What is Transaction Reference Number?

Many sectors have undergone transformational changes in the twenty-first century. One such sector is digital payment infrastructure. The global digital payment market was valued at USD 3.53 trillion in 2018 and is projected to reach USD 19.89 trillion by 2026. Notably, India, with its 46% market share, leads the global digital payment system market.

As the volume of digital transactions has skyrocketed and will keep increasing, the transaction reference number (TRN) has become more valuable.

Let's explore the concept of TRNs and their benefits for NRIs.

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What Is A Transaction Reference Number (TRN)?

The transaction number is a unique alphanumeric code assigned to every financial transaction. It is crucial in enabling tracking, verification, and future referencing, providing a secure and reliable digital payment system. Hence, it is beneficial in case of any disputes, auditing of financial fraud, etc. It is an essential element for any financial transaction and serves as a reference point for both the sender and the receiver.

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When Should NRIs Use TRN?

NRIs can use TRN in different situations:

Dispute Resolutions: NRIs can use TRN in case a dispute arises regarding their transactions. Providing TRN information can help to resolve disputes faster.
Tax Notices: In case of wrong tax notices on unpaid tax due, a TRN can save NRI from unnecessary harassment and financial loss by providing indisputable proof of the transaction and its tax status. (Review a few income tax notices for NRIs.)
Double Taxation Issue: A TRN can help NRIs avoid paying double tax by verifying the transactions and preventing income from being taxed twice in different jurisdictions.
Bookkeeping: A TRN helps NRI avoid errors, prevent duplicate transactions, and help with accurate bookkeeping.

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How To Find A Transaction Reference Number (TRN)?

A TRN can easily be found at the following places:

Internet Banking: Login to the banking portal and look for the transaction history tab. Each transaction will be mentioned with a description, the date of transfer and the amount.
Account Statement: The transaction reference number (TRN) is present in the account statement, also known as a passbook.
Email/SMS: Careful email and SMS inspection will provide TRN. After a successful transaction, both email and SMS are sent to the receiver and the sender.
Mobile Apps: A TRN can be easily checked under the recent transactions tab in mobile payment apps.
Bank Visit: Physically visit the bank branch and inquire about the TRN.

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Importance Of TRNs

The TRN is integral to the financial system, ensuring all transactions are done precisely and accurately. It also prevents fraud and helps transfer the right amount of money between persons. The Income Tax Department keeps track of and verifies financial transactions via the TRN, and the individual and business will receive just the right tax amounts. More importantly, the TRN is helpful in the fight against corruption and black money. TRN can track all financial transactions, which helps detect corrupt practices and money laundering cases quickly.

Hence, the TRN is an integral part of the financial system and is highly relevant to the accuracy and integrity of various financial transactions.

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How To Utilize TRNs For Transaction Tracking As An NRI?

Some examples of how NRIs utilize TRNs for transaction tracking:

Remitting Money to Family in India or receiving money from India: TRNs help track outbound remittances and inbound receipts, ensuring compliance with tax laws such as the Liberalized Remittance Scheme (LRS) and monitoring large transfers for proper reporting. They also assist in tracking gift taxes for recipients or declaring foreign income received in India.
Purchasing or Selling Property in India: TRNs assist in tracking financial transactions and Tax Deducted At Source (TDS) deductions when buying property, ensuring compliance with tax laws and FEMA regulations for NRIs. They also help to monitor capital gains for accurate tax filing during property sales.
Booking Flights and Paying Visa Fees: TRNs help NRIs track international payments for flights and visa fees, maintain records for tax filing, and claim travel-related deductions.
Taxation on Remittances: TRNs help track remittances and enable NRIs to claim benefits under Double Taxation Avoidance Agreements (DTAA), thus avoiding double taxation on income earned abroad.
Monitoring Wire Transfers and Net Banking Transactions: TRNs help track large wire transfers, ensuring compliance with reporting requirements under the Income Tax Act, particularly for high-value transactions that must be disclosed to tax authorities. It also assists recipients in India in accurately reporting remittances for tax purposes, ensuring proper filing and avoiding potential discrepancies.

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Common Issues With Transaction Reference Numbers

TRN issues often arise due to technical failures, human errors, and lack of standardization. Common issues with TRN are:

Delay in issuance of TRN: Technical problems or a system failure can delay generating a transaction reference number.
TRN Mismatch: Typos in systems or anything else that would result in the wrong form of communication may lead to a mismatch between the TRN sent by someone and the TRN delivered to the recipient.
Duplication of TRN: This can happen either through the system or through humans. In this case, many TRNs are generated for one transaction due to a system mistake.
Multiple TRNs for the same transaction: Technical glitches or human mistakes can result in having more than one TRN for the same transaction.

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Conclusion

Transaction Reference Numbers are crucial to a person and a business organization as they help track all financial transactions, ensure tax compliance, and correctly report income. The TRN assists an NRI in easy navigation through complex cross-border transactions to comply with the tax laws of India and that foreign country.

The TRNs, through their application, reduce the chance of errors and penalties. The taxpayer also attains transparency in financial transactions. TRNs play a significant role in coordinating the taxation system, which will indirectly benefit taxpayers and authorities in the long run.

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Frequently Asked Questions (FAQs): Transaction Reference Number

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What problems are solvable by TRN for NRIs?

TRNs help NRIs solve problems related to tracking remittances, ensuring compliance with tax regulations, managing property transactions, avoiding double taxation, and maintaining accurate financial records for tax reporting purposes.

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Is a TRN the same as an Order ID or Invoice Number?

No, a Transaction Reference Number (TRN) differs from an Order ID or Invoice Number. A TRN tracks specific financial transactions, while Order IDs and Invoice Numbers identify specific purchases or billing transactions.

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Can I use a TRN to track the status of my transaction?

Yes, you can use a Transaction Reference Number (TRN) to track your transaction's status.

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Why is a TRN important?

A TRN is essential as it provides proof of transaction, enhances transaction security by offering a unique identifier, and helps in tracking, bookkeeping, etc.

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Are the bank reference number and transaction reference number the same?

No, they are not the same. The Bank Reference Number is used to identify specific transactions or communications, often related to inquiries or issues with an account. At the same time, TRN is a unique identifier for particular financial transactions.

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