219 An individual is required to pay tax on the chargeable income in advance during the course of the respective tax year. In this connection, the Act prescribes the mode of computing advance tax as well as the due dates by which the advance tax has to be deposited into the Government treasury. Advance Tax is calculated under the following steps - Step 1 - Estimating the total taxable income for the tax year. - Step 2 - Computing the tax liability on the estimated total taxable income. - Step 3 - Reducing the amount of tax deductible/collectible at source (if any). The balance tax liability is the advance tax payable by the individual. Please note that advance tax is payable only if the total amount payable as per the above computation for the respective tax year exceeds Rs 10,000. Self-assessment tax Where the tax liability of a particular tax year is not discharged by way of tax deduction/collection at source or advance tax during the respective tax year, an individual is permitted to discharge the liability by way of self-assessment tax. While paying this tax, the individual is required to compute the interest payable for delay in filing the return, delay/default in payment of advance tax or shortfall in payment of advance tax as per the prescribed instalments, and discharge the same along with the outstanding tax liability.


CONCEPT OF DOUBLE TAXATION AVOIDANCE AGREEMENTS When an individual is sent on an international assignment, based on the respective domestic laws, he could be subject to tax both in home as well as the host country. Generally there are two methods of relief available under a tax treaty - Exemption method - Under this method, income is only taxed in one of the two countries (i.e., it enjoys exemption from tax in one country); and - Tax credit method - Under this method, the income is taxed in both the countries, but one of the countries (i.e., the country of residence) allows credit of the taxes paid in the other country

TAX COMPLIANCE CYCLE We shall now discuss the typical tax compliance cycle that we undertake for our clients. The same has been divided into employee related compliances and employer related compliances, and covers the following compliances -

a. Emplo yee compliances


1) Conducting tax Counseling sessions for the assignees. 2) Processing the Permanent Account Number for the assignees. 3) Preparation and filing of the Indian return of income. 4) Processing authorities. Departure Clearances from the Revenue

b. Emplo yer compliances


1) Processing the Tax Deduction Account Number for the employer. 2) Preparation of tax withholding computations and year end withholding

forms. 3) Preparation of quarterly withholding tax returns. In the following paragraphs, we will try to understand these compliances and the assistance


Employee related compliances Tax counseling sessio ns In case of international assignments, it is essential that employees, who are being deputed from one country to another, understand and are familiarised with the regulato ry compliances applicable to them in the home as well as in the host country. This helps the employer to ensure that there is timely compliance of regulations by the assignees. In this connection, our clients engage our services in conducting such sessions. Some of the areas/topics that we typically cover in such briefings are - Brief discussion on taxability in India during the period of assignment. - Apprising the assignees of the local tax registrations like obtaining Permanent Account Number, filing documents for registration with Foreign Regional Registration Office. - Informing the assignees of the ongoing compliances like the India income tax return, the Due dates etc. - Apprising the assignees of the departure compliances prior to departure from India i.e. obtaining Tax clearances from Revenue authorities. - How the employer and KPMG will be assisting them in meeting the aforesaid compliances.


Social Security Regime in India

Basic Concepts Social security regime in India is primarily governed by Employees Provident Fund and Miscellaneous Provisions Act 1952, (the Act) and comprises of following schemes:

Employees Pension Scheme, 1995 (EPS) Employees Provident Fund Scheme, 1952 (EPFS) Employee Deposit (EDLIS) linked Insurance Scheme

The above schemes provide for the social security of employees working in an establishment employing 20 or more people .The employer is required to contribute towards these schemes for the employees earning wages below INR 6,500 per month. However, employees earning wages more than INR 6,500 can voluntarily choose to participate in these schemes. On 1 October 2008, the Government of India, issued a notification introducing a new concept of International workers (IWs) which include expatriates (foreign citizens) are working for an employer in India and the Indian employees working overseas. The IW(s) are required to join the schemes from 1 November 2008 and they along with their employers are required to contribute towards these schemes irrespective of the salary threshold of INR 6,500 per month. We summarize below the various contributions and charges which need to be deposited under The relevant provisions:


Particulars Sr. No. I II. A. IWs contribution to EPFS

Percentage of salary 12

Remarks To be deducted

from IWs salary.

Employers contribution: EPFS 12 (less pension Contribution) Limit of INR 6,500 is not applicable in case of IWs. Limit of INR 6,500 is applicable Limit of INR 6,500 is applicable Limit of INR 6,500 is not applicable. 0.01 Limit of INR 6,500 is not applicable.

b. c.


8.33 0.50


EPPF Administration charges EDLIS Inspection charges


Salary for the purpose of the PF deduction would include basic wages, dearness allowance (including cash value of any food concession) and retaining allowance.



Particulars A) Income under head Salary GROSS SALARY (after allowing exemptions) (B) Income under head House Property Annual value of House Property u/s 23 Less : Statutory Deduction u/s 24(a) : Interest Payable u/s 24(b) (C) Income under head P/G/B/P Net profit as per P&L a/c Add: Adjustments as per Sec 30 to 43 B Less: Adjustments as per Sec 30 to 43 B (D) Income under head Capital Gains Long Term Capital Gains Short Term Capital Gains Less: Exemptions u/s 54 head Other Sources (E) Income under Gross Income Less : Deduction u/s 57 F) ADD : Income to be Clubbed u/s 60 to 64 -----------(Under respective Heads) (G) LESS: Set off & carry forward of losses u/s 70 to 80 ----------(Under respective Heads) Gross Total Income [ GTI ] (A + B+ C+ D+ E + F -G) Less: Deductions under chapter VI (Sec 80CCC to 80 U) Total Income [ TI ] (Rounded off to nearest 10 u/s 288A) 24 Amount(Rs.) Amount(Rs.)

Income Tax slab Rates for FY-(2011-12)

Male (less than 65 years) Upto 1,80,000 - Nil 1,80,001 to 5,00,000 - 10% 5,00,001 to 8,00,000 - 20% 8,00,001 and above - 30% Resident Female ( less than 65 years) Upto 1,90,000 - Nil 1,90,001 to 5,00,000 - 10% 5,00,001 to 8,00,000 - 20% 8,00,001 and above - 30% Resident Senior Citizen(>=65 yrs) Upto 2,40,000 - Nil 2,40,001 to 5,00,000 - 10% 5,00,001 to 8,00,000 - 20% 8,00,001 and above - 30%

Income Tax slab Rates for FY-(2012-13) Male and Female( less than 65 years) Upto 2,00,000 - Nil 2,00,001 to 5,00,000 - 10% 5,00,001 to 10,00,000 - 20% 10,00,001 and above - 30%


Resident Senior Citizen(>=65 yrs) Upto 2,50,000 - Nil 2,50,001 to 5,00,000 - 10% 5,00,001 to 10,00,000 - 20% 10,00,001 and above - 30%




Organiser Analysis-




Counseling Notes& the tax organiser play a very important role in the development of the tax liability of the assignee. The first step towards the process of making the liability of the assignee is to make the Counseling notes. Counseling notes is a kind of meeting where there is an interaction of assignee with us. This session helps us to know about the KYC details of the client and helps to know him better. In this session we also brief the clients about the tax liability being used in India. This session also helps to build up a relationship between the two parties. The Counseling notes annexure is being supported in the annexure s lists to point the relevance of this component. Another Important part of the computation of the liability is sending of the Tax organisers to the assignee. A tax organiser is document which helps us to know about the various kinds of income being earned by our client in a particular assessment year. Tax organiser contains various annexure, checklists and supporting agreements in order to ensure that proper information is obtained from the client so as to file in the proper taxes to the government .tax organiser as a part of annexure is being provided in the annexure part. Organizers help us to understand the clients details in the manner that we are able to understand his earning pattern by just looking at the organizer. Thus its very important to understand the details as this would facilitate in making the final tax liability of the assignee. These organisers has various forms of annexure requiring details about the various sources of income like income from house property, income from capital gains, income from investments and income from other sources. Also these organisers help in knowing the status of the expat. By looking at the day details we are to classify our expat into different categories of ROR, NOR and NR. From this year onwards i.e. FY-2011-12 there is an additional annexure being included in the organisers named as wealth tax and foreign assets. If an assignee falls in the category of ROR then he/she is required to submit the details of any foreign assets which one possesses. As ROR is taxed on his global income so one needs to mention all his earnings in the organiser so as to compute his final tax liability. 28

Computation AnalysisIn this analysis we basically prepare different sheets which helps in computation of final tax liability of the person. This step is extremely is important because this will help us as well as finance dept. in paying of tax deducted at source. This process includes details of CTC of the person being provided by the HR dept. of the organisation. CTC details help us in knowing the various components of the incomes which are being earned by the assignee. As we know that CTC includes the total amount and we know that basic is 30% of the total and contribution to PF is 12% and the rest is the special allowances for the assignee. This sheet also provides us the details about the perquisites like Car, accommodation etc. The next step is to prepare the salary sheet where we calculate the components of the salary on monthly basis where we first calculate the basic and special allowances and multiply it with the relevant exchange rate. Then we calculate the contribution to the PF for both employees and employer. The next step is to determine the salary for the purpose of rent free accommodation. The next step is to determine the tax liability on monthly basis and help us in determing the actual amount of tax on monthly basis. The next step is to determine the perquisite value of rent free accommodation and car value of the facility being provided to the assignee. At last we calculate the taxability on behalf of the employee by taking in salary and allowances as income earned for the same and applying this year taxes for it. In the end we calculate the salary and allowances and perquisites value and employ the tax slabs to find out the liability for employee and the other part to be paid by employer. Thus we can easy advice that the client could pay on the taxes easily and could easily save the money by investing in the various saving scheme of the government.


Form -16 AnalysisIn simple words, Form 16 is the document proof given by an employer to all its employees with the complete details of income (salary) , the amount deducted as income tax (TDS) for each month and the total tax payment. This document will be used by employee to submit the income tax returns to the government. financial year. Components of Form-16PAN PAN stands for a Permanent Account Number which is a 10 digit alpha-numeric code generated by the Income Tax Department of India. The tax department has made it mandatory for everyone (including NRIs, PIOs & Companies) who wishes to conduct any type of investments and financial transactions in India. Carrying business, filing or paying taxes, investing in India, buying a property, opening a bank or demat account, etc. now require a PAN number. TAN TAN or Tax Deduction and Collection Account Number is a 10 digit alpha numeric number required to be obtained by all persons/companies who are responsible for deducting or collecting tax. TAN nos. is also unique to companies. Gross Salary It refers to total of an employees regular remuneration including allowances, overtime pay, Commissions, and bonuses, and any other amounts before any deductions are made. Perquisites Perquisite is an additional benefit provided by the employer to the employee in addition to the salary or wages. It is also called Perks in short. Profits in lieu of Salary Profit in Lieu of Salary is a part of the salary income, thus it is taxable under the head income from salary. It is any payment made to employees in lieu of salary. Issuing form 16 is applicable only for the salaried employees. Normally, form 16 would issue after the current


Entertainment Allowance It is the amount paid by employer for availing entertainment services. Deduction on entertainment allowance is only is allowed to government employees. The amount of deduction allowed is to the extent of least of the following Actual Allowance received 1/5th or 20% of the salary (excluding all other allowances benefit or any other perquisites) Rs.5000 Deductions Government encourages certain type of savings mostly long term savings for your retirement and therefore offers you tax breaks on such savings. These tax breaks are nothing but deductions allowed from the gross total income (Chapter VI A). To know more about deductions click here Relief u/s 89 Relief is granted to individuals when salary is paid in arrears in a lump sum. For example, Salary (received in arrears/advance, family pension received in arrears, retirement benefits such as gratuity, commuted pension, VRS and retrenchment compensation) Form -16 is a form being prepared by a company for his salaried employees. This form helps in knowing the income from the head salaries and various other income of a salaried employee. Form -26 helps in knowing the tax liability of the assignee by taking into account his salary income his benefits and adding on the various other incomes. After getting his total income we would deduct the deduction under chapter VI of the income tax act. These deductions include contribution towards PF, medical claim, donations insurance etc. After claiming these deductions whose limit is dependent upon its nature one gets the final income which is being charged to tax. Then we employ the taxes by looking at his category and adding on the cess we get the final tax liability of the person.


Annexure B of form-16 helps us to know the monthly payment of taxes by listing the amount, BSR code, date of deposit, and the tax challans no. In order to facilitate the assignee that this amount of TDS has been deducted from your salary. For this we have the challans no. As proof that the taxes have been deposited in his name. The last page of the form shows us the values of various perquisites being given to the assignee and how much is taxable for the same. This sheet contains a complete list of perquisites which would facilitate us in knowing the final liability of the assignee.

Thus form-16 is a very valuable source of information in filing of the final returns to the income tax department of a country.


FRRO Registration and Visa Extension

Foreigners visiting India on long term (more than 180 days) Student visa(S) (including those coming for study of Yoga, Vedic Culture, Indian system of dance and Music), Research Visa(R), Employment Visa (E), Missionary Visa (M), Medical Visa (M) or Medical Attendant (MX) Visa are required to get themselves registered with concerned FRRO/FRO within 14 days of his/her first arrival, irrespective of the duration of their stay. If the Indian Visa has a stipulation/ observation/ Special endorsement made by Indian mission/ Embassy on the Indian Visa for Registration, the Foreigners are required to be registered. Foreigners visiting India on other categories of long term visa including Business / Entry (X) visa would not require registration with the concerned FRROs/FROs if , repeat if duration of his/her stay does not exceed 180 days on a single visit. In case a foreigner intends to stay for more than 180 days on a single visit he should get himself registered well before the expiry of 180 days. Pakistan Nationals are required to register within 24 hours and Afghanistan Nationals are required to register within 14 days of their arrival in India. Registration facilities are not provided at the airport and are carried out in the office of FRROs or District Superintendents of Police (FROs). Personal presence of the foreigner at the FRRO/FRO office is mandatory for visa related services. Children below 16 years of age are exempt from Registration if they have entered on PIO card or on any type of VISA. It is mandatory for the foreigner (even children) to personally appear at the FRRO office, Delhi for obtaining any visa related services. Entry RequirementsBusiness and Employment Visa The Ministry of Commerce and Industry (MCI) had issued a letter dated 20 August 2009 requiring all foreign nationals in India holding Business Visa (BV) and working on project/ contract based assignments in India to return to their home countries on expiry of their BV or by 30 September 2009, whichever is earlier. This deadline was subsequently extended to 31 October 2009 by the Ministry of Home Affairs (MHA).


The MHA has issued frequently Asked Questions (FAQs) on work related visas issued by India, clarifying the purpose, duration and various scenarios under which BV/ Employment Employment Visa: EV shall be granted to a foreign national who is a skilled and qualified professional or person who is being appointed at a senior level or as a technical expert. EV shall not be granted for jobs which are routine/ ordinary/ secretarial in nature or for which large number of qualified Indians are available. The FAQs provide the following illustrative scenarios under which EV shall be granted to foreign nationals: For execution of a project/ contract (irrespective of the duration of the visit). Visiting customer location to repair any plant or machinery as part of warranty or annual maintenance contract. Foreign engineers/ technicians coming for installation and commissioning of equipments/ machines/ tools in terms of contract for supply of such equipment etc. Foreign experts imparting training to the personnel of the Indian company. For providing technical support/ services, transfer of know-how etc. for which the Indian company pays fees/ royalty to the foreign company deputing the foreign national. Foreign nationals coming to India as consultants on contract for whom the Indian company pays a fixed remuneration (whether monthly or otherwise). For taking up employment as coaches. Foreign sportsmen who are given contract for a specified period by the Indian club/ organization. Self-employed foreign nationals coming to India for providing engineering, medical, accounting, legal or such other highly skilled services in their capacity as independent consultants.


Income Tax Return Form Person Description



Income forward

from from

salary/pension: previous year):

or or

Income from one house property(excluding where loss brought Income from other sources( excluding winnings from lottery and income from races horses)



Individual who cannot file Sahaj above and where the total income does not include any income chargeable to income-tax under the head Profits or gains of business or profession, partner in a firm and income chargeable to income-tax under the head Profits or gains of business or profession does not include any income except the income by way of any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by him from such firm





deriving business income and such income is computed in accordance with special provisions referred to in section 44AD and section 44AE of the Act for computation of business income Not covered in sr number 1 to 4 Above and deriving income from a proprietary business or profession Not being an individual or a Hindu undivided family or a company or a person to which Sr no 8 applies. Applicable for All source of Incomes




Partnership firm



Not covered in 8 below. All Income heads


person including required to file a return under sub-section (4A) or sub-section (4B) a company or sub-section (4C) or sub-section (4D) of section 139 whether or not registered under section 25 of the Companies Act, 1956


ITR-1 ITR-1 is being prepared for salaried employees to file on their returns for the current financial year. It not only includes income from salary but also includes income from one house property and income under the head other sources. ITR-1 contains the basic details of the person filing on the return like his PAN, address, his residential status and whether its a new return or revised return. It also contains various types of income being earned by a person in the current financial year like income from salary , income from house property and income from other sources. Then it contains any kind of deduction under chapter VI of the IT act 1961. Then at the end it contains the total tax liability of the person which one has to file with the tax authorities of the India. The second sheet comprises of the TDS being deducted by the employer in respect of payment paid to the employee. It contains the total tax deducted at source with the name and TAN no. of the employer. It also contains the details of any advance tax and self assessment taxes being deposited by the employee during the current financial year.

The third sheet contains the sum of all taxes and if the total amount of TDS is more than the actual liability then their arises a situation of a refund. This sheet also contains the details of Bank account no. of the person filing on the return and the last sheet comprises of any kind of donations being made under section 80 G of the IT act 1961.

Thus ITR-1 is being used to file on the return of the expats.



Before sending a proposal to a new Client, a valid Sentinel Approval Number (SAN) and Conflict Check clearance (to be done only under certain circumstances) must be obtained. If there is any reason due to which these clearances cannot be obtained, a written waiver from the Risk Management Partner (RMP) must be obtained before issuing the proposal. For Inter Firm Agreements with KPMG Overseas offices, SAN must be obtained from the originating office. Only when we are specifically asked by the originating office to obtain a SAN for our portion of work locally, should we obtain a SAN in India.

Client Background Check

A background check is carried out to check the clients integrity and tax positions taken by them. Steps to be taken to conduct a background search: 1. In order to obtain the basic information on a company / person, refer to the companys official website. Information obtained is primarily in the nature of: Industry and nature of business Key promoters, officials, etc. Financial status / key figures (published) Group / related companies

2. MANDATORY An advanced search shall also be conducted on Google. This will be primarily used as they give an option for Search within results that helps us to filter results for relevance 3. The background information can be substantiated or updated by conducting a search on available in-house resources (KPMG subscribed databases): 1. Intranet Securities (current news, company / industry information, financial market data, etc)


2. India Info line (company database / business news /stock markets / mutual funds, etc) 3. Insight (company / industry data, industry analysis and forecast) 4. If the parent company is located overseas, the following databases may be used: 1. Economist Intelligence Unit (analysis on economic / business / political development, country commerce and country finance reports) 2. OneSource (business / financial information, news, executive biographies, company financial status, industry statistic, etc) 5. When reporting the search results the source and the period should be stated at the

top of the item for relevance. Such searches are desktop reviews and hence the reports prepared are focused on only publicly available information / data. Client Acceptance Form Client Acceptance has to be done prior to acceptance of a new client or if 12 months have elapsed since the last CAF was completed.On the basis of the Client Acceptance Form, the client is given a risk rating which ranges from 1 to 4. On occasions when the CAF preparation or review process identifies the need for deeper, non-public information about a company and/or its principal officers, forensic involvement is sought as they have contacts at CBI, Interpol, etc. to dig deeper. Engagement Acceptance Form There are two kinds of Engagement Acceptance Forms.
For For

a normal engagement and Inter Office Memorandums.

The scope of services should be clearly mentioned in the Form and the taxonomy should be correctly selected.


Client Continuation Form Client Continuation Form is required to be completed as and when there is a significant change in the management or risk profile of the company or the business of the company, or; every 12 months

Whichever happens earlier. Letter of Engagement Once the risk rating is complete and if the client is found suitable, the partner / director is advised to go ahead with the proposal. A Letter of Engagement is then drafted and sent to the risk team and legal team. After their approval of the letter of Engagement, it is then sent to the client. Inter Firm Agreement Engagement Acceptance Form (EAF-IOM) must be completed for all inter-firm engagements and should be accompanied by the following documents:

received from the originating firm clearance (to be taken for the inter-office work as and when carried out) Border Client Acceptance (in case it does not form part of inter-

Local conflict Cross

office instructions)

The EAF should be approved by all concerned prior to formal acceptance of the interfirm agreement/ group reporting instructions.


KPMG being the world 2 nd Largest Audit Company has provided various opportunities to manier people in the field of audit, advisory and taxation. It has always been a support to the freshers in exploring out the fields of taxation. By working in this organisation as a trainee in the field of International expatriates services, one has able to explore the diverse field of taxation with a broader scope. Earlier taxation to my understanding was just filing of returns at the tax office but by working with the team IES, one has explored newer things in this field. Starting from day-1, one feels that you are working in the environment where work is the utmost priority for everyone. Starting from preparation of the organisers then sending it to the assignees and getting the relevant information from them, preparation of computation, calculation of self assessment, advising our assignees about the changes in the structure of tax laws, the creation of Form-16, getting the details from finance and ultimately preparing the ITR-1 for the assignees has strengthen my analytical skills and broaden my horizon in this field. IES in itself is biggest revenue genitor to the organisation as in this department one deals with the inbound and outbound clients who are getting high salaries and perquisitites for their services in India.

IES has the same pattern as its being followed for the normal Indian citizen. An expat has various sources of Income and depending upon his residential status , we are liable and authorized to file on the taxes for the current financial year. At the end, We can say that the expat and a citizen pays on the taxes on similar pattern and is liable to claims the same deduction from his total liability so as to ensure growth pattern in the economy and by paying taxes, one directly contributes to the GDP of the country w hich ultimately leeds to the growth of the economy


Learning from SIP

1. On Job Work Experience: Internship with KPMG provided a valuable opportunity to have an on job experience and to understand the day to day working of an organization. The on-job experience gained during this internship helped in understanding business environment and to have a feel of organizational behaviour. 2. Understanding of Recruitment and Selection: KPMG provided an opportunity of not only learning about the process of recruitment and selection, but also helped in going through tough interviews . 3. Insight into Taxation Field: My stint with KPMG gave me better insight into Taxation practices.I came to know about various rules and regulation related to tax laws being followed up in India.

4. Understanding of Working Style of Virtual Teams: Opportunity to work with KPMG gave me an opportunity to have a better understanding of working of cross-functional, virtual team. This helped me understanding how to ensure clear line of communication within our team and with other teams.

5. Leadership style (Decision Making, Level of empowerment): The level of empowerment in this organization is very high. This field helped me to understand that a vital decision could be taken with the support of the team. So I developed to work within a team so as to come out with best levels of decisions.


References- www.inco in www.inco www.immigrat www.inco in/ m/pan/ ml m/tan/ ml www.passportindia.

IES ready recknor- KPMG India Inco me Tax Act - by Singhania Double taxat ion Agremments- by Sighania


Organization Information Docket

SIP Organization Name: 1) Contact Details: Identity Faculty Mentor Mentee Industry Mentor HR Head Name Dr.Meena Bhatia Rajat Khullar Ms. Aarti Pathak Ms. Nisha Syraic Mobile 9810839449 9911506997 9873950921 0124-3345217 Email id (Preferably personal) meena.bhat in m KPMG

2) Company Details (A macro view): Year of establishment Indian or MNC Headquarters Product Category Business Type (B2B/B2C) Number of employees (Total) Revenue of last financial year No of Locations in India/Worldwide Name the locations in India/Worldwide 3) Company Details (A micro view): Nature of project assigned (e.g. Yes No research/sales/client servicing etc.) Work environment (a)Mentors were supportive (b)Employees could go directly to discuss issues to senior bosses if required (c)Working environment was good? Is there any alumni working in this YES organization? 43 NO 12 1987 MNC Amsteevelen,Netherlands Services Both 145,000 US $22.7 billion

If Yes, please provide the details: Name Designation & Location, Mobile & Email id Would you recommend the organization for further relationship? Tick (Yes / No). If yes, then for what? Placement Consulting Live project Guest Lecture Final