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EXPERT OPINIONS - TAX & LEGAL
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Sections: Tax & Legal | RBI | Real Estate

What are the tax implications on money transfers to India by NRE?

Mere transfer of money into India by NRE is not taxable in India more so if the money pertains to post tax accumulations abroad.

I have to file tax return in India, I want to know that for filing tax return do I have to give bank statements of my NRE Account or just its ok to give my account number?

The column in the return of income required you to furnish only the Bank Account no. The copies of the statements are required only if your case is taken up for scrutiny assessment.

I have been living in the UK for over 20 years. I am about to relocate to India for one or two years. I have a British passport, but am of Indian origin. If I am paid by a UK firm for work relating to the UK - it involves calling the UK, and requires no work to do with India or Indian firms - will the income be subject to Indian tax?

Though it is work related to U.K the said income is taxable in India.

Can you please confirm once from next year, i.e. from 01/04/2005, when tax will be levied on NRE accounts held in India, do we have to submit to tax authorities the income on savings account by completing the necessary tax return form? If one is not in India what would the procedure be? The Bank where the account is held, are they going to notify to the account holder to submit the return or they automatically advise what tax is deduct at source and remit to tax authorities?

The interest on the NRE Account will be taxable from 1.4.2005. A return will have to be filed in India though you are living abroad if the interest exceeds the minimum threshold limit of 50000/-. Alternatively you could avail of the facility in Chapter XII A of the Act where a return of income need not be filed if the interest is subject to tax deduction at source. There are other conditions to be satisfied for the benefit under that chapter.

I need to pay income tax to Indian Government on capital gains. I have a NRO account with Citibank. What is the process for sending the payment to the Indian Income tax through Citibank? Can I authorize Citibank to pay the tax by deducting the amount from my NRO account? I do have a Chartered accountant who has prepared our tax liability.

You could authorize Citibank to pay the tax on you capital gains in India. The only issue is they should properly fill up the challan, which is a manual process quoting the correct PAN number etc and pay the required tax.

I am non-resident Indian residing in the Gulf for last 11years and planning to go back to India next year.
(1) If I transfer money from my NRE account to my parents' (senior citizen & residents in India) account, can they invest in the 9% senior citizen scheme? When I become resident in India, will this income be clubbed in my hand?
(2) My spouse is a housewife & also a non-resident Indian having money in her NRE account. After becoming resident, will her income be clubbed with my income?

1. They can invest in senior Citizen scheme out of the NRE account. When you become a resident in India the said interest will not be clubbed in your hands since it does not come under the provisions of sec 64 of the Act.

2.The question of clubbing in this case will arise only if the money in your wife's account is the result of asset transferred by you. If it is accumulated out of her own funds, the said income will not be clubbed in your hands.

I have now been in the US for about 2 years and want to change my status to NRI. Have few questions:

1. Is the onus on me to convert my status to NRI? Is there a deadline by which I need to convert my status?

2. I am working for an Indian company in their US subsidiary. I get some basic salary and retirals in India and main salary in US. I file taxes in India for my Indian salary (as NRI) and taxes in US for my US salary. Is this appropriate?

1.There is no concept of conversion from a resident to a non-resident. If your physical stay in India during the previous year is less than 182 days you become a non resident and the declaration is to be made at the time of filing the return of income.

2.Since you are working for an Indian company and employment source is India your US salary is also taxable in India subject to double taxation relief in respect of the taxes paid in the US.

I sent around Rs.20 lakhs of money recently to India to buy some real estate property there. Due to some unexpected events, I decided not to invest in India now and want to get that money back. The money I transferred was to my father's account, and whole Rs. 20 lakhs is in my father's account now, which is a regular Indian account. Now what are my options to get that money transferred to my account here in USA? What are tax and legal impacts in USA in bringing that money here?

This is a little complicated from FEMA ( foreign exchange law) perspective. It is important to know how the foreign inward remittance in to your father' account was termed. The banker should be approached to give a certificate that this was intended for purchase of property and you/father should seek permission from the banker for repatriation. This may have to go to the regional office of the RBI for approval as this can be viewed as a temporary loan transaction to your father. You may in case the banker is not aware of the procedures, take the help of a consultant in this field to take care of the procedures.

I hear that the amount of money that can be given as gift has recently been reduced.

1) I live in UK and would like to know the amount of gift in year that can be given without the recipient having to pay tax on it.

2) Is this limit for all people of all ages as long as the cheque/draft is made in their name?

1) Effective 1st Sept 2004 any sum received exceeding Rs 25000/- is subject to tax in the hands of the recipient.

2) Yes. The limit is available without any age limit.

I am 67 yrs. and my wife is 61 years of age having resident saving accounts and investments in shares, properties, mutual funds, govt. bonds etc. We both have PAN and regularly file our returns. Our children settled abroad want us to live with them which, in fact, we don't intend to. In case we do so and seeks that country's citizenship plus dual citizenship as overseas Indian citizens so that we can live in India as much time as we want, will it be mandatory for us to change our resident accounts into NRO accounts and will we be required to inform all the companies to change the status to non-resident and file our returns as NRIs. We will be often coming to India to stay in our house but don't know - may be sometimes less than six months in a year and sometimes more than six months in a year. Would appreciate your advising whether according to Indian tax laws, is it necessary to file our returns as NRI? Or can we continue filing as residents? Are we supposed to inform all cos. about our seeking foreign citizenship. Since we will be holding Indian citizenship also, can we continue showing us as Indian residents even if we live abroad more than 182 days in a year? Also, are the benefit of sections 88 and 80L available to a NRI?

Once you have gone abroad to live with your children and your stay in India is less than 182 days during the previous year you will be treated as a Non-resident. The return of Income will have to be filed as Non-resident. Citizenship status has nothing to do with the test of residence. You also will have to inform the companies about your change of status from resident to non-resident. The benefit of section 88 and 80L deductions are available to non-residents.

I purchased a house in India in 1994 for Rs 5 lakhs. Subsequently, we did construction and spent Rs 10 lakhs. Today, if I sell the property for Rs 15 lakhs, do I need to pay income tax? Please advice.

Since the sale value of Rs 15 lakhs is just equal to the cost of acquisition and cost of improvement on the basis of the date given there is no capital gains tax. Incidentally the cost of acquisition can be indexed based on the index factors notified in the law.

I am NRI for 46 years. My only income in India is through 1) bi-annual distribution of income from inherited ancestral salt pans from a Co-Op. Salt Society in Karnataka, 2) interest earned from FDs in NRO and NRE A/Cs in Maharashtra and 3) Dividends earned through MFs and a few shares in Maharashtra. All in the earnings are much less than Rs.50,000/- annually. I have been subject to deduction of 30% TDS and 10% SC. My questions are: i) Where do I have to apply for exemption from TDS and SC: Karnataka & / or Maharashtra? ii) Would I have to furnish proof to Indian Tax authorities of my tax liability in country of my residence? iii) Would I be subject to Capital Gains / I. Tax for redemption of Equity MFs which have far exceeded the lock-in-period of 3 years? iv) Can I claim retrospective refund of TDS and SC? v) Roughly how long does it take to obtain such a certificate from I.T. Authorities?

Is income derived from distribution by a Co-Op. Salt Society considered Agricultural income? Does the finance Act of 2004 have retrospective effect?

Since you are an NRI the exemption can be claimed or return can be filed in the NRI circle in any metro city. There is no need to furnish proof of tax liability in the other country since you are not availing any tax credits involving DTA. Redemption of equity-oriented fund, which is long term in nature, is exempt from tax by the finance Act of 2004. Retrospective claim of TDS is possible and the procedure would take about 2 years.

Income distributed from the coop society is not agricultural income but treated as income from other sources. Finance Act 2004 has only a prospective effect unless a specific proposal states that it has retrospective effect.

Currently, I am working in Mexico as a part of my job since the last 9 months and I have a salary account in India. My problem is I have just deposited Rs 175000 in my account through my friend. Is there any tax issue on this amount? I have used this money to invest in the stock market.

If you had deposited the salary earned in Mexico to you account in India directly there is no tax issue in India. But it is not clear why your friend has deposited it in your account. That being the case it can be treated as income in your hands by virtue of section 2(24) (xiii) of the Act.

If I transfer any funds from Dubai to India for my son's education is the amount taxable as per Indian Law?

Transfer of funds from Dubai to India does not involve any tax liability in India.

How does an NRI without an address in India obtain a PAN number? I need one to carry out financial transactions in India.

An NRI can apply in the designated NRI circle in any of the cities and get the PAN no even if he does not have an address in India.

Can you clarify whether India has a double-tax avoidance treaty with USA (as also with Europe or Japan) please)? I currently pay 30% tax deducted at source on dividends on my US equity stocks, which I am keen to minimize (I am an NRI).

India does have a DTA with the USA. The question is about minimizing tax liability, which can be answered only with specific facts and better routed through a consultant.

Is Dual Citizenship allowed? I am an UK Resident since last 5 years. I already have an Indian passport. My decision to apply for BRITISH Passport depends upon Dual Citizenship. Is it legally allowed now?

Though this is not a tax question we understand that dual citizenship is now being permitted. You are however advised to consult a Immigration specialist to get more details.

Suppose I buy a property in India when I am NRI. However in future if I become an UK citizen, what are the tax implications on my ownership?

The property in question has no tax relevance even if you become a UK citizen. If any income arises from letting out of the property it will be taxable in India.

Is there any capital gains tax on sale of shares in India, acquired by funds brought from overseas, for a NRI? For such capital gains made by an NRI, is he required to file a tax return with Income Tax Department?

Sale of listed shares in India attracts capital gains tax if short term in nature at 10%. If it is long term in nature capital gains is exempt from asst year 2005-2006. In case of an NRI you could opt to come under chapter XIIA of the Act where a flat 10% tax will apply for long-term capital gains. A return of income has to be filed with the Dept.

How can I claim refund of tax paid on interest in my NRO account if gross is lower than taxable amount?

Refund can be claimed by filing a proper return of income and claiming the TDS as refund.

As an NRI, I wish to help my aging parents to build a house, in their name. If I were to simply transfer the requisite funds to my NRE account and they use those funds towards the construction of a home with all property in their name, how does it affect their tax liability? Can these funds be considered gifts and if so, are they taxable?

There is no tax complication in the procedure outlined and there are no gift tax implications also.

What are the rules in regards to taxation when NRI sells property in India (Capital Gains Tax)?

Property held for more than 3 years will qualify as long-term asset, taxable @20%+surcharge and cess. The cost of acquisition can be indexed. Relief from tax is possible by investing the part or full consideration in specified bonds. Short-term gain is taxable at the slab rates. Repatriation is possible.

I have been in the UK for the past 16 months. I am on a student Visa and working with a company (which is a part of my course) I have a Rupee Checking account with Citibank. I wanted to transfer money to India. Will I be taxed?

The exact period of stay may become important to determine your residential status in India to ascertain if any part of the remuneration received would be taxable in India. This has to be checked for the relevant financial years April-March. However the mere repatriation of the funds will not create any tax liability in India.

I plan to move from the UK to India and live off savings. I have a UK passport and have lived in the UK for the last 20 years. Will the interest earned by my savings, which will be paid gross, be taxed in India?

For two tax assessment years post your return to India, you will have the status of a not ordinarily resident and not liable to tax on any income arising outside India. However, thereafter the interest would be taxable in India.

I want to open an NRI Rupee Checking Account with Citibank. Can you let me know of the tax matters related to this account like whether the money transferred to this account would be taxed or not? If so, what percentage would that be? What if I save the transferred amount as a deposit? Would the interest be charged (if so, what's the %age?)

Contributions in to an NRI a/c will not constitute taxable income in India. However the interest earned on the same is taxable. Deposits held with companies in India, among certain other assets specified, are treated preferentially and interest on the same will be subject to a flat rate of 20% tax + surcharge @8% on income exceeding Rs.8lakhs, as against the slab rate which taxes income above Rs 1.5lacs at 30% + surcharge as stated. There is an education cess of 2% applicable on the tax and SC. Since some of the banks are also companies the deposits will also qualify for the lower tax.

I was born in India and became a US Citizen in 1980. I have inherited 1/4 of a house in Delhi. As a US Citizen, can I own it legally in India? Should I start paying all the real estate taxes and other utilities?

Inherited assets can be held and sold with full repatriation. Taxes and charges are definitely to the account of the owner.

I have invested money in R B I bonds. Since the income on these bonds is totally tax free, I neither declared the investments nor the income on these bonds in my Income Tax returns so far. Is it in order? Since these bonds will be maturing shortly and I would need to reinvest them? Will it create any problem?

This is OK and should not pose any problem.

My wife has her own income, which has always been below taxable limit and therefore she never filed a return. Now, for any investment or transaction of more than Rs. 50,000/ a PAN no. is required. Is it advisable that she starts filing returns even when the exemption limit has gone up to Rs. 1 lakh and her income remains below this limit?

It would be good to have a PAN even if return-filing obligation does not arise when the income is below the taxable limit.

If revenue earned through e-commerce is deposited to a US bank account and wire transferred to Indian bank account, is there any tax liability? May I know if there is maximum limit in such transactions?

The determination of the tax position is dependent on the existence of a business presence through a permanent establishment. This would depend on the detailed facts and the actual business model/supply chain details. We recommend that a specific advice from a tax lawyer in US be taken. There is no tax on mere transfer of money from US bank a/c to Indian bank a/c and no limits on the same.

I am an Indian Student in the UK. I am pursuing a Masters Degree from London, I have doing a paid internship in the UK, hence have opened a Citibank NRI account to transfer money. Please tell me my TAX implications. I do not pay tax in India and have no income. I hear that there are some changes coming into force (New RBI regulations) Will I be taxed for the transfers I have already made supposing that I make no new transfers? I have been in the UK for 1.5 years at length.

No tax arises only on money transfers to India. Your tax status in India is dependent on the residential status.

Could you tell me what kind of an account I need to open in India for investing in mutual funds and their tax consequences?

You can open and NRE a/c or a FCNR a/c. The bank will advice on the relative benefits from money management perspective.

I am a Person of Indian Origin, lived abroad for almost 20 years, now back in India living in Uttaranchal State, receiving a disability pension from Switzerland. My queries are:

1. My pension is not taxed in Switzerland. The approx. rate of income tax in Switzerland was 5 to 8% on gross income. Now I will become a resident in India soon, what will be the tax rate that applies to me? Is there any separate form for PIOs, any separate rules and regulation for people receiving pension from abroad? Where do I have to file my return? My pension income per month is approx. Rs. 100000/-. My disability pension is paid by Swiss government (45%) and rest by my erstwhile employer (from Switzerland). What will be the Indian income tax rate for me? Can I get benefit of DTAA agreements? I am still Swiss Citizen holding Swiss Passport.

2. I want to apply for Indian Citizenship as Switzerland comes in the category of Dual Citizenship, where to apply or inquire about it. Kindly send me details and addresses of concerned authorities.

3. Is there any separate account where I can maintain my Foreign Currency, since I have only income in Foreign Currency? No other income in India.

1. Pension will not be taxed in India if it is paid by the Govt. of Switzerland. If not, (ie.) paid by non-govt. institution, it is taxable only in India and no tax will arise in Switzerland. Since the non-govt pension is taxable in India of approx. Rs 6,60,000, the normal schedule of tax rates will apply. For income exceeding 1.5 lakhs, the tax is Rs19,000+ 30% of the income exceeding Rs 1,50,000/-. Education cess of 2% on tax will apply. This is without considering any tax rebate as applicable to a senior citizen or any other relief that you may be entitled to. However, the DTAA with Switzerland helps to avoid tax on pension paid by a Government. Form 2E can be made use of by you.

2. This is coming in the purview of the Ministry of Home affairs. Contact your local immigration office in the State of Uttaranchal for guidance.

3. Resident Foreign Currency a/c is permitted. The bankers will open an account if you so desire.

What happens to the status of NRE a/c when one returns to India and continues operation of the same a/c. What are the tax implications on the same on the person's return to India?

It would be converted to resident foreign currency account. No tax implications on principal/accretions.

I am receiving remittance regularly through remit2india. Recently, I have obtained FIRC (Foreign Inward Remittance Certificate) from remit2india. Do I need to pay income tax while filing returns?

No, unless it is income for services rendered from India.

The PAN application form needs an address in India. Presently, I do not have one. How do I get around this requirement?

Any c/o address of relative or professional or P O Box will do.

An NRI has short-term capital gains from sale of shares Rs 45,000. STT has been deducted on the transactions. Can he avail of the basic exemption limit of Rs 50,000 or will the Rs 45,000 capital gain be taxed at 10%?

Basic exemption is available.

I am informed by ICICI Mutual Fund that it is necessary for NRIs also to quote their PAN. Is it correct? If so, how can I apply? I have gone through various websites and written to them but they themselves do not know and ask me to refer the website. My question is: the assessee representative who will lodge the application has to give his address or I have to give my overseas address? I am surprised even the authorities who issue PAN are not able to answer this query. Will the PAN be posted to me abroad where I am currently residing? Please give me the details as to how I should apply.

We understand that a local address is necessary. This can be a c/o address of a lawyer or accountant or any relative. You can try a PO Box No.

I have been sending money to my parents to support them as they don't have any other source of income. Does my father have to pay income tax for the money I am sending him from U.S?< I also sent money for paying my dad loans. Is this money taxable to my dad as well?

Remittance of money from U.S per se does not constitute income under the Income tax law in India. One has to see the definition of income contained in section 2(24) of the Act and then decide whether it constitutes income in the hands of the recipient. In this case the father has not earned any income in India for the receipt to be taxable in India. The son has to examine the law in the U.S however and pay the tax in U.S on his income earned there. As regards the repayment of the loan of the father the answer is the same. It does not constitute income in the hands of the father for the same reasons mentioned above. It would at best amount to gift but since there is presently no gift tax in India there is no tax liability on this score also

I gave the loan to my friend in India from my Citinri account. As he cannot repay my loan to my Citinri account, I have asked him to make the payments to my father in India. Will it have any implications on taxes or legal regulations etc?

It would be better to give the money to the your dad first; the loan can be given by your dad to the friend who can repay it in Indian Rupees. The act of giving the money to your dad doesn't give rise to any regulatory issues in India.

In case you have already sent the DD to your friend, he can encash the DD and transfer the money to your father and this can be directed by you specifically. Your father can later issue a cheque to make over the loan to your friend and specify the repayment terms.

What are the advantages and disadvantages of dual citizenship?

Normally, citizenship carries voting rights, and any other privileges that may be conferred under the constitution of the relevant country. For example, under the Constitution of India the right of freedom of speech is guaranteed only to a citizen. Certain countries may limit ownership property to citizens. In India, the Exchange Control regime is more favourable for citizens of India to own property in the country. If citizenship-based taxation system is followed, it may count as a disadvantage, like the US taxing their citizens even on income earned outside the said country.

I have some ESOP shares. If I vest some of them now and sell it. Do I need to pay Capital gains tax in India or Germany?

From the question, it is not clear whether the shares held are that of an Indian company or a German company. If the shares are that of a German company and sold there then there is no tax implication in India. However, the employee will have to reckon with the German tax laws and pay tax in Germany. If however the shares are that of the Indian company any sale thereof gives rise to capital gains in India. The gain will be computed taking into account the sale price and the exercise price of the ESOP. Attention is also drawn to the concessional tax treatment for NRIs in Chapter XII A of the Act where the employee can pay tax at 10% plus surcharge subject to certain conditions mentioned in the chapter. Even in this case, the tax laws in Germany and the DTA Agreements will have to be applied to arrive at any tax liablity in Germany also.

I moved from India to United states in July 2003 on L1 Visa(Compan transfer). When I will get my NRI status?

NRI status for tax purposes arises once the emigrant stays outside India on employment beyond 183 in a financial year.For the tax assessment year 2005-6(previous year 2003-4) you will be a NRI on crossing 182 days stipulation.

If I open a NRI account and transfer money to India then am I supposed to pay any income tax on that money?

Mere transfer of money to NRI a/c doesnt result in any tax liability.

I have few ESOP options, listed in Nasdaq. If I sell those shares in US, then I am paying 32% incometax in US. If I transfer that amount to India, then again am I supposed to pay any income tax on that amount in India.

If the ESOP grant was as per the Income tax approved scheme the liabulity to tax arises only on sale of the shares. If at the time of sale you are not resident in india for tax purposes and the shares are not of a Company registered in India no tax liability arises in India.

I had bought shares in 1992 of various companies as a resident Indian. In 1998, I moved to Dubai and since then I am an NRI. I heard that all stocks holdings above one year are exempt from any tax as per the Budget of this year. Please advise exact rules as to the treatment of my income from sale of such shares in this financial year.

The exemption referred to by you is only in respect of some 'specified' equity shares purchased between 1/3/03 and 1/3/04. Your case, obviously, does not fall under this.You will be subject to to tax at 20%+SC , with indexation or at 10%+SC without indexation. (SC refers to surcharge on tax @10% on the tax payable where the the total income exceeds INR 8,50,000).

I am a US Citizen of Indian Origin and have been in the US for the past 15 years. Currently my brother and myself are in the process of selling our apartment in Bombay.

a) I believe that the capital gains on the proceeds can be avoided by investing in SIDBI bonds for 3 years. Is this correct?

The capital gain arising from the sale of the Mumbai apartment (on the premise that the asset is long term in nature) will be completely exempt from capital gains tax if the entire capital gains are invested in SIDBI bonds within a period of six months from the date of transfer. If only a part of the gains are invested then the exemption will be worked out on a proportionate basis. This is spelt out in section 54EC of the Income Tax Act. It may be noted that though you are a US citizen, the gain or income arises in India and is taxable in India, subject, of course, to the exemptions provided in the section 54EC. SIDBI was notified is this section effective assessment year 2003-2004. Kindly also note this the investment has a lock in period of 3 years.

b) After 3 years of investment of Cap gains in SIDBI, are the proceeds repatriable to US in my case?

Repatriation of Indian assets or earnings is possible only in the case of non residents. In the case in question, repatriation is prima-facie possible. The only point to check is whether the flat in Mumbai is acquired out of inward remittance inheritance or legacy. If it is so, then the proceeds can be repatriated. In some cases, remittance is done by banks without RBI approval and in other cases it requires RBI approval.

I am an NRI. Age 64 years. Also my wife is NRI and 61 years old. I get rent about Rs. 6000 per month from Govt .Dept for my flat. Rent comes by cheque in my name and is credited in our joint account ( wife and myself). Also I get pension of Rs 6000 per month.

a) Can rent of flat be treated (in full or 50%) as income of my wife for tax purposes?

This is possible only if the investment had been made in like proportion.Otherwise it would be clubbed in your hands even if the wife receives the rent under the agreement with the tenant.

b) Can my wife file separate tax return for her income in India about Rs. 2000 per year on deposits?

If the investment can be established as made out of her income, separate tax return is possible. Otherwise, it would be clubbed in your hands.

c) Am I liable to pay tax considering all deductions on pay and rent.I learnt that deduction for rent is 30% and salary also 30,000 or 1/3 of income. Thus my total income for tax after deduction is about Rs 96000. Less deduction for senior citizens. I heard that senior citizens are exempt upto income of 100,000.

Rent is 30% deduction as stated by you. Standard deduction on salary is 40%, subject to a ceiling of Rs30000. The rebate for senior citizen is available only if the person is 65 years or more.

I am an NRI and once I return to India under a resident do I have to declare what foreign currency I have outside India when I come back? What tax do I have to pay ? The money will be mostly in long-term deposit.

Section 6(4) of FEMA specifically provides that a person resident in India may hold, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security, or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India. There are no tax implications on the capital; however the income theron will be subject to tax in terms of the 'residency' and the exemption under the relevant double taxation treaty.

I graduated from a US university in June 2003 and returned to India immediately. I had a little savings. What is the best way to transfer those funds to my Indian Bank account? What are the tax issues I have to deal with when I transfer these funds?

The savings can be brought in through normal banking channel and would be converted at the appropriate rate. No tax implications arise in India on repatriation. It is also possible to hold in foreign exchange as currently permitted under the exchange regulations.

I am in UK on 5 years work permit w.e.f. 26 Nov 2003. I was here since April 2003 on business trip as inter-company tranfer from India to UK. My concern here is that if I transfer money to India to my relatives, is that taxable? And do I still have to file return when I am here and have no plans to come back shortly?

Mere transfer of funds to India does not constitute income in India. Further, there is also no gift tax in force. Your income in UK is liable to be taxed in UK in accordance with the tax laws in force there. You will have to file a return of income in India, in respect of any income earned in India.

I am an NRI employed by an International organisation. Part of my salary is paid in India in Indian Rupees, out of the funds held by this organisation in India. Is this income taxable in India now, or when I become resident on my return to India ?

This income is taxable in India since it is earned in India. This is irrespective whether you are a non resident or a resident since the source of the income is in India. You are entitled to the deductions and reliefs available in the Act.

I am an NRI employed by an International organisation. Part of my salary is paid in India in Indian Rupees, out of the funds held by this organisation in India. Is this income taxable in India, now or when I become resident on my return to India?

This income is taxable in India since it is earned in India. This is irrespective whether you are a non-resident or a resident since the source of the income is in India. You are entitled to the deductions and reliefs available in the Act.

I am staying in abroad for 120days and returning to India. Can I bring my earned USD with me as cash? Can I open RFC account and put it there? Is there any tax on this in India?

From the facts stated, it would appear that you are a resident in India during the period of stay in US and hence your earnings in US will be subject to tax in India. However the remittance of the savings will not be subject to any tax. The money can be retained as forex or converted into INR as you choose. 

I credited the sale proceeds of repatriable domestic mutual fund (capital loss) to NRE account and resident shares sale proceeds (capital gain) to NRO account. Whether the capital loss of mutual fund proceeds can be adjusted to capital gain of resident shares?

Adjustment is possible subject to the restriction that long-term capital loss can be adjusted only against long-term capital gains.

I have been a NRI, prior to and including the financial year 2002-2003. In the financial year, 2003-2004, I am expected to be  in  India,  for  about  170 days.  The rest  of  the  days,  I  am expected  to be outside  India,  searching  for  a job, on  visit  visas, especially  in the  middle  east.  Please let me know, if  I  am considered  to be  a resident  for  financial year 2003-2004, for  the purposes of  Income  tax.  Also, is my overseas investment income taxable?

As per section 6(1) of the Income Tax Act you will be a resident in India if and only if your physical stay in India during the financial year 2003-2004 is 182 days or more. Since you expected stay is not likely to exceed 170 days you will continue to be treated as a non resident for tax purposes and consequently you overseas income whatever be the source will not be subject to tax in India.

I am NRI and like to build up asset in my wife's name to reduce tax after we return to India next year. If I invest in NSC in my minor 16 year old daughter's name, after 18 years of age if she gives the certificate as gift to her mother (my wife) the future income will be clubbed with me or my wife can show as her own income? Whether the transaction is permitted as per law?

The provision on clubbing of income get attracted whether the assets giving rise to income were transferred directly or indirectly and hence there is significant chances of the tax authorities invoking the clubbing provision in the given case.

I am a software engineer working in Tokyo for the past 4 months. My period of stay here is most likely to be about 1 yr. I want to know what is the best way to transfer my savings earned in Japan back to India. I have been paying my tax here. Will my savings be taxable once i deposit the sum in any Indian bank?

Tax would not arise merely on account of transfer of money into India. However, you would need to check your residential status for the tax year(s) concerned to determine any tax liability.

a) Do we need RBI permission to seek repatriation of rupees into dollars for sale proceeds of Indian property?

No, but only if the repatriation of sale proceeds of Indian Property, is complying with the conditions set out in January 13, 2003 circular. For these conditions, you may approach banker remitting such sale proceeds.

b) Does the $1 million USD per year permission now mean that you still need to get permission from RBI to repatriate your sale proceeds if they are $100,000 to $1 million per year?

No. If the remitter strictly complies with the requirements and conditions of January 13, 2003 circular.

I am an NRI and would like to invest in 8% savings bond. What would be the best way to invest in this? What are the tax implications upon maturity?

The best option is the 6.5% tax-free RBI Bonds. Some of these bonds are not available to NRIs.  You will have to select to the bonds accordingly and then invest. The 8% interest bearing bonds are taxable and hence may not be attractive. The proceeds on maturity constitutes return on principal or capital and is hence not taxable in the hands of the recipient.

We both husband and wife are NRI for 12 years. We would like to build asset in wife's name who is a housewife, to reduce the tax burden after we return back to India.

Will the investments made in NRE deposits or Indian mutual funds in wife's name as first name be considered as her own income for future income tax purposes? What are the options available and precautions to be taken to avoid clubbing of incomes? The Income of income from gifted asset is not taxable with the donor. Whether this rule is applicable for NRE deposits and dividends in NRI investment in mutual funds also (now TDS for dividend). i.e. Accrued interest part of the gifted NRE deposits will be considered as wife's asset for future income tax payment?

The provision on clubbing of income get attracted whether the assets giving rise to income were transferred directly or indirectly and hence there is significant chances of the tax authorities invoking the clubbing provision in the given case. One may build assets abroad in the name of the spouse but the income arising thereon will get clubbed in the hands of the transferor. The investments standing in the first name investor or depositor in the person liable to pay income tax on the income arising thereon.

I have been in Saudi Arabia since June 2003. I am getting the salary in India as well as the allowance here in Saudi Arabia from the same company. Will my savings in Saudi Arabia be taxable in India when I return?

Prima facie the savings in Saudi Arabia is not liable to tax in India. From the query the nature of allowances received in Saudi is not clear. The taxability of the allowances in India will have to be examined with reference to the contractual arrangement with the employer and the residence of the assessee.  

As an NRI, would there be tax implications on a savings account that I wish to initiate in India?

The interest income is taxable, subject to limited exemption under section 80L (Rs12000) together with other eligible items if any. The final liability to tax would depend upon your slab, if you have other taxable sources in India.

I have returned from the Gulf after 16 years in April 2003. I would like to know if it is required to declare all my NRI assets (FDs, Bonds etc.) At present I do not fall in any taxable bracket.

There is no requirement to declare all the foreign assets.

I have been living in Denmark for the past 12 years and would like to live in India for 6 months and 6 months in Denmark I have an Indian passport. Can you let me know if I have to pay any tax of my income in Denmark and India? Can i bring a car and what are the duties on it?

If you happen to be in India for a period exceeding 60 days in a financial year and had stayed, cumulatively, for more than 365 days in the four preceding years, you will become a resident, but not ordinarily a resident in India. You can at best maintain this status for two years and then would become a normal resident and the worldwide income will be subject to tax in India. If in any year you exceed 182 days stay in India, and also have not been a non-resident for more than 9 out of 10 preceding years, you would become resident in India. These are alternative conditions and if you get covered by one of them you would be exposed tax on all income. The position with regard to Denmark should be ascertained locally there.

The car can be brought in to India after payment of applicable customs duties. The procedure for import would be assisted by a customs clearing agent.

I have seen the new definition of "RNOR" status. Will there be any tax benefit if I have UK citizenship, but come back to work in India?

Citizenship is unlikely to be a criterion in deciding tax residency either in India or UK. Once the RNOR status is crossed and you become a resident the entire worldwide income will be subject to tax in India.

a)I am planning to move to India permanently.  I am planning to put some amount of money in rupee account and live off the interest.  What are the tax implications?

The interest income would be subject to tax in India, depending on the tax bracket you would fall under.

b) What about the principal amount I bring in?  I already paid taxes on that in US.  I am assuming that the principal will not be taxed. Am I correct?  What about the amount sitting in my retirement?  If I draw now prematurely I have to pay taxes here in US.  Will that amount be taxed in India?

No tax would arise on the principal in India. Pension withdrawals pertaining to past services in the US won't be taxed in India.

If a NRI transfers fund to his parents’ savings a/c in India, will it be taxable?

No tax would arise in India on any such transfer.

I am Indian citizen currently working in Germany with resident permit for 2 years. I have SB account in India and I would like to transfer money from my account in Germany to my account in India. Is this amount taxable? Am I considered as a NRI?

No tax would arise on remitting money from Germany to India. To qualify as NRI you should have resided outside India for more than 182 days in the year preceding the year when this determination has to be made.

I am an NRI. Is the dividend income from stocks taxable? If so, could you please send me details of percentage of tax and if there are any slabs?

The dividends received from shares in India are tax free in the hands of the recipient.

I want to make an investment in the stock market & want to purchase the house in India. What will be the tax implication for me as I am staying in London & doing job here. Please let me know how can I save more tax by investing regularly i.e. every month in the stock, mutual funds etc.

The income, both periodical and onetime on disposal of the asset is subject to tax. The rate of tax could differ depending upon the nature of the income. Capital gains on Investments in specified shares made between 1-3-2003 and 1-3-2004, and if held for at least one year would be exempt from tax. There is no tax rebate/concession for the investments made in stocks or in mutual funds.

How much tax will I be paying for importing a 1-year-old Benz from UK? I have lived in UK for 6 years and will be moving permanently to India. Will i have to pay customs duty even if it is a transfer of residence? If so, how much?

Under the current tariff structure motorcar import attract a basic customs duty of 105% advalorem, additional duty of 24% (levied on the value inclusive of value of the car and the basic duty and special additional duty of 4% on value). It may approximately work out to about 165% of the value of the car.

I am an NRI based in Malaysia. I want to invest in Indian Mutual Funds/Stocks from my NRO account.  I want to know the tax implications for 1.  Dividend arising out of Mutual Funds/shares 2.  Short Term/Long-Term Capital Gains arising out of sale of Mutual Funds/Shares Will there be any TDS on Dividends/Capital Gains at the bank side/or in the hands of Fund house?  

Dividend arising from share and Units of mutual fund are tax-free. Sale of shares and units beyond 12 months holding period gives rise to long term capital gains at 10% without indexation and 20% with indexation. This has to be increased by surcharge of 5%. There is no TDS on dividends from the bank side and the question of TDS on capital gains does not arise.

If I transfer around 30000 dollars to purchase a house in India, will there be any tax liabilities that I should worry about? Do I have to pay any withholding tax? I am a Greencard holder in US.

The transfer of 30,000 dollars to India, per se, has no tax implications. The amount can be invested in a house property without any tax issue. Needless to add, if the property is let out on rent, the rental income is liable for income tax.

Is there a way to convert the money accumulated in 401(K) in US to some pension plan in India without having to pay the penalty?

Such a step would not be possible. There are no Tax-approved pension schemes for individuals in India, though certain schemes provide limited tax credit on investments made.

How much Money I can send to family/friends in India in one year? I heard there is a limit of 10,000 dollars per year.

There is no limit on sending money to family. The limit mentioned by you is actually the physical cash that can be brought in on a person visiting India.

I took a home loan when I was in India. I then migrated to Canada about a year ago, though I still am an NRI with Indian passport. Can I pay my home loan from Canada by sending money to my parents in India on a monthly basis?

The repayment of instalments of loan from Canada to India has no tax liability in India.

Is foreign pension of PIOs on long-term visas taxed, and is the same used in computing possible taxable Indian source income? If an exemption is taken under Indo-US DTAA because of US citizenship for foreign income, does one have to file a tax return to claim it, assuming the only Indian income is NRI bank account interest?  Is there any applicable interest exemption?

The nature of foreign pension has to be examined to decide whether it is taxable in India. If it emanates by virtue of employment outside India it is not taxable in India. Then there is no need to file a return of income in India since the other source of income is only interest on NRI account, which is any way tax-free here.

My husband, two children and I intend to migrate to Canada under the Investment Category. As such, I shall now dispose of all my fixed and other assets immediately after I receive the confirmation from the Canadian Authorities. Please inform me

(a) How much of these liquid assets am I allowed to transfer to the new country?

Currently, the foreign exchange regulations do not allow Indian residents to transfer fund out beyond a reasonable limit for living purposes. I would reckon that permission may be granted up to USD 100,000. The Authorised dealers like Citibank etc can help in this.

(b). What procedures are required to be done by me with respect to all the RBI and Income Tax Acts to get these funds transferred?

The authorised dealer will take care of any RBI requirement. You will need a tax clearance certificate under section 230 of the income tax Act for which necessary application be made to the concerned tax officer in your city.

(c). Which Money exchange agency can help me transfer these funds to my account, which I shall be opening in the new country?

Already covered above.

I have been working in UK for last 9 years and have got British passport. Now I am getting a job offer where by I can work from India for a company based in UK having all their operations in UK. Nothing to do with India but flexibility to work from India over the Internet. I will pay tax in UK for every penny that I will earn in UK.

    a) Do I have to pay tax in India too on that income? If yes, then I will be paying 41% in UK and 35% in India? What can I do to avoid paying tax twice on the same money that I earn? I will be allowed to work from India 365 days.

    Once you come to India and physically reside here for over 182 days in a year you will be treated as a resident in India for tax purposes and your UK income will get taxed in India at the rates applicable here. You will be entitled to double taxation relief in respect of the tax suffered on the same income, which is paid in UK. The law and the rules prescribe the procedure to avail of the relief. You may also check the tax position of U.K just to make sure.

    b) Is it easy to avail double taxation relief in India? Do we have to pay the tax first and then apply for the refund to get double tax benefit relief?

    The primary liability in this case will arise in India and the tax paid in India can be set off in the UK and you can get in touch with the authorities there to ascertain the manner in which the credit can be availed.

I have been hired by a US Company but I am unable to go there immediately due to the H1B Visa Cap being reached in the US. Now I expect to get Visa only in October. Till then, the US Company wants me to operate from India at US$ salary. Can I open a NRI account & ask them to transfer funds into this account? Should my tax be deducted in the US and I pay tax only on the interest component I earn in India (or) should I ask the Company to give me the full salary in US$ & pay IT here? First of all can I open the NRI account just based on the job that I am getting or will I qualify for an account of this nature only after I get entry into the US?

You can open a RFC (resident foreign currency) a/c and get the salary in forex. It can also be received in INR. This would be taxable in India only and not in the US.

I have been residing in Dubai for the past one year. During this period, I had been to India once. Now, I have opened a NRE a/c with Citibank. If I deposit some money in that account, is this income taxable in India?

Since you are a non-resident any income earned from NRE Account with a Scheduled bank is exempt as per section 10(15)(iv) (fa) of the Income tax act.

I am an NRI in Saudi Arabia. Is it possible for me to invest in RBI Relief Bonds. In my opinion, the non-eligibility of NRIs only implies that on maturity both principal and interest shall not be freely eligible for repatriation like in the NRE account. Is my understanding correct?

NRI is not allowed under the bond issue conditions to invest in RBI relief bonds. It is not a matter of repatriation only.

My mother was born in India and held Indian citizenship. She now holds Australian Citizenship. I was born in Sri Lanka and after holding Sri Lankan citizenship now hold Australian citizenship. I was educated in India and have many cousins and aunts and uncles living in India whom I visit every year. In view of my mother's original Indian citizenship, am I entitled to be considered an NRI for the purposes of investments?

The concept of NRI in the Income Tax Act has nothing to do with citizenship or for that matter place of birth of the individual or his parents. It is limited to the no of days stay in India during the relevant previous year. If this exceeds 182 days in a year you will be treated as a resident in India for that year.

Can I invest in Indian Postal Recurring deposits? I am an NRI living in US. Also, are those tax- free until maturity? Are there any limits on amount I can invest in RD's?

NRIs cannot invest in Indian postal recurring deposits in India.

I am living in USA since last 3.5 yrs. I want to start buying/selling stocks in both Primary & secondary market in India. What are the tax-related issues? If I have any tax on gains, do I need to personally file taxes in India?

Long-term capital gains (asset held for more than 12months) are taxed at 10%. Short-term capital gains are taxed at normal rates, maximum being 30% for income exceeding INR 150000. If the total income exceeds INR 850000, then a surcharge on tax of 10% would apply. Exemption from tax for BSE 500 shares held for more than 12 months has expired as of 1st March 2004 and may be revived subsequently. If the activity of purchase and sale gets classified as business then the concessional rates as applicable to LT assets won't apply. Filing of return of income is waived if all the taxes on income are deducted at source.

Citibank withholds 30% of the interest income for tax purposes in the NRO accounts. I have the following questions:

    a) Are all banks (authorized dealers as well as other banks) in India required to withhold same percentage of interest income from the bank accounts for tax purposes?

    The withholding requirements are the same for all payers of interest.

    b) Is there an amount of interest income below which no income tax is paid?

    No threshold limit in respect of a non-resident. Withholding arises on all payments.

    c) Is it cumbersome to get a refund if interest income falls below the limit?

    If you are not liable to tax due to any reason, you can obtain a certificate from the tax office, based on which not tax will be withheld. Otherwise, a tax return should be filed for claiming the refund. The procedure is quite simple.

I work in Indonesia and pay my taxes there. Do I have to pay any taxes in India?

If you are an NRI there is no requirement of paying taxes in India since your contract of employment and origination of income is in Indonesia.

I sold a few shares from my holding that I bought through NRI fund. My broker deducted the TDS on it U/s 195 of IT. My banker is asking for Annexure A U/S 195 as per RBI guidelines.
Question: Who will submit this annexure? Is it I, who is getting money? Or is it the broker who has deducted TDS and making payment to me?

The annexure has to be provided by the broker who has taken the responsibility to deduct tax at source and is also arranging the repatriation of the proceeds.

I am investing in shares through the online brokerage account with HDFC Sec. I would like to know if it is essential for me to file a return?

The mere process of investment does not require filing a return of income. You must have income liable to tax and above the minimum threshold limit to file a return of income.

I left India on the 29th Oct. 2003 on a H1 work visa for the US.

  1. Assuming my tentative arrival date back to India is the 30th June 04, which account (NRI, NRO, FCNR, etc) I should open and deposit my US allowances so that they would be tax-free? Please note that I would like to avoid paying tax on both the amount deposited as well as the interest earned.

  2. If the arrival date back to India changes would there still be any change in the type of account I should open?

    The deposit of money does not create any tax liability in India. However , prima facie, the dates mentioned implies that you will be a resident in India for tax purposes for both the financial years involved and would be liable to tax in India.

    You can choose any of the accounts mentioned, as they are indifferent from tax point of view. However the other features vary which the banker would advice you.

I have been in Europe for the last 3.8 years and am planning to return to India for good in April.

Am I eligible for RNOR status? Does the so-called 'Finance Act 2003' make me eligible? Would the funds I bring to India to open an RFC (Resident Foreign Currency) Account be taxed?

You will not qualify as RNOR unless you have been in India for less than 729 days in the previous seven financial years. No taxes arise on bringing in the money into India on the facts stated by you.

I am US citizen with a PIO card. My company likes to send me to India on deputation to TCS to set up a offshore project with TCS consultants for couple of years. My company would pay me in US in dollars.I will be paying US taxes. Do my company or I need to pay any taxes to Indian government?

Since you will be resident in India for tax purposes the income earned in dollars will be subject to tax in India. The tax paid in India can however be set off against the taxes paid in the U.S.

When a Non-Resident Indian visits India on a short visit is he allowed to avail the Basic Travel quota of US $?

Basic Travel Quota is intended for residents intending to travel abroad for business or other purposes.

I'm a NRI currently living in USA. I'm working here and my wife is a house wife with no income. I get some component of my salary in India. For all the salary I get here and India, I have paid tax in USA.

  1. Can I claim rebate on my Indian salary as I have already paid tax on that in the USA?

    If the salary is paid for the services rendered in India, then though you are an NRI, it is taxable in India. You can claim rebate in respect of the taxes paid at India in the US.

  2. My wife has taken housing loan in India. That house is currently locked with no one occupying it. Can we file a joint tax return in India and claim tax rebate for the housing loan? This year my wife has no income.

    There is no provision in the Indian law to file a joint return of income. Anyway the value of self - occupied house property for tax purposes has to be taken as nil.

I want to decide on exercising my stock options from my company. I will be leaving US shortly to settle in India. I would like to know what are the tax implications in India, during the time I am holding the stocks and when I sell them off.

If the stock is sold and taxable gains arise subsequent to your becoming ordinarily resident in India ,taxability would arise in India. Typically you will become ordinarily resident in India upon staying in India beyond two tax years.

I am a NRI and have money coming out of sale of our house in Chennai, which i jointly own with my Mom & sisters. I am wondering will there be any tax need to be paid if the total sale amount we receive (approx. about 12-14 lakhs) is deposited in my NRO account? Also will there be any tax to be paid (or) any RBI queries if it is deposited directly in my mother's a/c (who is not NRI) in India? Are there any implications of doing this? How much would be the tax % applied on the capital gain if it were to be deposited only in my mother's a/c?

Tax will arise as capital gains on your share, subject to applicable exemptions etc., the money is also repatriable under current RBI guidelines. Depositing in your mother's a/c should not pose any problem; however tax arises as stated above.

Tax on capital gains on long term assets is 20% and short term cases are subject to tax at the normal rates ,maximum being 30% on income exceeding Rs.1,50,000. A surcharge of 10% on tax is applicable for income exceeding Rs.8,50,000.

I am in UK on deputation since Sept 2002. The company pays me salary in India and allowances in UK. I have been to India 4 times during the period from Sept 2002 to April 2004 but the duration of stay in India was not more than 15 days everytime. Now I want to know if I transfer the money to Indian NRI account do I have to pay tax on the transferred money.

No taxes would arise on mere transfer of money to NRI a/c.

Can NRI investment in Public Provident Fund (PPF)or NSC or RBI Relief Bonds?

NRI cannot invest in the items mentioned.

I am an American citizen of Indian origin. I am retired and plan to spend over six months a year in India.

My only income would be Social Security income and withdrawals from my IRA. Tax returns have to be filed for these in USA, but there may be minimal tax due here.

Will these be still taxable in India? If yes, how will the tax paid in USA be deducted from the tax due in India? What happens if returns are filed in US and no tax is due? Can I maintain my IRA and bank accounts in US? How and where can I get detailed information on this topic?

The moment you stay beyond 6 months in India you run the risk of being treated as a resident in India for tax purposes. This will expose you U.S income to tax in India. You will have to pay the taxes in India and and then claim the set off in the US.

Last year when I visited India, I filed returns for refund of TDS on my NRO a/c from 1997 onwards. Please let me know my chances of getting the refunds for the excess tax deducted for these past years. Also please advice on how I can track/follow-up with the dept on this matter

Presently the only way to follow up this is to meet the concerned officer with whom the return has been filed the pursue the refund. We do not have a online system of tracking such matters.

What is the tax payable for LT gains on mutual fund units? TDS has been deducted @20%+ for my mutual fund units. Can I get refund for any excess tax deducted in this regard if I submit returns?

The tax on long-term capital gain is 10% plus surcharge without indexation. You can file a return here and get any excess TDS refunded.

I have been in US for the last 6.5 years and have been in India during that period only on month long vacations totaling to 5 months. I have come back for about a year to finish some family work. Since I cannot be away from my work for that long, I am working from here for my US company as if I was there. My salary is also being deposited in to my US account. So essentially I am not being paid at all in INR. What sort of tax liability I have and what do I have to do to fix it? I will be paying my taxes at the end of the US year 2004. Please help.

Stay in India in a financial year exceeding 183days will make the person a tax resident and salary earned for services rendered from here would be taxable In India, though paid abroad in USD. However tax credit should be possible in US if the same income is also subject to tax there.

I'm planning to go back to India in June 2004 from US after 7 years (for good). Could you please give me some pointers about how should I transfer/invest my savings, what kind of bank a/c (not paying unnecessary tax) etc.? Could you please suggest any specialist advisor for this? Any reliable firm?

You have a choice of holding the money either overseas or in India. In India the amount can be held in foreign exchange or in Indian currency. This would depend upon your perception on exchange rate fluctuation as well as the investment opportunity in India vs Overseas. From tax angle income earned by you outside India will not be taxable in India till you become an "ordinary resident" under the tax law. This will happen after the lapse of two years of residence or 730 days of stay in India. On investment opportunities, it would be good to consult a specialist advisor.

Some of the Banks like HSBC, CITI,HDFC and IDBI have services for wealth management. Many private CA firms offer this to thier clients. Bajaj Capital and India Infoline can also be approached. Kindly evaluate properly before selecting any agency.

I am going to receive a dealer's commission from my foreign principal. Could you please explain whether is income is taxable? If so please provide me the rate of Tax applicable.

The commission is taxable in India as business income. It appears that you are a sole proprietor and the tax rate will be as applicale to individuals on the slab rate basis the minimum being 10% and the maximum being 30% plus surcharge of 10% on the tax where the income exceeds 850000/-.

I am in the process of having my ancestral home title deeds changed into my name. I was born in Goa and now have a British passport and my parents come from Goa. What is my standing with tax?

Transfer of title deeds perse does not have any tax implications more since there is no gift tax in vogue. You may have to transfer the status of the property from HUF status to INDIVIDUAL status for tax returns if any income arises out of the property in question.

I have a large some of money in NRI account earning about 3.5 %. Is there any way I can invest elsewhere fetching more return?

This would require an Investment counsellor for advice; by and large, in today's context, one can get a yield of 6-7% in various instruments.

Is PAN a requirement for NRI? Last time when I filed the returns for refunds, no PAN was given. Will the returns be processed in this case?

PAN is mandatory for any person who is to file a return of income and who is assessable under the Income tax Act. This is contained in section 139A of the Act more so where refund is claimed.

I wish to give my brother in India a loan to develop his property. What are the Income Tax rules applicable to him and me in India?

Mere granting of the loan and repayment thereof does not have any tax implications. Any income arising out of the property in question is to be offered to tax as income from house property.

I am an Indian citizen and soon to acquire British citizenship. With dual citizenship still not approved I guess I will have to surrender my Indian passport and then apply for PIO card. With this please advise what will be my status in relation to my bank accounts and taxation in India if I am working in India?

The change of citizenship will not have any impact on the bank a/c status nor the taxation in India.

I have been abroad for the past 6 years, out of which 6 months were spent in India.  Could you please let me know will I be considered as NRI or not?

The tax residence in India will depend on the actual number of days stayed in the country during the previous year.

Is tax applicable on interest earned annually for NRI account and if so how much?

Presently, interest on foreign currency a/c with scheduled banks is exempt from tax.

Is there any with holding tax on investment in Government T. bills which has maximum maturity of 1 year and does not pay any interest?

The withholding requirements depend on whether the recipient is a non-resident. Any payment to a non resident which has income component has to be subject to withholding of tax at source.

After settling in India, what will happen to my retirement accounts in USA? If I withdraw from it, I have to pay tax in the US. Do I have to pay tax in India?

No tax will arise in India on the past income earned outside India.

I was in Dubai for the past 12years and had deposits, shares and bonds with Citinri. Now for the last one year I am in USA. And will be in USA for a couple more years. Do i have to bring all my deposits to USA? If so, will it be taxable? All my transactions are with Dubai address only. Can I change it to my USA address or is it safe to keep it in Dubai itself? Now I have a resident visa only for USA and not for Dubai.

I am assuming that the deposits, shares and bonds with Citinri are the deposits, shares and bonds in Indian company / firms. As a non-resident you are entitled as per law, to continue to hold, own these deposits, shares and bonds, which you had invested while you were a resident. The intimation of address depends on the facts of your place of residence. In case you are going to be in US only temporarily and your Dubai address is the permanent address there is no problem in continuing Dubai address. It is assumed that all communications from Dubai will duly received and responded, if need be. The interest/dividends flowing out of the investments are taxable in the U.S.A as per the taxation laws of that country.

I earn income from investments made in Rs when I was in India. Of course, this income is taxed at source as per the prevailing IT regulations. I do not have any other income in India. I would request you to advise whether I have to file my income tax return? If so, please advise how do I go about it? Which is the correct IT form No.? Is it available on the web? Can I lodge my IT return through Internet?

If the investments were effected out of convertible foreign exchange, exemption from filing the return is available. However, from the facts stated it appears these investments were done in rupee funds. Return has to be filed if the total income exceeds the threshold limit of Rs50,000. Return form is available online on many personal finance portals as well as the website of Finance ministry. Online filing has to be followed up with hard copy of the tax return.

I am on H1B visa in USA. If I open an NRI Account and transfer my money to that account, will I have to pay tax on the money that I transfer?

No tax will arise in India only for the reason that amount is remitted from US in to a bank account in India.

I am working is US. If I open an NRI account and deposit money in US (in $), will this deposited amount be considered for tax?

Mere deposit of money in the US in NRI account is not eligible to tax in India.

I live in United States for past 6 years. I have a NRI & NRO account.  2 years back, I purchased a flat in Bombay for 27 lakhs.  The amount was completely funded by my income in the US via  NRI account.  This year I sold my flat (with no profit) and the money received was deposited to my NRO account.  I then purchased another flat for 20 lakhs (funded by my money in NRO account).  The remaining is the balance in my NRO account (7 lakhs), which i may use it for my dependent’s expenses in India.  My question is: Am I liable to pay any taxes to the government in this case?

The sale of the flat for 27 lakhs is liable to capital gains tax in India. It is not clear how you say there is no profit on the sale.In any case since you have reinvested the proceeds in another flat in India you can claim exemption under section 54 of the Income tax act. The utilisation of the balance money to defray medical expenses has no tax implications.

I am a PIO living and working in the U.S. year-round.  I plan to buy and sell property in India for investment purposes.  What are the tax implications in India on the capital gains from the sale of properties?

As regards PIO purchase and sale of property in India is liable to capital gains tax. In the case of long-term capital gains the rate of tax is 20% plus surcharge. There is scope to pay only 10% tax plus surcharge applicable to NRIs subject to certain conditions. In the case of short-term capital gains the tax rate is as per the slab rates with the maximum marginal rate being 30%.

I came to Malaysia on 2nd January 2004 on Employment Pass for 1 year, my concern is on Income Tax for three months ( Jan, Feb & March ). As a resident, this income is taxable in India, but if Income Tax is paid in Malaysia, it need not be paid again in India (double treaty); but in Malaysia, the financial year is from January to December, so I will be filing the Income Tax (in Malaysia ) in January 2005 only. Please advice me in which assessment year I have to show this foreign income? Will be part of assessment year 2004 or 2005?

The income received in Malaysia will also be taxable in India and credit of tax paid in Malaysia will be admissible.

Subsequent to the recent Budget 04 NRI deposits are going to be taxed. Will this tax on interest apply to fresh deposits put in from Sept 04 or to already existing ones? What will be the tax %? Is it applicable to NRE deposits and FCNRs?

Any interest earned on or after 1/09/2004 in NRE account will be taxable in India at the slab rate of 10/20/30% as the case applicable to Individuals. This is the position even for the existing deposits.

I am retired from Indian govt.service and am getting pension. I wish to become a US citizen. Will it affect my status in any way? Will the PIO card keep the status alive? Can I get the Indian pension till my death?

Indian pension may not stop on your becoming US citizen.

I was in US from Nov-2003 to Mar 2004. I was on H1-B visa. If I open an NRI in any Indian bank and transfer my money from US to India to that bank account (I have already paid my tax in US for the US earned income) should I need to pay tax for the US-earned income, which is there in my NRI account? As I read somewhere that I spend 182 days in a financial out of India then only I will be considered NRI and won't have to pay tax for the US-earned income. Please guide me that do I need to show my NRI account while filing the tax returns. Will I have to pay tax on my US earned income in India or not?

Based on the information given, tax may apply in India since NRI status will apply only if more than 182 days spent outside India.

My son has opened a Citibank NRI account in Bangalore from where I withdraw money in emergencies. He is paid interest in Dollars and he pays tax here in USA on this interest, which is intimated to him and the IRS (IT dept) of USA. Will he still have to pay tax in India as per the new budget? I thought there was a double taxation avoidance treat existing between India and USA.

The interest on the NRI account will be taxable in India subject to the double taxation agreement setoff in respect of the taxes paid in the U.S. As per the double taxation agreement, the taxes paid in India can be set off against the taxes payable in the USA.

How does the recent 2% tax on NRI deposits effect me as an NRI savings account holder with Citibank?

The 2% cess is on the tax payable in the interest on the NRI account.

I have returned to India on Apr 12, 2002. However I hold an FCNR account opened on 28 Mar 2002 and 02 Apr 2002. Could you tell me about the tax implications that I face? Will I have to pay a flat 20 per cent on the interest earned?

You can avail of the concessional rate of tax of 20% under Chapter XII A of the Act if the account relates to and asset created out of convertible foreign exchange. You will have to ascertain the source of the FCNR Account before availing of this facility of 20% tax.

As there is a proposal under consideration to impose I.Tax on the interest earned by NRI Deposits i.e FCNR,NRE, A/C's, what is your advice? Whether one should open a FCNR (NRI A/C) in GBP English Pound? Could I.TAx be charged back dated on A/C's opened in July2004?

The income earned after 1.9.2004 in respect of NRE Account will be taxable in the slab rates of 10/20/30% as the case may be. This applies to existing deposits also.

I am Person of Indian Origin; now, I have a UK passport. I work for a UK company. I have been an NRI for last 9 years. My company has given me a choice that I can work from India whenever I want. I want to spend 182 days working out of India for the UK company. I will get paid after UK tax deduction (Tax paid Salary) as if I am working in UK all the time. What will be my tax liabilities in India, if any? Let us say I earn 10,000 pounds in UK and pay 3,000 pounds as tax. I do not get any payment from my UK company in India. Would I have to pay full India tax or the differential of the tax (as tax in India is higher than UK)? Would I be able to get refund of this tax in UK?

When you operate out of India and work for the UK company, the compensation relatable to the work in India and paid in pounds will be taxable in India. You may avail setoff of the Indian tax paid in the tax assessment of UK. You will have to pay the full India tax and get this as a set off or refund in the U.K.

The Indian Budget has declared that interest earned on NRE deposits is now taxable. What is the rate at which this tax is going to be applicable and when is the date from which it would be effective? What would be the status of previous deposits?

Interest on the NRE earned after 1.9.2004 will be taxed at the slab rates, the maximum being 30%.

I am an NRI. I would like to set up a professional firm in India (a partnership or a PC) and a business as a sole proprietor. What are the tax consequences? What kind of business account(s) should I open? What measures should I take to follow all the rules and regulations?

The type of entity to be set up for business has to take into account not only the tax issues but also several other factors. A generic solution is not possible for this query.

If taxable income is less than Rs 1 Lakh, no income tax is applicable. Also agriculture income is exempt from tax if other income is not taxable. Please advise if this exemption is also applicable to NRIs for income in India from pension, house rent, agriculture land etc.

Yes, no tax if income is less than Rs.1 lakh and agricultural income is exempt. NRIs are treated like residents for this purpose. However, this is yet to become law.

My wife is 60 years and we have hereditary agriculture land about 4 acres. If the property is hereditary property from husband's grandfather, can wife claim part of this income and file separate return? Also we have a house, which earns rent. Can this income be treated as wife's income for tax purposes? The house was purchased in 1978 for Rs. 1.5 lakh for which wife contributed by selling her gold ornaments and other savings.

Not likely, as wife does not inherit any interest in the property .If the investment in the property is out of wife' sources of funds then the income will be that of the wife.

I am housewife and an NRI. I have no work permit here and live with my husband. I do currency trading and other investments. Can I file separate income tax return for my income on NRI deposits in India? I have joint account with my son and husband in India. Do I have to have separate accounts for this purpose or joint accounts?

If the NRI deposit income accrues to you out of funds remitted by you then you can file it as part of your return of income, though the account is maintained as joint account.

Since I am already paying tax in US for the interest earned from current account, after this new NRI tax rule, do i have to pay twice?

If this interest is earned in the U.S there is no question of paying tax in India.

I have been in UK for last 8 years. I am holding some FCNR deposits in foreign currency in India. According to the new budget I am told that the interest earned will be getting taxed. I started these deposits in April. Will I be retrospectively taxed or does this apply only to new deposits? If I am taxed what is the rate of interest and will taxing be done at source?

The interest arising from the 1st September 2004 will be subject to tax. This applies even to existing deposits. Tax will be deducted at source by the bank and the tax rate applicable is as per the present slab rates, where no tax arises for income less than Rs 50,000.

Can you explain the new tax implications of FCNR deposits and how the tax is calculated by way of an example?

Interest earned from FCNR Account is taxable in India from asst year 2005-2006. The tax is as per the slab rates of 10/20/30% as the case may be plus surcharge and cess. An NRI can opt for the concessional rate of 20% tax plus surcharge and cess under Chapter X11A of the Act subject to certain conditions. As far as detailed calculations one can visit www.factorm.com

How is money earned abroad (Switzerland) treated in India? Precisely, tax implications on the income and money transfer to India.

Money earned in Switzerland is taxable in India if you are a resident and ordinary resident. There could be set off as per DTA Agreement depending on the source and component of income earned there. Money transfer to India per se does not entail any tax liability.

Is money sent as gift to parents in India to support their living taxable? The sums are from tax-paid money in the USA.

Money sent as gifts to parents in India from US or for that matter any other country is not taxable in India.

We have inherited agricultural land and annual rent is about Rs 60,000. My only son and I are NRIs.

  1. Can the rent of agricultural land be treated as income of my son in part or full for tax purposes?
  2. In addition to agricultural income how much of interest income can be exempt from tax for NRI?
  3. What is income limit for NRIs, which is exempt from tax?
  4. In case of joint account, is the tax liability in India is for main applicant only or for both?
  5. A NRI wife (without work permit) can have FNCR deposits in India and assessed as independent tax payee?

  1. Agricultural income is not taxable and is included only for determining the slab rate for taxing non-agricultural income. In any event, the inheritance by you cannot be treated as income of your son.
  2. Income becomes taxable if the threshold limit of Rs50, 000 is crossed
  3. Answered above
  4. Income is taxable in the hands of the owner and not based on how the joint account is structured
  5. If the funds belong to the husband and invested in the name of the wife, tax will arise in the hands of the husband only.

I have separate PPF accounts for my wife, two kids and myself. I am the only earning member of the family. Is it possible for me to deposit Rs. 70,000/- per financial year into each of these PPF accounts (i.e. a total investment of Rs. 280,000/- every year) and still able to attract the 8% interest rate for all four accounts? Of course, I understand that I can only deduct 20% of Rs. 70,000/- from my taxable income while calculating my yearly net tax.

Yes. This is permitted.

What are exemption limits for HUF? Is it same as an Individual. What are the benefits of HUF for tax purposes?

HUF is taxed a separate entity and hence will enjoy the exemption limit etc., as applicable to an individual.

Will I have to pay tax on my income earned abroad? If I work abroad for say a period of 5 months in this financial year & hence am a resident of India will I have to pay tax on my foreign earnings?

If you are a resident in India for the financial year in question the income earned abroad is liable to be taxed in India.

I am a NRI in USA for 4 years. Recently I got married. My wife has not joined me in USA till now. Can she buy Kisan Vikas Patra or other govt. investment? Will there be any problem in encash once she becomes NRI?

The wife being currently an Indian resident can buy KVP. Encashing subsequently will not pose any problem.

My question has 2 parts:

  1. Is the money I sent to my parents back to India, either through an NRI account or just through a check which they deposit in their local account, taxable to them any way?
  2. Is there any way I can avail tax deduction on that money in US?

  1. No tax will arise on this
  2. This needs to be checked with a US tax advisor. As far as we know there is no deduction for these.

I have lived in USA from 1996-2002. During this period I have opened up multiple NRE fixed deposits with State Bank of India. The deposits are due to mature around June 2005. Does this mean that all the interest accrued will be taxable at the time of withdrawal? This bill is postponed till April 2005, so if I do a premature withdrawal then I can avoid the taxation?

Yes. The interest accruing in entirety in June 2005 is liable for tax. In view of the heavy liability for tax in June 2005 maybe you could think of withdrawal before March 2005 and avail of the exemption.

I am an Indian Passport holder. My kids are born in US and my wife is an US Citizen born in Pakistan. Will my kids be able to qualify for PIO cards or not?

PIO would be available if one of the parent/grand parents is Indian.

What is the tax liability of a person in the US on an L1 visa? Are there any exemptions on the normal US taxes payable in the specified state? Is there any liability in India on the income earned in the US, especially if part of this assessment year is spent in the US?

Taxability is based on the number of days stay in a country and not on the nature of visa. Wherever taxes become payable in two countries for the same income, tax credits are possible. We do not advice on the US tax implications, either federal or state taxes.

If a person is working in the US for the full year on an L1 visa, is the tax liability for the person at par with the normal US taxes prevalent in that state?

Yes. Taxes would be as applicable to a resident of that country.

I am currently in Saudi Arabia, currently deployed on a project by an Indian company. The queries that i have are as follows: Firstly, the money that I earn here, can I open an FCR or NRE account here and deposit the money in that account? Secondly after I deposit the amount will that income be clubbed in India as taxable income or will it be non-taxable?

Moneys earned abroad can be deposited in NRE/FCNR a/c. Such income becomes taxable after 31/3/05. They will be clubbed along with other taxable income in India, if any.

I came to US in 1997 as a student, became a H1 professional in 1999, and then became permanent resident of Canada in 2002. The question is whatever income I have earned from 99 to today, which is already tax paid in U.S, do I still have to pay any taxes in India on that income if I transfer that income to India?

None

I have been living in U.S. since 99 on H1 if I want to invest to buy Kisan Vikas Patra valued Rs.1500000/- in India can I invest on my name or can I give this money to my relatives as a gift?

This is not available for investment to NRI

I am a US citizen from India. Do I will need a PAN number to pay capital gains taxes in India, from the sale of property? Is there any website from where I could apply for one? Or do I need somebody in India get it done for me?

Yes you need PAN. Currently it is to be applied in hardcopy. You can engage a professional to do this, as you would need the assistance to file the tax return.

What would be tax implications of US citizens of Indian origin (PIOs) living here on long-term visas if income is from:

    1. US Social Security pension (for employment in USA for non-Indian companies)

    2. US investment income (on US source savings)

    3. Minimal interest from local Indian banks(interest threshold for tax?)

  1. Assuming US tax returns on worldwide income filed, and the presence of Indo-US DTAA exemption, would there be any residency restrictions in India as related to tax obligations?

  2. If interest from Indian Banks were zero, would an Indian tax return be required?

  3. Does inheriting a flat from parents require the filing of a return? Is "one in six" rule relevant here?

  4. Any applicability of wealth tax because of foreign assets?

It is assumed that the querist on return to India has become a resident and ordinary resident in India. The queries are answered as under;

    1. social security pension is taxable only in the US (Kindly refer article 20 of the Double taxation agreement with the US).

    2. US investment income is taxable in India on the basis that you are a resident in India.

  1. There are no residency restrictions here where the worldwide income is offered to tax under the Indian law.

  2. Even if the interest from banks is zero here a return of income is to be filed in India if you are treated as a resident.

  3. Inheritance of a flat, per se, does not entail filing of a return.

  4. There is no wealth tax on foreign exchange assets.

I am an NRI staying in Singapore. With regards to notification from Finance minister on withdrawal of tax benefits on NRE Account, I would like to know the following.

  1. IS TDS applicable for interest derived from NRE Recurring deposit? If yes how?

  2. I was told by a bank manager that there is no tax to be paid for any interest derived from recurring deposit be it NRE or NRO or resident one. Is it true?

  1. TDS is applicable for interest derived from NRE recurring deposit account and the bank will be deducting the same at the appropriate rate.

  2. The information is wrong. Tax is applicable on such interest from 1.4.2005.

If I have received one cheque in $ then how can I encash it in my Indian bank a/c? Should I have to pay tax for it?

The cheque has to be converted into rupees by the authorised bank using the conversion rate. There are no tax implications on this.

I have some queries about the foreign exchange that we bring along with us back to India during a visit to any locations abroad.

I had gone to Netherlands on a Business Visa. Regarding the foreign exchange (We get it as a part of our allowance) that I bought along with me back to India I have the following queries:

  1. Since we get an allowance during a visit abroad on a Business Visa, is this allowance taxable?

  2. If I manage to save some foreign exchange (Allowance) and bring it back with me during this visit, is that foreign currency if converted in INR taxable?

  3. If the INR is taxable under which Section does it fall under? What deductions can I get? How much of the money is taxable?

  4. If it is taxable and falls under some section of the Income Tax laws could you give me the details of the Section?

Any saving made on the foreign tour allowance is taxable in accordance with section 2(24) read with section 15 and section 10(14) of the Act. No deductions are allowed against the said income.

I am living in the USA from Jan 2001 (NRI status) as a permanent resident of the USA.

Before coming over here, I purchased 2 apartments. One in Chennai in the year 1990 and another in Mumbai in the year 1998.

Both properties were purchased out of income generated in India.

Now I would like to sell these apartments and repatriate the proceeds to USA where I have need for the funds. Given the real estate crash in India, I am informed that the sale price now will be lower than my purchase price or at best with no gains after indexing.

When I repatriate the funds to USA will I have to pay any tax in the USA?

Alternately, I would like to make these investments productive by renting them out. . If repatriation of rental income is allowed by RBI, will have to pay tax in the USA apart of income tax in India for the rental income?

There are no tax implications when you repatriate the funds out of India. The rental income is taxable in India since it is earned in India. There is no requirement to pay tax in USA on this income.

My company (MNC) allotted me some stocks about 3 years ago under ESOP, if I sell the stocks now (Mar 2005), what are tax implications on the differential value. Does it come under long-term capital gain or perquisite, if so what is the tax rate?

Sale of ESOP shares after holding it over 12months is treated as long-term capital gains and if it is a listed security there is no tax on such gains from assessment year 2005-2006.

I am a resident India. My brother is a US based NRI. We plan to a joint Housing construction loan (It will be a NRI Loan). In this case will I be eligible for Tax benefits?

Repayment of the loan and interest is entitled to tax rebate under section 88 of the Act subject to income limits and other conditions.

I left India to join my job in Saudi in Jan. 09, 2005.

What will be my tax filing status now? I guess, I will file return for this fiscal year for income that i earned in India till Jan. 2005. How about my salary in Saudi Arabia after Jan 2005 for which I don't pay any tax in Saudi?

  1. What is tax treatment of salary earned in tax-free country like Saudi Arabia if repatriated to India in normal old saving bank account in India?

  2. Do I necessarily have to open a Non Residents Accounts to transfer my money to India or I can credit my Indian old saving account directly?

  1. The salary earned in Saudi from Jan to March 2005 is taxable in India for the asst year 2005-2006 since you are a resident in India for that year. There is no tax on the repatriation of funds to India.

  2. You have to necessarily open a NRE or NRO account to keep the funds in India.

  3. The issue of not opening a NRE or NRO account does not arise.

For a PIO who is R&OR in India, what is the tax liability on proceeds of selling one's property in the US? The US has no capital gains tax on selling one's home. How does the DTAA affect this transaction?

Since you are a resident and ordinary resident in India the global income is taxable in India. Consequently, capital gains on the sale of property in US is liable for tax in India.

I am planning to send some money back home to my family could you please let me know what tax they have to pay to receive that money.

I am planning to send Rs. 2,00,000 to my brother, Rs. 1,50,000 to one of my close friend and Rs. 1,00,000 to my brother in law.

Gift to friend will be treated as income and taxed. There is an exemption limit of Rs 25000. Gift to relative is exempt from tax.

I was serving in Singapore since July 96 to March 2003. And I came in India for service since Apr 2003. Now I want to bring back the investment in bank, FD, Shares, etc. in Singapore to India. Please advice me whether is it taxable in India.

You can bring back the investment from Singapore to India and there are no tax implications. The yields on these in India will attract tax depending on the type of investment.

I returned to India in Dec 2002 after 5 years in the US. I have an NRE a/c to which I've transferred funds as and when required after I came back. I've still maintained a bank a/c in the US as well as an account with a online brokerage. I've been operating a business in India since Mar 2004. Now to file my taxes, do I need to declare my overseas a/c and NRE a/c (can I still keep them or do I need to close them?)

Interest on NRE account is exempt from tax. Since you are a resident in India your global income is taxable in India.

I have following investments paid out of NRE funds, please advice if I need to pay tax / file return for FY 2004-2005

NRE FD = 6.7 lakhs

Investment in Family Business - (Paid out of NRE funds)= 3.7 lakhs ( business turnover is 1 crore PA

Investment in FD - (normal rupee deposits paid out of NRE funds) - 14 lakhs

Investment out of NRE account per se has no tax consequence. But income arising thereon like return from business is taxable.

I have 2 Demat accounts with two different DP's. For both the account i am the first account holder and my wife is the second holder. Our names are mentioned differently in both the accounts. eg. For First DP my name is spelt as Vishwas Gite and for second DP my name is spelt is Vishwas " myfathername" Gite .I want to transfer some shares from DP1 to DP2. These shares are more than 3 years old. I want to know if i sell the shares in less than 12 months after transferring, will I have to pay long term capital gains tax.

Transfer from DP 1 to DP2 does not result in change of ownership and therefore the subsequent sale of share results in long-term capital gains and in case of listed security it is exempt from tax.

I have NRO account in India. Citibank has deducted tax on interest earned. I thought that NRI income is tax-free. Please explain.

Interest arising to the Non-resident external account alone is exempt from tax.

I am Indian citizen, living in USA for the last 30 years. I purchased the piece of land for a residence in 1996 for Rs.10 Lakhs.

Since then, my situation has changed and would like to sell this land. I have a couple of questions to help me decide what is the best for proceeds.

I have been thinking of setting up a charitable trust fund for needy in India.

1. Is it better if transferred the land to a new charitable trust fund and then have the trust sell the land? Does the Trust incur any taxes? If so, what %?

2. What if I transferred this proceeds first to an account in my name, and then gradually transfer to a charitable trust account? What are tax consequences?

1.First and foremost transfer of the land to a trust will entail stamp duty at 13%. Later the trust selling the land will have to pay long term capital gains tax of 20% subject to indexation of the cost of the asset.

2. This option looks better since you sell the asset in question retain the post tax proceeds in you name and use the funds to start the corpus for the trust. The constitution of the trust can be adequately structured to mitigate tax consequences.

I am a US citizen. On the sale of my ancestral property in Bangalore, India, what are the capital gains taxes that I owe to the Indian Govt? Do I owe anymore taxes on the repatriated Dollars to US?

Capital gains taxes are due on sale of property at 20% + surcharge of 10% on taxes (applicable if the taxable income exceeds Rs 850,000) and education cess of 2% (on tax +SC), if the property had been held for more than 3 years. Otherwise tax rate will be as per slab rates with 30% on income exceeding Rs 150,000. Tax liability in US on the same income will be as per US tax law and any tax paid in India should be allowed as a deduction from the taxes payable in US. However, no tax arises in US only on account of repatriation of the money there.

My questions are related to NRI status. I am a citizen of Israel for 13 years. Before that I was an Indian citizen and was born in India and lived there for 22 yrs. I would like to be an NRI resident My questions are

1) What is the procedure for being an NRI for people like me (what documents would I need to submit?)

NRI status is dependent on period of stay outside India and if you are staying in Israel, you will be NRI. No forms to be submitted.

2) What are the advantages and limitations for an NRI resident?

Advantages and limitations are difficult to enumerate. One advantage is Indian laws on exchange control don't apply to NRI. Limitation may be restriction on ownership of real estate in India.

3) Now do we have to choose between applying for dual citizenship ( i.e. being an Israeli citizen and Indian citizen at the same time?) and applying for NRI status or can I be both ( dual citizen and NRI at the same time)?

NRI status is automatic as stated above. Citizenship is matter of choice and no conflict between both.

4) Lastly, will I have to pay anything to the Indian government for application as an NRI/dual citizen? If so, how much?

The rules for applying for citizenship need to be checked with Indian immigration authorities and Indian embassy in Tel Aviv should help.

My son will be born in US in March 2005. Will he be eligible for Dual Citizenship? By when can I actually apply for Dual Citizenship?

This needs to be clarified with the consulate and as such no information in public is available.

My wife is a US citizen. Her father had opened NRI bank A/c on her name in India in Rs where he had deposited money as a gift. If this money can be transferred to USA in dollars, does she have to pay any tax in US?

Transfer is possible. Based on secondary knowledge no US tax would arise. However this may be confirmed with a local expert.

I am a US citizen of Indian origin (PIO), but have been living in India for about a year now. I had bought a piece of land in Bangalore in 1997. I am planning to sell it now. I have the following questions:

1. In order to avoid long term capital gains, under what time frame must I re-invest the gains in qualified real estate investments? Is this predicated upon when I sell it in relation to the tax year (e.g., selling in March vs selling in April)?

2. With ref. to above question, between the sale and re-investment, must the money be kept in some special account or can it be kept in a Savings Account?

3. What are the various qualified real estate investments for this purpose? Land, flat, real estate fund/account set up for this purpose ?

4.What are the advantages with regards to taxation for a NRI if he opts for Dual citizenship?

No difference arises between sale in March vs April. The money realised need to be invested in a property (house/flat) within 3 years (two years if it is purchase of built property), if you do not own more than one house at the time of disposal of the land.

Till the money is fully invested, it needs to be parked in a special a/c in a bank and not in a general savings a/c.

The tax law will apply based on tax residency in India and not on dual citizenship.

I worked in USA for 8 years. I am currently living in India from past two years. This is my last year as NRO in India. In USA I am still filing Tax as a resident as I have re-entry permit till Jan'06. I am planning to maintain GC as long as possible. Now I still have some stocks, which I got from ESOP plan from my US employer. I am only selling nearly $ 50000 worth of capital gain stocks to pay nearly zero tax in USA by filing jointly with two kids. I plan to continue to do so for next year. Next year I will be resident in India. Do I need to pay tax in India for US capital gain? Does DTAA only allow tax credits to write off tax in India (in this case it is 0, so it won't be of any use)? Or I can take 50000 as an amount to write off the income?

As an ordinary tax resident in India, global income is taxable and credit for the tax paid if any in the other country would be admissible. If no tax arises in the US on the gains on disposal of the ESOPs, naturally no deduction will arise in India. Subject to a more detailed advice, as a planning the disposal may be completed before the Indian tax status is changed. Such disposal can be to a family member also.

I am a NRI, and I have a NRE account in an Indian bank. I am planning to tender my India employee stock options (these are Indian equity shares now) for conversion into American Depository Receipts, and benefit from the premium attached with the ADR compared with the stock price in the Indian market.

My question is this: can I deposit the rupee proceeds from this transaction into my NRE account? What are the tax implications, if any?

Rupee proceeds can be deposited only in NRO a/c though this can be repatriated subsequently under the overall limits in force from time to time. No tax implication on deposit of money, though the sale of shares/ADR will attract capital gains tax.

If I return to India from USA where do I need to pay the taxes on capital gains on shares sold in this year. I heard that if I return before 183 days, I only need to pay the taxes on capital gains in the whole year in India. I was on H1 for last 4 years in USA.

Capital gains tax are payable in any case.

I am an Indian citizen but hold a US green card. I came to US in Feb 1998 and have been here since working for a US company. I have not had any Indian income other than

- A sum of Rs 300 odd paid as pension every quarter

- Interest on my NRE deposits

Also, on an average I have been in India around 3-4 weeks every year on vacation.

Now, I am planning to transfer to the Indian arm of my company in Bangalore. My Indian payroll would start sometime in April.

a. When do I lose my RNOR status? Does it matter whether my Indian payroll starts in April or after that?

b. I hold some ESOP and securities in US directly owned or purchased through ESPP. When would it be advisable to sell those off from a tax angle if I plan to pay taxes on them in US?

c. After I become resident in India, can I still sell them and pay taxes on them in US? Do I have to pay taxes again in India?

a. RNOR status carries on for 2 years.

b. Sale of foreign shares would be better during this time to avoid taxes in India.

c. Date of commencing stay in India is more critical than the date of payroll.

I have 2 Demat accounts with two different DP's. For both the account I am the first account holder and my wife is the second holder. Our names are mentioned differently in both the accounts. eg. For First DP my name is spelt as Vishwas Gite and for second DP my name is spelt is Vishwas " myfathername" Gite .I want to transfer some shares from DP1 to DP2. These shares are more than 3 years old. I want to know if I sell the shares in less than 12 months after transferring, will I have to pay long term capital gains tax?

Transfer from DP 1 to DP2 does not result in change of ownership and therefore the subsequent sale of share results in long-term capital gains and in case of listed security it is exempt from tax.

I am filing for my US tax and I have received a 1099- INT form for my NRE account. I know this is exempt from tax in India. Should I show this as Income when filing my US Tax? I want to know should I pay tax for this interest income in US?

The interest earned out of the funds in India has to be declared in the US tax returns.

I have NRO account in India. Citi bank has deducted tax on interest earned. I thought that NRI income is tax-free. Please explain.

Interest arising to the Non-resident external account alone is exempt from tax.

I have taken H/L for Rs.1300000 from my employer as below

Rs.300000 @ 5.00% Simple Int.
Rs.500000 @11.00% Simple Int.
Rs.500000 @ 7.50% Compound Int.

Kindly clarify in detail, what would be the differential int. rate amount to be added along with income to be shown as perquisite.

The difference between the STATE BANK OF INDIA rate and the contracted rate is to be treated as a perquisite. The SBI rate for housing loan ranges from7.5% to 8.25% depending on the period of the loan for asst year 2005=2006.

I am Indian citizen, living in USA for the last 30 years. I purchased the piece of land for a residence in 1996 for Rs.10Lakhs. Since then, my situation has changed and would like to sell this land. I have a couple of questions to help me decide what is the best for proceeds. I have been thinking of setting up a charitable trust fund for needy in India.

1. Is it better if transferred the land to a new charitable trust fund and then have the trust sell the land? Does the Trust incur any taxes? If so, what %?
2. What if I transferred this proceeds first to an account in my name, and then gradually transfer to a charitable trust account? What are tax consequences?

1.First and foremost transfer of the land to a trust will entail stamp duty at 13%. Later the trust selling the land will have to pay long term capital gains tax of 20% subject to indexation of the cost of the asset.
2. This option looks better since you sell the asset in question retain the post tax proceeds in you name and use the funds to start the corpus for the trust. The constitution of the trust can be adequately structured to mitigate tax consequences.

I am an NRI for last 7 years. Have these following questions. Would highly appreciate your inputs

(1) I own a house in India and have been paying property tax for the same every year promptly. I do not intend to sell this property.

-Do I need to file IT return every year too in India?
-Do I need to include this anywhere while filing US taxes?

(2) I recently purchased a plot and the first year's property tax is already paid and I intend to pay the tax every year. I do not intend to sell this property. Still paying off a loan via HDFC.

-Do I still need to file IT return every year in India?
-Do I need to include this anywhere while filing US taxes?

(3) For an old LIC policy (for which I make regular payments every year), I received a maturity benefit of Rs.50000/-.
I opened an NRO account with Citibank and deposited this cheque into the same. I also withdrew/closed a UTI policy (on which only one year was left with a very little penalty) and received Rs.70000/- which also I deposited into my NRO account.
Looks like the bank has already debited applicable tax on the interest earned.

- Do I need to file my tax return in India for this?
- Do I need to include this in my US tax return somewhere like foreign accounts/interests under any scenario?
- Do I get a 1099-INT for my NRO account?

(4) I received Form 1099-INT for Citibank NRE (not NRO). I included this for US tax return under 1099-INT with other 1099-INTs from other local US banks.

-Do I need to include anything under foreign accounts/interest earned while filing my US tax under any scenario?

1.Since you are an NRI there is no need to file any return of income even under the one by six scheme. You need not include this in the US tax return.

2.If the property is let out and derives income a return of income has to be filed reflecting the income and claiming the deductions relating to property tax and interest on loans.

3.Proceeds on the maturity of LIC policy are exempt from tax. Interest on NRO account is taxable and a return has to be filed to get the TDS refunded if the income is below the taxable limit.

4. Specific US tax issues are not addressed in these columns.

I have moved to Singapore in Nov 2004 on an Employment Pass for 2 years. In February I have remitted INR 75000/-. Please inform me about my Tax liability on the remittance in India. Please also tell me the taxation implication on my salary recd in Singapore for the yr 2004-05 & 2005-06. Financial yr in Singapore is Calendar year for Taxation purpose. I was exempted to pay tax on my Salary in Calendar yr 2004 in Singapore. Please advise.

Salary earned in Singapore for 2004-05 is taxable in Singapore and the remittance of 75000/- is not taxable in India. Likewise salary earned for 2005-06 is taxable in Singapore and not in India.

In earning 3 streams of income i.e. rental, business and capital income, what is the position to taxation in India for a NRI as there is a Double Taxation Pact with Australia. Secondly, is there any way the income can be remitted overseas? Is there any time period after which these incomes are permitted to be remitted or at any time after investment?

In respect of the streams of income a non-resident can opt for a flat 20% tax subject to certain conditions. The said income can be remitted overseas subject to RBI regulations.

I was an NRI from April 1993 till April 2002 i.e. exactly for 9 years in Kuwait when I returned for permanent residence in India .I have NRE deposits in the bank due to mature in 2007 which I continue at the contracted rate of interest. I would like to know:

a. How long shall I be considered RNOR?2.do I have to pay only 20% income tax on the interest on NRE deposits till maturity? I have been paying 20% income tax on interest accruing on NRE deposits for the last two years.
b. Do I have to pay income tax on interest income from RFC deposits from April 1,2005?

Interest on NRE Account is exempt in the case of non-resident and resident and not ordinary resident. Interest on RFC Deposits is taxable and does not enjoy any exemption.

What is the current status of Dual Citizenship offer for NRI and Foreigners of Indian origin? What is the procedure to be followed to obtain Indian passports?

Procedure for dual citizenship may be checked up with Immigration officials.

I am working in Australia on a trainee visa from December 2004 (presently 13 months visa). As I am on leave from my parent institution in India, I continue to get a small amount as leave salary. I was getting full salary till end of November and had paid monthly tax as calculated till November end 2004.

My questions are
1) When will I submit my tax return in India? Can I submit this from Australia?
2) Do I have to disclose and pay tax for the salary I get in Australia? I am paying regular tax in Australia.
3) I have started an NRE account with one of the banks. Is there a limit to transfer funds from this account to any other accounts in India - either in my name or relative's name?
4) Is savings in NRE account is taxable in India?
5) Is there a utility tax while paying bills or premium using this account?

For the year 2004=2005 you will be treated as a resident in India and the salary earned in Australia is taxable in India. The tax return can be submitted from Australia itself and has to be filed before the 31st July. The tax paid is Australia can be set off in India in accordance with the DTA Agreement. There is no limit for the transfer of funds from the NRE Account to any other account. Gifts out of this account could be treated as income in the hands of the recipient. There are exemptions for specified relatives. Interest earned on NRE account continues to be exempt from income tax. There is not general utility tax here.

I hold IRA (individual retirement acct) that is more of a tax-deferred acct in US where it's held by a custodian in my name and I have stock/bond mutual funds. When I withdraw the money from IRA, I have to pay regular income tax to US. When I am Indian resident, how does Indian Govt view IRA withdrawal? Does it treat as regular income or I have to just pay capital gains tax? I heard there was some Advance ruling regarding this issue.

Withdrawal out of IRA is generally exempt under the tax law here on the EEE model. It would however depend on the nature of savings. There is no direct Advance ruling on the subject. If we get hold of one we shall pass it on.

I have been working in UK for last 5 years and returned to India on Jan 2005. Now I am getting a job offer where by I can work from India for a company based in UK. Nothing to do with India but flexibility to work from India over the Internet. As I have got my UK Bank account the money is paid to the UK bank without any tax deductions at source, my queries are:

a) Do I have to pay tax in India or in UK on this income? If in India and/or UK what's the procedure?

b) What's the procedure once I have resided for more than 182 days in India?

Since the salary is earned in India it is taxable here and a return of income has to be filed in India. Once you become a resident the income earned in UK also would get taxed in India.

What is the rate of TDS on NRO a/cs? Under which section of the IT Act is this fixed?

The rate of tax on interest on NRO account is 10% plus surcharge.

I am an NRI (but Indian citizen) residing in the US for the last 5years. I have invested all money earnt before moving to the US in the Indian stock market.

Now I wish to get a PAN number to continue transactions in the Indian stock market. How do I do that? The NSDL website says PAN number is not for Non-Residents.

PAN no is mandatory if you have income in excess of the limit liable to tax. In your cases your investments are in India and in Indian currency. You will have to apply for PAN no in any NRI circle in the metro cities.

I had invested in real estate properties in India with my US earnings in the past 8 years. Now I want to sell some properties in India and planning to transfer Indian Rupees to US dollars. I have a NRE account with SBI, India. I would like to know the right process to accomplish this task so that I can avoid tax implications from RBI.

Sale of the property in India is liable to capital gains tax subject to specified exemptions on reinvestments. Repatriation is possible and the procedure can be got from banking channels

I am in the USA on H1B visa and plan to return to India after the H1 period is over. I want to know whether there are any retirement investments in India on which I can get tax exemption in US. I cannot contribute to 401K plans, as I am not going to be in USA for my entire life. I want to start saving towards my retirement and also I want to get a US tax exemption. Are there any such options?

This is a direct query on investment and not taxation and not in our scope to answer.

I have shares in Indian companies held while I was resident in India. What are my tax implications if I sell them? Can the money be taken out of India?

If the shares are listed and sold after holding them for more than 12 months the long-term capital gains are exempt. Otherwise they are liable to tax. Repatriation of the sale of shares is not permitted.

I am working for the past 20 months in USA. I was working in a USA-based subsidiary company. I have NOT received any salary in India (in my company) for the year from 01/04/2004 to 31/03/2005. I have my permanent account number in India. I have to file my return for this year 2005. But, I have not received any salary and in my company they don't give form 16 for the period. What is the procedure for filing returns, if at all I should?

Since you have not earned or received any salary in India there is no need to file any tax return here and the question of issuing Form no 16 does not arise.

If I am returning to India after 5 and 1/2 years in May 2005, will the five- month income be taxable in India?

The income earned in India will be taxable in India.

Lived and worked abroad for 24 years and returned 2 and a half years ago on the presumption that the overseas Income is not taxable for at least 9 years after my return. This seems to be wrong. Invested Funds are maturing in 2006 and there are loans against them on which interest is payable by me. What is the current position on taxation on my overseas income?

Income would be taxable due to change in law. If you can manage to stay out side India for 183 days in that year you will escape the tax

I am planning to return to India after living abroad for 4 years. I would like to bring my car along with me. What would be the tax applicable and how would the valuation be done?

Customs duty would be payable at the rates applicable on your date of importation. Depreciation for usage will be admissible. For more details please contact a clearing agent at the port of importation

I am a NRI and my friend is planning to return to India. She has a few NRE and FCNR deposits, besides a Savings account in Citi. Can she let these deposits mature before converting them to Resident deposits? Or, do all of these accounts have to be converted on her return to India? Will the interest or principal be taxed on such conversion?

Deposits can be allowed to mature. No tax will arise till the tax residential status changes to resident in India.

Would there be any tax on income in NRI rupee a/c in India? I live in Los Angeles.

Yes. You can either pay under normal slab rate or 20% flat rate with surcharge and cess.

My mother who is a housewife was nominee for all the shares (from share market) my father bought and he is no more. I converted all the shares in her name and opened an ICICI Direct account, as I need to demat them. Will this be considered as gift? Also does it come under any taxable income? Should she file tax returns?

No gift tax exists now. Filing of tax return also depends on economic criteria like owning property etc.

I work here in USA since November 15 2004 and would return in May 30th 2005 (more than 183 days). If I remit my savings from my overseas earnings for which tax has been already paid, will the amount remitted to my NRE account in India be taxable?

No.

As NRI I'm planning to invest money under the PIS Scheme for NRIs. The PIS provider will take care of all issues dealing with Tax authorities. I have a question on a Tax issue. I have rental income from a house (which I co-own with my NRI brother) of around INR 40,000 a year. I do hold a PAN number, but haven't files any returns for the past 10 years. Assuming I get rid of the housing income, would I be eligible of getting exemption from filing Tax returns?

Yes.

I moved from India to Australia in 2001 as a permanent resident and subsequently took up Australian Citizenship in 2004. I have a 15-year LIC money back policy from 1991 and it is due for renewal next year. Do I have any tax liability when I receive this maturity amount next year and can I deposit this maturity amount in my NRO account and either gift it to my parents or spend it in India?

The money received on insurance policy would not be taxed and this can be gifted or used by your parents as stated.

I have a NRE account in India. I am purchasing a property in India and I am giving a check from my NRE account. Suppose I am selling the property within 2-3 months. Can you please let me know what are the tax implications on it, if there is a profit? And if not? Also, since it is a NRE account, can I deposit the cheque in that account? As the person buying this from me in India shall be giving me the cheque in Indian rupees. Also, if there are any tax implications is there any way to get relief from that tax which I got from selling property?

This amount on sale of property can be remitted out of India. This facility is limited to two properties only. Instead of repatriation the banker can permit deposit in NRE account. Tax on gains will be payable by you as applicable. Sale within 36 months will be giving rise to short-term gain taxable at the current slab rates.

I am an NRI working in the United States. I am considering retiring in India after a few years.

I have a substantial amount of money saved in an Individual Retirement Account (IRA) in the US. Contributions to the IRA were made by me and my US employer, a private organization. Under US tax law, when these contributions were made, the same were deducted to arrive at my taxable US income. The contributions have been invested in equity and bond mutual funds and can be withdrawn without penalty only after I reach the age of 59.5 years. The yearly growth in the value of the investments is not taxed in the US until I make withdrawals. At the time I make withdrawals, US will tax the withdrawal as ordinary income. Thus the IRA is on an EET (exempt-exempt-taxed) system under US tax law.

It is my understanding that after I return to India and become a resident (resident and ordinarily resident), India will tax my global income. If so, it appears reasonable to presume that any withdrawals that I make from my US IRA after becoming a resident of India will be subject to Indian tax. I have no problem in paying this tax and claiming an offset from the US using the provisions of the US-India DTAA. However, I am worried about Indian tax on the yearly growth in the value of my IRA investments, even if I do not make any withdrawals from my IRA after becoming a resident of India. I will not be able to claim an offset from the US if this yearly growth is taxed by India because the US taxes withdrawals only and not the yearly growth in the value of the IRA. Please clarify my Indian tax liability of my IRA after I become an Indian resident.

No tax liability will arise in India on notional gains arising on appreciation in investment till it is crystallised on withdrawal. The tax patterns will be similar to the US practice mentioned by you.

Is money transferred to my Indian savings account through ICICI Money 2 India taxed in India? Does it depend on the number of months stayed in USA?

Remittance into India will not be taxable per se.

I have heard that investments in mutual funds by NRIs will attract a deduction of 20% when they are redeemed. Is it true and if yes then what can be done to prevent this deduction?

This can be avoided by getting a certificate from the tax officer on the exact amount of tax liability on the redemption of units, for which an application be made either by the recipient or the Mutual Fund.

I am in USA currently on B1 visa. My friend is in USA on H1 visa. He is transferring 2000 US Dollars from his account to my personal savings account in India through State Bank Of India online transfer. It is an account-to-account transfer. Do I have to pay taxes for this amount in India? My friend is taxed in USA for his income. Secondly, How do I transfer some money from USA to India as gift to my parents?

Receipt of such money from a friend will be taxable as income under a special provision that taxes all receipts other than from 'relatives' as income if the amount exceeds INR 25,000 in a year. Transfer money to parents will not pose any tax problem and this can be done by wire transfer or through special money transfer intermediaries, like Indian Post Office.

What are the taxation issues for a PIO/NRI when buying a house in India? Will it be cheaper if my parents, who are Indian citizens, buy it themselves (after I give them money)?

Purchase of house doesn't create any tax problem, even if acquired by NRI/PIO.

In the definition of NRI does the individual have to be employed abroad for the full 183 days? Example if I am on a contract for 5 months and then I am on vacation abroad for another month or so to complete the requisite number of days, will my NRI income be taxable?

Unlikely, since the provision applies only if the person leaves India in pursuance of an employment. If the employment was fixed only for 5 months to start with, this won't be possible.

I have lived abroad (Republic of Panama) for 21 years and would now like to settle down in India at Madras. I wanted to know whether the amount that I propose to bring to India will be subject to tax. Are there any other taxation-related issues I may face on my return?

No tax would arise on repatriation of money into India.

I am an NRI working in Saudi Arabia. I have purchased a flat in Gurgaon, on loan from HDFC. Registration was completed two months ago.

  1. What are the Wealth Tax formalities as per RBI or Wealth Tax rules? I do not have a PAN.
  2. How can I get a 'Clearance certificate for wealth tax exemption'? Am I liable to pay any other taxes towards my first house to the state government (Haryana)?
  3. Is there any 'NRI certificate' issued by RBI, which will make me legally qualified for all exemptions/ concessions available to NRIs?
  4. Is there any other TAX related procedures if I give the house on rent.
  5. As an NRI can I buy and maintain a car in India.

  1. One residential house is exempt from wealth tax.
  2. There is no need to get a clearance certificate. When there is no liability there is no need to file a return of wealth tax. Local taxes are a state subject and may apply.
  3. There is no specific NRI certificate issued by RBI.
  4. If the house is given out on rent the income thereon is liable for income tax.
  5. An NRI can buy and maintain a motorcar in India.

I am a NRI & have several fixed deposits with a Bank in India. I also have a few share holdings, which pays dividends. The interest income & the dividends are taxed at source and, as usual, I would like to claim these back or minimize them. What is the most cost effective way to do this, besides retaining an accountant or a financial adviser? Can one claim a total refund directly? What is the procedure?

The procedure is to file a return of income and claim the refund if applicable depending on the ultimate tax calculations. One can file the return directly in the NRI circle or engage a tax consultant for this purpose.

I am now an NRI and I have a current income from partnership share & investments in India. Do I have to file a return as an NRI and if so will my salaried income in the US have to be included in the India return?

Since you are an NRI income earned in India is taxable in India and a return of income, as an NRI has to be filed in India. The salary earned outside India is not taxable here since you are an NRI.

I am likely to have a capital gain from sale of land. I understand that tax can be exempt if the profit (sale price - indexed cost) is invested in certain bonds. Could you please enlighten be about this? Land in question is agricultural land, which has been in our family for about 42 yrs. How will the 'profit' on sale be calculated? Can the 'cost basis' of the land be 'indexed' to arrive at the profit? Since the purchase was made in 1963 rupees and sale in 2005 rupees. Also, kindly clarify - must the entire sale proceeds be invested in the specified bonds or only the amount of `profit', which is liable for tax?

If the proceeds of the sale of land is invested in specified bonds like National Highway Authority bonds, rural electrifications bonds etc capital gains on the sale is exempt under section 54EC of the Income tax Act. There of course conditions like holding period for the bonds, which are specified.

Agricultural land situated beyond certain limits will also qualify for the capital gains exemption. To calculate the capital gains the original cost is taken as the basis. Indexation will apply taking the value as at 1.4.81 and indexing the value from thereon. The capital gains need to be reinvested in the bonds to qualify for the exemption and not the entire proceeds.

I am an Indian Citizen here in USA since last 3 & half years on H1 Visa. Here I am working with US Company. My annual income here is @ $50,000. I don't have any income back home (India). Do I have to file any Tax return in India? Also, if I open a NRI account with Citi Bank & send money to India to my father, would I be liable for any Tax or Tax Return in India?

Since you are a non-resident and do not earn income in India there is no tax liability in India and no need to file a return of income in India. In respect of funds transferred to India from the USA there is no tax incidence.

I recently bought a property in Bangalore, which I now need to put on rent. I have the following questions:

  1. Given that I reside in US, can I give a general power of attorney to somebody local to pay the taxes, collect the rent etc on my behalf? Is there anything I need to watch out for?
  2. I assume the rental income I receive will be taxable in India. How can I pay the taxes but void filing a tax return? (TDS?)

  1. You could give a general power of attorney and the only safeguard to be taken is the integrity of the holder. There is no other implication.
  2. The rental income is taxable and will suffer TDS. A return of income has to be filed.

I want to buy an apartment in my name and want my brother to be a co-applicant. My brother is an NRI in US. To purchase the House, I want to take a loan for 50%(say) of the agreement value. The balance amount I plan to ask my brother to remit to my Father in laws' / my Citibank account from his Savings. Will there be any tax implication (eg gift tax) for my brother or me, if a single remittance of, say, about Rs 20 Lakhs is made? The tentative date of possession of the apartment is in mid 2007.

You could take the amount as gift from your brother without attracting any tax on the amount received. Avoid father-in-law from the loop. It would result in the amount being treated as income.

I am a US citizen; I hold a PIO card by virtue of my marriage to an Indian Citizen (and US green card holder). I will be working for the American Embassy School in New Delhi for the next two years. My status there will be as an "Overseas Based Local Hire", as I interviewed for the job while visiting New Delhi. When I return to India next month, I will enter on my PIO card, not on a special work visa. I have two questions:

  1. Most Americans brought to the school from the US do not pay taxes in India; Indian hired by the school in India, on the other hand, do; does my PIO status or the fact I was hired in India mean I should expect to pay taxes? The school is not clear on this point.
  2. Since my wife, currently a NRI, will be considered a resident Indian in 182 days, will she then have to pay income on the rent we get for our house in the US? Would it be advantageous to have that income put in my name?

One would have to examine if your case can come under the exemption provided in section 10(6)(ii) of the Act dealing with income earned by embassy officials. If so you could also claim the exemption. For a period of 2 years she need no pay tax in India on the rental income earned in the US. After that it is taxable here.

I may return to India after being NRI for more than 730 days (actually around 7.5 years)

    a. How to file return forms and when? I presume it shall be March 2006.

    b. In that return will my income from Qatar, which will be bulk as a result of Gratuity etc, which I will receive in May be taxable. If so, at what rate? It may be around $20K.

    c. I am due to receive SBI deposit and accrued interest of SBI Millennium deposit by end of Dec 2005. Is the interest is taxable?

    a. Return will be due if assessable income arises in India. You will need a PAN to file a tax return. Return will be due on 31July 2006.

    b. Income from Qatar employment will not be liable to tax in India

    c. Income from SBI deposits will be taxed unless it is a foreign currency deposit

I want to convert my present resident savings account in India to a NRO account. Will I have to pay income tax on the interest earned in NRO account?

Income from NRO account will be taxable.

Do I have to take an Income tax Clearance certificate before going out on an immigrant visa? I am a regular taxpayer and have income only from NRE account, and no income from India.

There is no tax clearance certificate required.

My brother who is in the USA maintaining an NRE account here with SBI. Does he have to file for tax return in India for the income from the interest he has on this account? He is not showing this on his US tax return as the interest accumulates and remains in India only.

Currently there is no tax on the interest and hence no need to file return.

I am a PIO interested in resettling in India after retirement. I have monies in a statutory provident fund in the US (statutory in accordance with US laws). What are the Indian Income tax implications of withdrawals from these funds after I become an ROR in India? How will my foreign capital holdings be treated under Wealth tax?

This will not be taxable in India.

My friend has just received a foreign inward remittance (from sale of shares in the U.S.) of 1.44 crore. Can this amount be invested in Indian markets - in debt and equity? If yes, what is the tax implication for my friend - what will he be charged? And what instrument would he need to invest in to save the entire tax?

Investments will be possible subject to existing limits in different companies. Debt investment is also possible. Tax on dividend is exempt in India for the shareholders. However, specific tax advice will be necessary as the quantum of investment is quite significant.

I am a NRI since 1995 and intend to take up employment in India effective August 2005. When I leave my current employer in Saudi Arabia, I am entitled for end of service benefits, etc. Will they be taxed in India?

The terminal benefits will not be taxable in India.

I have been living in the US for the last 6 years and I am still an Indian citizen. I have a few NRE deposits and I plan to come back to India permanently next year. Whatever income I earn in the US by next year, I plan to transfer that also to the NRE account before my return. Question is when I withdraw money from the NRE accounts on my return to India and utilize it there, will I be subject to any Indian income tax?

No tax will arise on withdrawals from the NRE deposits.

I heard that NRI accounts would be taxable from 2005. Is this true, if so when is it effective from? Where can I find information regarding filing taxes etc?

Interest on NRE deposits continue to enjoy tax exemption and the 2005 deadline has been removed.

I am an NRI currently living in Spain. I intend to sell a house in India, which I had purchased for Rs 13 lakh, for Rs 19 lakh. I understand that if I invest the capital gains in bonds, it could benefit me, as I have an NRO account in India. If I do not invest in bonds, what will the rate of taxation be on the capital gains? Further, can I use the Rs 13 lakh to cover my expenses when I visit India on a holiday? The house is 9 years and 8 months old.

The tax rate on long-term capital gains is 20%, plus a surcharge of 10% on the tax payable, if the taxable income exceeds INR 1million. An education cess of 2% is applicable on the above. In computing the cost of the property (which is deducted from the sale value to compute the taxable income) inflation indexation as prescribed by the Government will be admissible.

I have been sending money to my parents to support them. Does my father have to pay income tax for the money I am sending him from U.S? I also sent money for paying my dad loans. Is this money taxable to my dad as well? I don't have an NRE account. I have sent Rs.5 lakhs.

Money sent to your father is not taxable for him.

As an NRI for the last 7 years I would like to know whether I could invest in Post Office Savings Deposit without attracting any Tax. I have been given to understand that interest income up to Rs.1 Lakh per person per annum is exempt from Income Tax. Please confirm whether this is correct.

Post office deposit is not open to Non residents.

I immigrated to Canada in 1995 and now I am a citizen of Canada. I recently opened a Citi Bank FCNR deposit. My questions are:

    a. Would I have to pay income tax on earned interest on these deposits in Canada?

    b. Or would I have to pay income tax in India?

    c. If I withdraw these funds back for my personal use in Canada then would the interest earned on these deposits be taxable in Canada?

    d. Does Citibank or RBI report interest earned to the Canadian government when these FCNR deposits are repatriated back into Canada?

Interest on FCNR deposits is tax free in India. Status in Canada to be checked locally. Withdrawal doesn't attract any tax in India. Please check with Citi whether they have any reporting to the revenue authorities.

I want to purchase a two bedroom flat in Delhi. I want to know if I purchase the property in my wife's name will the tax paid for registry etc. be less as compared to the situation when I purchase the property in my name.

Registration costs are the same for any individual buying a property

What are the options available to an NRI returning to India for good? How long does his accounts (NRE and FCNR) continue to retain the non-taxable status? Am I to understand that for example, if I arrive to India for good on 1.6.2005, my income would be taxable only after 1.6.2007 (after 2 years)?

FCNR/NRE income is not taxable till you become an ordinary tax resident of India. Normally two-year time frame would be available. This rule operates on the basis of the tax assessment years. The exemption, if applicable, will not be available beyond 31/3/07, at best. Since the applicability of this depends upon exact no of days stayed in India in preceding years etc., the generic advice given needs to get validated on specific facts.

I propose to dispose my property in India and gift some amount out of the sale proceeds. If so how much tax have to pay?

Sale of property is subject to capital gains tax. Rate will be 20% + surcharge (as applicable) and education cess, if the property is more than three years held by you. Gift doesn't attract any tax in India.

Since 1991 I had been a NRI. I have FCNR and NRE deposits with Banks in India. I have a house property that is kept locked and used only when we visit India. I have another house under construction. I have only small amounts of dividend income in India. I have no PAN and have not filed return also since 1991. Is it Ok under our tax laws? Should I get PAN and start filing returns?

Need for filing return arises only in the event of taxable income. Since you don't fall in that category, no need to file return of income.

My parents moved to Canada from India about 35 years ago and are Canadian citizens, however would now like to move back on a trial basis. They intend to get a PIO card. We are now wondering the procedure to purchase a place in India and also the tax implications as my parents have significant pension income accruing in Canada, of which they would like to send a portion to India every month to cover living expenses. We would now like help with the taxation, i.e. is there a tax treaty in place, as we will be paying tax in Canada. Please advise.

The position on PIO card needs to be ascertained from the immigration officials in the Indian embassy. On taxation of pension, for two tax assessment years after return to India, tax will not arise due to the tax residence status in India. After that point of time under the terms of the tax treaty between Canada and India, only Canada would have the right to tax pensions. However, detailed professional advice on the operation of the treaty rules may be taken.

The move by the Government to tax the interest income of NRE deposits of an NRI from 1.4.05 has been given up. What about the interest income from RFC account for a RNOR?

Interest from NRE Account only is exempt from tax and not any other account.

I will be returning to India for good after being an NRI for 11 years. I want to transfer Rs. 40 lakhs to my wife's name (house wife) in India and make her a separate assessee so that we can enjoy reduced income tax. Will this be allowed or her income will get clubbed with my income? The money in question was earned by me when I was abroad. What if I transfer the amount in my major son's name?

Clubbing of income will operate in the case of the spouse and will not arise in the case of the major son.

If I am working in US then do I have to pay tax on my NRE account there to US govt?

You will have to check the U.S law and then act accordingly. Interest on NRE Account is not taxable in India.

I have been staying in US for about 8years and about to relocate back to India in Aug 2005. Do I have to pay taxes on my US income for 2005, as I would be staying in India for more then 180 days for the tax year 2005, which ends in India on March 31, 2006? I understand that I will have to pay taxes on the income that I make in India once I return but what about my US income for the year 2005? If I have to pay taxes is there a way to claim it back so that I don't end up paying taxes twice in US and in India?

After your return to India your US income will not be taxable here for a period of 2 years and thereafter it will be taxable in India

I am interested in investing in Mutual Funds for more than 3 years. Also, I am planning to return to India in 5 years permanently. I was wondering what is the tax rate for capital income in equity funds. When I left India, I had a regular savings account. Can I transfer money in that and then use the SIP option to invest in Mutual Funds or should I invest in USD? What will be my tax rates in either case? Can I transfer money in my India account and then invest in stock options?

Dividend earned from equity-oriented mutual funds is tax-free. Long-term capital gains on sale of unit of and equity-oriented fund is also tax-free. You could invest from savings account or dollar account. Both are permissible,

I have an NRO Fixed Deposit Account in which I earned Rs.24,699/- as interest out of which a sum of Rs.7,558/- was deducted as tax (Rate 30.60%)and a TDS Certificate issued to that effect. The money for fixed deposit was transferred from my NRE Account. My question is since my total income for the period 01-04-2004 to 31-03-2005 is only Rs. 24,699/- will I get refund of the TDS amount of Rs.7,558/- because of higher Standard Deductions for women?

You can get the TDS refunded by filing a return of income in India and demonstrating that your income is below the threshold limit.

I am a PIO living in the UK and I inherited a property in Delhi in 1999 after the death of my father. The house was built in the sixties and I am now selling the house. For the computation of capital gains how will the cost of acquisition be worked out? Will the 1981 valuation be index-linked from 1999 (when I inherited the house) to 2005 or will the 1981 valuation be index-linked from 1981 to 2005?

For arriving at the cost of acquisition in case of asset acquired by will, the cost of the previous owner has to be considered. Thereafter the fair value as at 1.4.1981 is to be taken and the indexation applied till the year of sale, which is the current calendar, in your case.

I have been living in US since Jan 2, 2004. I have interest income of approx. Rs. 1,22,000 with a TDS of approx. Rs. 12,000 from my savings accounts in India. Shall I file my tax returns for financial year 2004-2005 in India or does the chapter XII A apply with respect to not filing tax returns because of TDS?

On the facts of your case Chapter XII A will not apply. You will have to file a regular return of income and avail credit of your TDS.

I have been resident in the US for 1.5 yrs and plan to return next year. I am contemplating investment in a 401k here. I plan to return to India and withdraw small sums every year (to avoid any US taxation beyond the 10% early withdrawal penalty) and file a 1040 NR (US non-resident tax filing). Will I need to file taxes in India on the same amt?

As long as the accretions are withdrawn, there would be no tax in India after your return. But, income accruing thereafter may be subject to tax.

Can an Indian citizen operate an NRE/NRO account jointly with a US minor citizen? If so, what are the options open for naming a guardian and their tax implications in US and India?

Minor can operate only through a guardian and the position may be confirmed with the bank concerned.

I am a retired US citizen of Indian origin and am going to stay in India for 9 to 10 months and 2 to 3 months in US with a PIO card. I maintain habitual abodes in both places. Since Article 4 of the Indo-US DTAA states that a person having habitual abode in both states will be considered a resident of the state of which he is a national, I presume that my residential status will be that of NRI and not RNOR or resident, irrespective of the length of stay in India. Is this presumption valid? Also, all my vital economic interests are based in US. Assuming I am treated as a resident of India, will my withdrawals from my IRA, accumulated before my move to India, be taxed there? I understand that Social Security benefits are not taxable in India.

The status may need to be seen each tax year. The benefit of treaty will certainly be applicable irrespective of the residence of which taxing state you are. However, the effect of local tax law is quite critical on how the tax would finally arise. Withdrawals from pension scheme should not be subject to Indian tax.

I was working in Singapore since June 94 to June 2003. I am working in India since June 2003. While in Singapore, I contributed every month to the government central provident fund (CPF) from my salary (similar to EPF). In Singapore, this is treated as EEE (exempt-exempt-exempt). The PF pays interest every year on the provident fund balance. Both the capital and the interest cannot be withdrawn until the age of 55 years as per Singapore government rules. I am currently 36 years old. As a resident of India (ROR), I'd like to know if: 1) the interest accrued in the Singapore CPF every year will be liable for tax in India, and 2) the tax implications of withdrawing this amount 19 years from now and remitting it to a bank account in India.

The interest accrued on the Singapore CPF is not taxable in India. Withdrawal after 19years does not entail any tax liability both in Singapore and in India. Remittance to a Bank account in India also has no tax implications.

After selling some shares, in order to avoid capital gains tax, I invested the money (1 lakh min.) in REC bonds 3 years back. Now they have given us an option for withdrawal after 3 years or continue with a lesser interest rate. I opted for withdrawing the money with accrued interest. Would like to know whether 1) I will have to pay any capital gains tax on this amount? 2) Is the interest taxable?

There will be no capital gains tax on withdrawal since it is made after the lock in period. Interest on the bonds is, however, taxable.

I am a Canadian citizen of Indian origin. Having lived in Canada/US for 20 years, I returned to India in June 2002 on a PIO card. I have a PAN number and have been filing Indian income tax returns since the fiscal year 2002-03. In parallel, I have been filing US tax return since I am a green card holder and have a re-entry permit valid until 2007. In my US tax return, I basically show all my Indian income and the Indian taxes paid.

Since my total income is less than $80,000, I don't have to pay any US tax. My questions are as follows:

1) If I purchase and sell stocks / mutual funds in the US, what are the tax implications in India (on any profit or loss)?

Indian taxes will apply on global income for a tax resident in India, which you would be unless you stay outside India for a minimum period of 182 days in the relevant previous year.

2) Can I purchase shares/mutual funds and other investment products in India freely just as any other Indian citizen? Are there any restrictions?

You can deal with investments in India freely.

3) If I were to give a gift of Rs. 3.5 lakhs each to my brother and sister, do they have to pay any taxes on it? Would any official start asking questions?

Gift to brother/sister will not give rise to any tax in their hands. Even if the officials question, explanation should be possible in this case.

I am NRI staying in US for past 14 years. I purchased land in Bangalore in 1996 and I pay property tax for the land every year. I had come across in one article that NRI are not required to pay property tax on the land they buy in India. Is it true?

No such exemption exists according to the best of information available.

I am an NRI residing in US from last 10 Years. If I send some money as a loan to my cousin in India for Real estate development, what are the tax implications and is it possible for me to get the loan money + interest back to US as Dollars?

If the borrower gets due approval of the Reserve Bank of India then repayment would be allowed in forex.

What is the TDS rate applicable for making payment to overseas company as professional fees?

The rate for deduction of tax at source is 30% or the rated specified in the double taxation treaty with the country, whichever is lower.

I am an NRI, living in US for past 2 years. I will be going back to India after one year. After which, I want to buy a house in India. I will be using my US earned money for this. I will transfer the money to my Indian resident savings account. I know that mere transfer of funds from US to India is not taxable, since I have already paid tax in US. Do I have to pay any tax when I use this money to buy house?

Deployment of the money to buy the house has no tax implications in India. If the house is let out and you receive rental income that will be subject to tax here.

My parents and I are Indian citizens, resident in the UK. We have a few questions:

a) As we have been living in UK for over 182 days a year, are we automatically considered NRIs. Do we need to make a declaration and if so, to whom? How long does it take to get the NRI status?

b) We own several shares in India. Do we need to make any declaration on our status before we sell these shares?

c) How many years do shares have to be held for before they are exempt from capital gains tax?

d) What is the process of repatriation of proceeds from the sale of these shares? I am aware of a $1M maximum per year. Do I need permission from the RBI?

e) The gain from these shares would be considered capital gains. What is the capital from the sale of these shares considered for Indian tax purposes?

a. There is no formal declaration for an NRI status. This has to be indicated in the return of income or other designated forms.

b. The shares can be sold and the status can be indicated while filing the return of income.

c. For listed shares the holding period is 12 months and long-term capital gains tax will not apply.

d. Repatriation is permitted with the specific approval of RBI.

e. The capital gains tax will be computed taking the cost of acquisition as the capital and the sale consideration as the sale price.

I will be in Singapore on Employment Pass for 4 months. My salary will be paid by my company's branch office there in Singapore Dollars. I will be paying Tax @15% in Singapore. I am in the 30% Tax bracket in India. Will I have to pay tax in India when I return, for the Total Salary earned in Singapore? If so, what is the % of Tax? Is there a Tax credit for the Tax paid in Singapore?

You will have to pay tax in India for your total income earned which includes the income earned in Singapore. The tax rates are based on the slab system with a maximum rate of 30% plus surcharge of 10% if the income exceeds 10 lakh plus education cess of 2% on the tax. The tax paid in Singapore can be availed as a credit on the tax payable in India.

I worked abroad from June 02 to June 04 and paid tax @15% and returned to India in July 04.What is tax liability for income from Apr 04 to Jun 04 for which tax@15% was paid abroad?

The tax liability for the period April 04 to June 04 will depend on the total income earned for the period April 04 to March 05. The max marginal rate is 30%. The 15% tax paid in Singapore can be set off against the tax liability in India.

Does GOI make any distinction between foreign sourced income versus Indian sourced income, when a person is ROR? What are the current tax rates for ROR (Residents/Ordinarily Residents) on following incomes earned from a foreign country like USA?

1. Long-term Capital gain
2. Short-term Capital Gain
3. Dividends
4. Interest

What constitutes as a long-term capital gain? Are there different rates for the mutual funds (in USA) as well?

The tax on long-term capital gains is 20% plus surcharge. On other categories of income it is on the slab rate with a maximum of 30%plus surcharge. The holding period for asset based in US is 36 months to rank for long-term capital gains. The tax rates for mutual funds in India are the same.

I am planning to acquire a 2nd apartment/flat in Maharashtra, in my name. I bought the first one in 1983. Please advise on implications of Wealth tax and other taxes. I am an NRI for the last 25 years.

One house is exempt from wealth tax without any limit. The other house is liable subject to the overall 15-lakh basic exemption.

I am a British citizen with a PIO card. I have lived in the UK for 10 years and am now relocating back to India. I have earned income from investments in the UK. If I am filing my tax return in the UK than do I have to pay tax in India as well? It is likely that my income would be approximately œ5000 per annum, which is below the personal allowance in UK and I will therefore have very little tax burden from my income in the UK.

If your stay in India during the year is less than 182 days your UK income is not liable to be taxed in India.

I was an NRI until the year 2003 and have RNOR status. I have a few NRE Fixed Deposits that were opened in the year 2002 (when I was still an NRI). The FDs are maturing this year (2005). Could you please let me know whether the interest income on these fixed deposits is liable to tax?

Interest earned on NRE Account is exempt from income tax by virtue of sec 10(4) (ii) of the Act.

I am working & earning in US. All my US income I show in US Income taxes. My name also appears in family business in India so in India my family files India income tax returns. They have been just filing regular returns. Do they need to declare I am an NRI and does it change anything for them (different form etc)?

In your return of income filed in India you need to disclose you are an NRI. You will have to offer the income earned in India and pay taxes in India. The question of offering the US income does not arise since you are an NRI.

I am returning to India in Nov 2005 after staying 4 years in USA and joining in government job immediately. I have a house in India and planning to buy a house in my wife's name who is also returning to India with me. Would it be better to transfer cash to India on her name or on a joint name with her being the first-named, to buy the house? Can I take any house loan on my name on the house I am going to buy on my wife's name for tax benefits? I will appreciate your help and possible alternatives if any.

You can gift money to your wife and there is no gift tax. It will not also be treated as income in her hands since it is received from spouse. A housing loan can he taken by you and the repayment will rank for deduction up to overall limit of 1.0 lakh under the new section 80C of the Act.

I am US Citizen but born in India and recently my Father also became U.S.citizen. My mother has green card and we have applied for her U.S. Citizenship.

My father has 25 Lakhs in bank that he wants to give to me as gift. a) How can we legally transfer that money in U.S. dollars? b) Which is better - Transfer in U.S. dollars in my fathers name and then he gives me as gift or gives me as gift in rupees and then transfer in US dollars under my name? c) We also have house under my mother's name that we want to sell and transfer all proceeds to me, which I need convert into dollars.

Presently, the said transaction would not have any tax implication in India. However, given the status of you and your father the implications in US should be independently checked. Repatriation up to 100,000 USD should be possible with RBI approval in the circumstances mentioned by you.

I have FCNR, which I have broken to deposit into my NRE account. I have used this amount to buy a unit linked life insurance plan. Should I as an NRI be paying capital gains on this process?

Not clear how capital gains arise in the given circumstance as FCNR earns interest that is exempt from tax.

I was working in US on L1 visa from the duration of Dec 2004 to May 2005. My stay was expected to be 1 year, so the taxes were deducted on my salary in US. But I moved back to India in between my tenure. For the India financial year (2004-05), do I have the tax liability on my US salary between Dec 04 - Mar 05 (107 days)? I do not have US tax certificate except my salary slips.

You are liable to taxes in India based on the information provided by you. You will need proof of taxes paid in US to obtain credit in India.

I am a US citizen and a PIO and retired. I have been visiting/living in India on and off and for FY 2005-6 I will be ROR per income tax law. My only Indian source income is nominal interest from ordinary SBI SB A/c (< Rs.8000). My US source income falls under capitals gains and interest. No salary or pension. I understand that India-US DTAA and tie-breaker rules are applied because of dual residency.

Question:
Per the treaty tie-breaker rules, if it is determined that I am a Resident of US and (therefore) Non-resident of India, what are the tax implications and filing requirements in India?

Specifically:
Per treaty tie-breaker clause, if it is held that I am resident of US, is the following correct:
1. Per treaty I am non-resident of India and therefore I am taxed only on income accrued from sources in India. Tax returns need not be filed if the total Income from Indian source is less than Rs. 50000.

2. If the above is not correct, then do I have to show the global income (US Source Income + Indian Source Income) in the returns and then deduct "US Source Income" as exempt income in the tax return? Do I have to use Form 2E? How can I take the benefit of dual tax agreement?

The issue of dual residency is never easy to resolve and in sticky cases the matter would need to be resolved directly between two tax authorities. It is difficult to opine on this in the absence of information on what the residential status has been in a few preceding years. Looks that ROR in India will cause the worldwide income to be aggregated here and in any event income doubly taxed will be mitigated through tax credits. It would be advisable to have the position crystallised with direct professional help.

Can you please assist me with my tax query? For the financial year 2005~2006, I would like to know if I can claim NRI status. I am a seaman working on an Indian ship. My ship makes short trips to foreign countries and comes back to India almost every month. I have been working on this ship from 1st Jan' 05. I am getting down from the ship in a few days time, and am going to U.K. for further studies and will leave India on 31st August 05 and return back after completing the same in June 2006. Now, say, that during this financial year my ship has been in foreign waters for a total period of 40 days. Can I file my return next year as an NRI for this present financial year? If yes then what portion of my earnings will be exempt from tax?

Indian ship is treated as Indian territory and the days spent outside don't help in counting the days outside India. Hence the status will be a resident only. This is also confirmed by the circular no 586 dated 28.11.90 issued by the Central Board of Direct taxes in India.

Is it required for an NRI having a saving bank account to file a IT Return? Is the income of a NRI having monthly income from fixed deposit/ state treasury taxable? If so can it be avoided by filing IT return?

Not a pre-condition to file a return on income. Monthly income form fixed deposit is taxable. Filing of return cannot avoid the tax liability.

I have a PR in UK having spent 4 years .I am planning to buy back the stock options from my Indian company as I need to have the same transferred on my name. I was a non-resident at the time of grant and hence as per UK laws there should not be any Income tax implications for exercise. However I may want to sell the first lot and then reinvest the amount to buy back the rest of my ESOPS. Are there any Capital Gains claims UK can have on the sale of Indian ESOPs? I do not intend repatriating this amount to UK. Can I transfer these shares to my resident demat account as these are based on my earlier resident transactions? Can I transfer these to my wife's resident account with the same depository as she also has the same Resident status as me here in the UK?

The question of capital gains in UK on sale of shares has to be examined as per the UK law. Sale of shares held in Indian company is on the face of it taxable in India. These can be transferred to a demat account in your name or your wife's account.

I am exploring taking up a job with an American Company in Israel and would like to understand the impact of tax laws on this income.

We are not in a position to opine on the tax laws of Israel.

I am an NRI with no income in India. But I was taxed through TDS on share sales in 2003 / 2004 by icicidirect.com. The income from shares is very much within non-tax limits. How do I claim that money back? What docs are required for it? How do I create a PAN no for myself from outside India?

Apply for a PAN no and file a return of income in the NRI circle and claim the TDS amount as refund enclosing the certificate. You can have a power of attorney here to expedite the process.

My friend is an Indian resident assessee and has dividend income in dollars with TDS. Please suggest a method to show income tax return and adjust against tax to be paid or get refund of TDS of dividend received in USA.

File a return of income in India disclosing global income since you are a resident assessee. Claim the US TDS as credit against the taxes payable in India.

I work for a US-based MNC company located in India. The company allots some shares to me every 6 months after deducting a part of my pay through ESPP. If I sell those shares in the US and get the proceeds here in India,
1. Where am I supposed to pay the capital gains tax? In India or in the U.S?
2. What would be the %age of tax I should be paying if the shares are sold within 12 months of purchase considering that these are not bought or sold in India?

The capital gains tax is payable in India at the normal slab rates applicable to Individuals. The gains will be treated as short-term capital gains and hence the normal rates. On the U.S tax position you may ascertain from a Consultant in the US.

I'm a US citizen and planning to come to India May 2006 after a stay of 8 years in US. My question is regarding the taxation

a) By May-2006 I will be having X amount in my NRE account. Will I be taxed for this in India? If not then for how many years I have this benefit? Is the tax only on interest or both on interest and the principal?

No tax on principal at any stage. Tax on interest will arise once you become an ordinary resident in India, typically in about two years after your return.

b) I have stock options that I can exercise. If I exercise them in 2007 May and bring that money to India, will I be taxed?

No tax in India

c) After 62 years I will be eligible for Social security. At that age assuming I'm not in US and still in India, will I be taxed for the social security benefits I receive?

No tax on this.

d) If I work for US company in India and payroll is run in India, do I still need to pay tax in US?

Please seek due clarification from a US tax consultant.

e) I have rental properties in India. Since I will be living here for 332 days, do I still need to pay tax on these rental properties to US?

Please seek due clarification from a US tax consultant.

f) I have read that I will be in status of Resident but not ordinary resident. What is the advantage of that status?

Under this status foreign sourced income will not be taxed.

I am an NRI living in the gulf for 10 years. My parents are above 60 years and living in India. I want to invest 15 lakhs in my mother's name (who is not paying any tax) under the Senior Citizens Savings Scheme (in post office) by transfer from my NRE a/c. Does she have to pay gift tax or any other tax while receiving this sum and on the interests earned?

No taxes will be payable on this.

I returned to India (after working in the US for several years) 2 years ago and will file my Indian income tax return from income year 2005-2006 as a resident and ordinarily resident (ROR). While in the US, my private employer and I made contributions every month (from my US salary when I was an NRI) to an individual retirement account (IRA), which is being managed by a private US based mutual fund organization. These contributions helped reduce my US tax liability at the time the contributions were made. The contributions to the IRA are invested in stocks and bonds. The current balance in the IRA includes the contributions made and the growth in the value of the investments via interest, dividends, realized capital gains and unrealized capital gains. I have the authority to make withdrawals from the IRA at any time, but have not made any withdrawals so far.

For the income year 2005-2006, when I file my Indian IT return as an ROR, please give your opinion on whether the following are taxable or not taxable, along with the reason for your opinion. If possible, please also quote the relevant section in the IT Act, the relevant portion of IT rules, IT circular or the relevant Article of the US-India Tax Treaty on which you are basing your opinion.

(a) Withdrawal of US$10,000 by me from my IRA. Please note that a good portion of this $10,000 will represent contributions and growth in the value of the IRA when I was NRI and RNOR and that only a small portion will represent growth subsequent to my acquiring ROR status.

(b) For income year 2005-2006, is there any Indian tax liability on the interest and dividend earned within my IRA, but not withdrawn by me in 2005-2006?

No taxes should arise in India on these accretions and withdrawals to the extent it can be demonstrated to pertain to the period when you were NR and NROR. However, capital gains, interest and dividends earned in US by a ROR of India will be taxable in India. If you require a detailed legal opinion, please contact a tax advisor, as this is a complex issue.

Follow-up

Can you please refer me to the relevant authority (IT Act, Rule, Circular) that forms the basis of the expert's view? Further, can the expert tell me why the Indian IT authorities should not regard the entire withdrawal from the IRA as a pension and tax the entire withdrawal under the Salary head of income?

Withdrawal of investment is return of capital and cannot be taxed as income based on the basic tenets of law. You can refer to decided cases on what is income from any of the standard text on Indian tax law. However, accretions in the form of income are taxable by the resident country under the double tax avoidance agreement between the two countries. The tax expert whom you approach for advice will help clarify the details to you.

My brother-in-law is a NRI and has a 10-year NRI bank fixed deposit account that is maturing shortly. Can the renewal at old interest rate be done? Will the interest attract tax if not renewed? What is the best option?

The bank alone can clarify on the issue of rate of interest. The exemption on interest is linked to the residential status of the income earner

For the last 15 years I have worked in USA and I have a green card. During my stay in USA, I have contributed to Individual Retirement Accounts (IRA, a tax-deferred retirement account, where contributions are not taxed in that year but taxable in the withdrawal/distribution year). I am planning to return to India next year. I will be NROR for first 2 years upon my return and ROR after 2 years. My questions are: If I withdraw all money from IRA when I am a ROR, will I have to pay tax on entire amount or just for the amount which has been a growth (by means of capital gains, dividends, and interests) from the date I become ROR to the date I taken withdrawals from the IRA account to Indian Tax authorities? My second question is, if I leave money in IRA as it is, during my ROR years do I need to pay taxes to Indian Tax authorities when my IRA account gets credited for capital gains, dividends, and interests?

The withdrawal of the entire principal contributed, and accretions/income earned before becoming ROR will not be taxable in India. However the income earned upon becoming ROR can be taxed, subject to the provisions of the double tax avoidance agreement with USA.

Are withdrawals from Individual retirement accounts taxable in India for a PIO who becomes an Ordinary Resident of India after the 2-year RNOR Status? If such withdrawals are first deposited in a US Bank account and then remitted to India, is this is deemed as income arising in India?

The withdrawal of the entire principal contributed, and accretions/income earned before becoming ROR will not be taxable in India. However the income earned upon becoming ROR can be taxed, subject to the provisions of the double tax avoidance agreement with USA. PIO status is not relevant for tax purposes.

We (my wife and I) are NRIs working in the UK since 1997 on work permit. We are currently buying a flat in Calcutta. Do we need to apply for a PAN to quote in our transactions while paying instalments for the property?

Not required. But advisable from a practical angle.

I need to send some money to India to my parents (more than 10000 dollars). I have opened a NRE savings acct in SBI and they will issue a DD to my parents in Rupees. Is wire transfer a better option? Will I need to pay any taxes here or will it raise any income tax inquiry, as the amount is more than 10000 dollars?

No tax on such remittances.

I was employed and staying in India for more than 182 days for the FY 04-05. I derived income from salaries in India. I was then employed in USA (on H1B visa) and started earning salary in USA. Tax has been withheld in USA and I will be required to file income tax return in USA.

In view of the facts that
1 - I am resident and ordinarily resident in India.
2 - I earned income inside and outside India and
3 - In view of DTAA between India and USA -

i - Will the income received in USA be taxed in India?
ii - Will I have to include the gross USA salary in 'Income under head salaries', compute tax as per the existing Indian income tax provisions and then reduce the tax payable by the amount of tax withheld in USA.

If the answers to the above are "NO", Can it be supported by any recent case laws?

'Yes' to both your questions.

I have some investment in India, which I got as an inheritance from my father who passed away 3 years ago. Can I transfer this money to USA? Do I have to pay tax on that money? And if I can bring it how long it takes for the procedure?

Upon encashing the investment capital gains may arise and be subject to tax depending on the nature of the asset sold and the period for which it was held. Repatriation is possible subject to RBI approval-normally allowed up to 100,000$.

I have been employed by a company in the USA.I have an appointment letter of the company. I receive my salary through http://www.remit2India.com. I am an Indian Citizen and I do not travel to the US at all. I work as a website developer for the company in the USA.I am not sure if any amount is taxed in the USA. I was told that I would receive $1200 per month, and that is what I am receiving. Can you please let me know, what are the tax implications? Will I be considered as a salaried employee or business? Do I have to procure an IEC number? What more documents apart from the appointment letter are required from the Employer? What's a "Foreign inward remittance certificate" and can it help me? Does a FIRC impact tax payable?
I have LIC's, PPF etc to the max permissible limit. I can also provide house rent receipts and medical bills? Will they help me get tax rebates?

Appears like a salaried contract. If the US co does not deduct tax, pay the advance tax to avoid any additional liability. It appears that tax would arise only in India. FIRC is a proof of forex received and is useful for claiming any tax rebates applicable. This is not necessary for computing and paying taxes.

LIC and PPF entitle you to get tax rebate. Medical and HR are tax rebated only of the same is identified in the salary component as an allowance. You can get the salary restructured suitably to maximise the tax benefits.

I am coming back to India after living in Indonesia for 8 months and want to transfer my earning through Western Union Money transfer. Will there be any tax implication?

The transfer itself does not cause tax liability. However, depending on the residential status the check the tax liability if any on the original income.

I came to Norway in Aug 04 and got a job in a company but now am leaving my job and going back to settle in India on 1st Aug 05 and am transferring all the money earned here (around 60000 Norwegian Kroner which is equivalent to Rs 3.90 lakh) to my NRE a/c in India. Do I have to pay tax on this amount in India also although I have paid tax in Norway @ 18%.I shall be thankful if I get a reply w.r.t the figures I have provided in my query.

Since in the fiscal year 05-06 your stay in India looks to exceed 182 days you will be a resident, and be liable for income earned during Apr 05. Tax paid in Norway will be available for set off. The repatriation of the saving will not attract any tax

I am non-resident Indian. I get govt. pension in India and rent on house. Please advise up to what limit my income is not subject to income tax in India for year 2004-05 and 2005-06.

Obligation to file a tax return arises when the total income exceeds Rs 50,000/-. Liability to tax will depend upon rebates, if any, for eligible investments etc.

I am an NRI, have ordinary rupee deposits (FD). The FD was made from the money obtained as rupee (as gifts) while I was in India. The interest earned in the total FDs for every 3 years crosses the Rs. 50,000 limit. Tax is deducted at the source in my bank. I go for re-investment plan. Should I file my income tax returns in India every year, even though the interest earned is once in 3 years?

If the total income exceeds Rs50,000/- tax would be payable. Reinvestment will not help to avoid tax liability.

I am NRI.I have invested in Pension funds in Ireland. I am planning to move to India. The pension funds are private companies operated. My query is that the pension which I get, will it be taxed in India though it is coming from Ireland (it will be taxed in Ireland already)? What will be the rate of tax?

As long as you are an NRI the pension income earned in Ireland is not taxable in India. After you become a resident in India it will be taxable in India subject to double taxation relief as applicable.

Is Inter-company Deputation legal and in case it is legal, what are the formalities need to be followed?

Inter-company deputation is not a taxation issue but in any case my understanding is it is legal subject to the local rules and regulations.

I am employed in Hong Kong as a professor with a foreign university for a period of 1 year starting from May 2005 to April 2006. When I return to India in May 2006, would I have to pay taxes on the income earned in Hong Kong?

For the financial year 06-07 you will have to pay taxes in India on the April salary earned in Hong Kong since you will be treated as a resident in India for that financial year. For the financial year 05-06 the salary earned in Hong Kong is not taxable in India since you are a non-resident.

I am a NRI settled in Australia. My mother built a house in 2000 on an old plot held by family. She passed away in 2002. My brother has asked me to transfer the house in his name through mutual agreement and will be paying me Rs 12 lakhs for that. Will I need to pay tax on the amount received? As I have no other income in India, what would be the tax rate?

You will be treated as a co-owner of the property with your brother and the consideration of 12 lakhs is exigible to capital gains tax here. The exact tax will depend on the cost of acquisition of the previous owner and so on. There are exemptions from capital gains tax on account of specific reinvestment of the gains/ consideration.

I'm planning to open a remittance account here in the USA and hook it up with a checking account of my dad in India. What are the tax implications on both of us?

Prima Facie, no tax implications. Only thing to ensure that any income earned in India is offered to tax here.

I am a resident of India and have come for deputation to Germany. I have stayed out of India for exactly 180 days. I have an option of refund of taxed paid here in Germany. So now my query is: do I have to pay taxes in India for what I have earned here in Germany? How much will be the taxes in India if I have to pay in India?

Since your stay in India in that year exceeds 182 days you will be treated as a resident in India. The income earned in Germany is taxable in India at the appropriate slab rate, the maximum being 30%. You can get set off of the tax paid in Germany on this income.

I am with Infosys, on deputation to US for last 2 years. I have part of my salary in INR and other, much larger, part in USD. I file my taxes in US on the global income (including Indian income). While filing my tax returns in India, do I need to show my global income (USD income too)? And, will I have to pay tax on that income again? Please advise.

Since you will be treated as an NRI for the year under consideration the US income will not be taxable in India. You will have to pay taxes in the income earned in India.

I have a NRE account with Citibank and I am currently in the US on an H1B visa. If I invest around 20K USD in FCNR deposits what are my tax liabilities in India as well in the US. Will I have to pay any tax on the income generated here in the US? Please advise.

Interest arising out of NRE account is exempt from tax in India. You may examine the tax liability under the US laws with a US tax consultant.

I work in the US on an H1B visa and currently contribute to the 401K plans with matching employer contribution. What are my options when I return to India for good? I don't want to withdraw 401k Fund, as there are penalties for the same in the US.

There is no tax implication in India since you are not withdrawing the pension fund.

How long can an Indian citizen stay in India as a NRI? What is the process if a NRI decides to be resident after staying/working for over 30 years abroad?

He can retain the status of resident and not ordinary resident for a period of 2 years after his return to India. For this period his overseas income will not be taxed in India.

I am a US citizen (not an NRI). My wife is an NRI and US citizen. 1997-98 was her last year of residency in India. She had some India bank accounts and shares in Indian companies that were invested in her name by her parents. She did get a tax certificate when leaving India. However, out of ignorance, I don't believe her parents changed her status to NRI in these accounts or indicated she was a non-resident on IT returns. In early 2006, I will be posted to Bangalore for 2 years and want to ensure she gets RNOR status.

1. How can she correct her status for those prior years? Are there penalties or other implications?
2. When in India, since married, will we file a joint return? Does that concept exist?
3. If for some reason she doesn't get RNOR status and is just treated as resident, I assume worldwide income would be taxed. Would it only be income in her name (which isn't much) or also my income (e.g. a house in the U.S. in my name that I sell with a gain)?

You can file a revised return correcting the status before the completion of the assessment. There is no concept of a joint return of income. Each one of you will have to file a separate return of income. In the event of her being treated as a resident and ordinary resident only her global income gets taxed in her hands and there is no fear of your income being included in her hands.

Follow-up:

I have been a non-resident of India (living in the US) since 1998. I used to work for Life Insurance Corporation and still receive commissions from them as well as some dividends on shares of Indian companies and local bank interest. This all amounts to less than Rs 30,000/year. Unfortunately, I now learned that when my parents filed my returns on my behalf, they have been listing me as a "resident" as opposed to non-resident and my bank account is still resident, not NRO. Questions on correcting this situation:

Is there any limit to the number of years back you can revise an IT return? Would the tax owed to Indian government likely be any different? Would there be penalties? Does interest or share dividend reported for a non-resident cause automatic reporting to the IRS in the US?

A revised return can be filed before the completion of the regular assessment. You can file a letter to the dept indicating that the residential status has been wrongly mentioned as "resident" instead of "non resident". There will be no change in the tax calculation and the amount payable to the Govt. To our knowledge there is no automatic reporting to the US in respect of the dividends and interest earned.

I am an NRI. I get Govt. pension in India and income of house rent. Please advise if tax deductions and rebates allowed to resident Indians are also allowed to NRIs. What is tax-free income (after deductions and rebates) for year 2005-2006 and 2004-05? Which tax form (SARAL 2D) should I use (NRI, income of pension, rent, interest)?

The related tax rebate and deduction is available to both residents and non- residents. On the specific issues therein kindly take the advice of a local consultant.

I have been working in the United States for the past five years. My employer is US-based company and the corporate office is located in the United States and we have some branches in India. In the past five years, there was no income from India. Now I will be moving to New Delhi for six months then will be moving to Bangalore for another six months. Finally, I will be back to United States. It is purely an extended business trip.
I am getting paid in the United States (in my US Bank Account) including Pension, Retirement Benefits and Health Insurance and I am paying the Tax in the United States. I am not getting any income from India's Office.
I know that I should file my tax return in the United States. I am an Indian citizen. Should I pay the tax in India? Should I file tax return in India?

For a period of 2 years after your return to India you will be treated as a resident but not ordinary resident. Hence the income earned in US will not be taxed in India. There is no need to file any return of income since there is no income earned in India.

I have done some consulting work for a US-based Pharmaceutical Company. The company is incorporated in the US and has no office in India. However, all the work I did for the company was in India. The work included helping the organisation conduct some clinical trials in India and also follow-up with some vendors here in India in connection with the same.

I will be paid out of pocket expenses and other actual costs will be reimbursed but my consulting fees will be paid by way of stock options of the US organisation. The company is not listed anywhere in the world including the US.

How would such a stock option be treated here in India for my tax purposes? I am a resident tax- paying Indian.

Stock options will be taxable, as you are not employed by the company as an employee. The basis of taxation may be an issue since the unlisted stock may be difficult to value appropriately.

I have seen various questions asked in the site with different answers. One saying that according to last budget, interest on NRE is taxable; another saying that interest on only NRO is taxable and NRE is exempt; and yet another saying that NRI acct interest is taxable (though I have not found any account as NRI account -so I assume NRI acct means either NRE or NRO).
a) Could you please confirm the above?
b) If NRE is taxable and has less interest, then why would anybody go for NRE over NRO (except that it is repatriable)?
c) If income from abroad is non-taxable in any case and only interest is taxable, why would anybody go for NRO when an ordinary rupee checking account gives more interest rate and both are not repatriable?

The provisions of Income tax Act on the subject are clear. Only interest in respect on moneys standing to the credit of NRE Account is exempt. The option of maintaining different accounts in India is not only a taxations issue but also considering various parameters like yield, repatriation issues, convenience of operations etc. We would refrain from advising on the investment issues since that is specific and need-based.

I am an NRI filing my returns regularly. This assessment year I filed my returns but by mistake my CA marked resident instead of non-resident in the IT Form, whereas all the attachment pages show as Non Resident and I have attached all the Passport pages as required. Is it a serious issue?

This is not really a serious mistake but a mistake nevertheless. You can write a letter to the Assessing officer indicating that you are a non-resident and the assessment can be completed on that basis.

I am in the US on H1B visa since Feb 2nd 2005 and wanted to know for filing tax in India, do I need to show the income in US for those 2 months for which I have already paid tax in India? Also can you please explain what the Dual Taxation Avoidance Agreement between India and USA is all about?

For the financial year under consideration you will be treated as a resident in India and your income earned in the US will be taxed in India. If you have paid tax in the US on the US income you can avail set-off of the tax paid in US in India pursuant to the Double taxation treaty.

I have worked in USA for 5 years and I returned to India in March 2004. Actually I took a transfer in the same company. In US the company allocated me some share options. Almost all of those options were vested while I was in USA. Now if I need to sell those options (ADR), will I to be taxed in USA? Will that be taxed in India? If it is taxed in India what will be the percentage (10%?)? I still have an account in USA and have money there. How long can I keep the money there? If I get the money back here is there a tax implication?

This is an issue lacking clarity. On the Indian side it should be possible for you to contend that the benefit is referable to the US employment and further if your status is not changed to resident and ordinarily resident, the case becomes stronger. If the value is high please take proper professional assistance. Taxability in US should be checked with a US tax consultant.

I am an NRI for more than 20yrs. I have NRE/NRO account for online share trading on Indian stock market. I plan to buy and sell shares online through BSE. I hear that any transaction above Rs 50,000 has to be with PAN no. I do not have any PAN no. How do I obtain it from abroad? I have read that you have mentioned NRI should get it through NRI circle in metro cities (I don't understand this). Please mention whether it is possible to get the PAN no. online with Indian tax dept.?

Kindly take the assistance of a local Accountant since this has to be handled with manual intervention. Metro cities are Mumbai, Delhi, Chennai, and Bangalore for this purpose.

What are the tax rates applicable for a person who is resident and ordinarily resident (ROR) and the income source is foreign and constitutes capital gains and dividends arising from companies listed in US stock market and interest earned from US banks' certificate of deposits? To qualify as long-term capital gain, how long the stock needs to be held on to? Are the non-Indian (US-based) mutual funds treated similarly as stocks (for capital gains and dividends)?

Shares listed in US exchanges should be held for 3 years to qualify as long-term capital asset. The rate of tax will be 20% with surcharge and cess added. Dividends will be taxed at normal rates applicable to individuals. Mutual funds will be treated like-wise.

I intend to open a NRO account with HSBC because I am buying a property. I will be receiving some cash help from my relatives (interest free), which I intend to put in the NRO account; I intend to repay this amount in 2 yrs time and also go abroad for further studies. Are there are any tax implications of this?

No tax implication on borrowings, but gifts may be taxed. Borrowing by non-resident may require RBI approval.

I am an NRI living in USA. I have a query regarding tax on Capital Gains. I have acquired some shares of an Indian company in foreign currency (USA). While acquiring those shares, I have paid taxes in USA, on deemed capital gains basis. This tax includes Federal Tax and State tax as per USA SEC regulations.
1. In future, if I sell those shares in India, would I be liable to pay taxes on capital gains in India too?
2. Does DTAA, prevent me paying taxes on capital gains in India?
3. Will Depository Participant (for example: ICICI bank) automatically deduct taxes on capital gains, when I sell my shares?
4. Am I eligible to get tax exemption certificate?

If shares in Indian listed co. are held for more than 12 months, only securities transaction tax would apply and not capital gains tax. If, however, this condition is not satisfied, the applicable tax will be deducted by the bank remitting the money and they will issue you a tax certificate. Otherwise you can approach the local tax officer in India and obtain a certificate for lower withholding of taxes.

My friend's brother who is staying in USA has transferred 30,000$ to my savings account a/c in India. In turn I transferred whole money to my friend's account and he bought house with that. What are the tax implications on this in India? Would any official start asking questions?

On the face of it, on both legs of the transactions, the recipient will be exposed of income tax under the provision of gift being treated as income by virtue of section 56(2) (v) of the Income Tax Act.

I have been living in the US for 8 years. I have ESOP's of a US listed company. What are the tax implications in the US and in India if I decide on selling those shares? All the shares have been held for more than 2 years.

If you are a resident in India during the year under consideration you will be liable to long-term capital gains tax at 20% plus surcharge.

I am a US green-card holder working in India for the Indian subsidiary of the US firm for the last year. I have stock options allotted to me that I can exercise and sell. The options were allotted 1.5 years back and vest over a period of 4 years. Will my sale be taxed both in India and the US? Or will it be taxed only in the US? If taxed in India, does the application of long-term or short-term capital gains in India depend on the day the options were granted or does it depend on the day they vest? How does the Indo-US tax treaty affect all this?

Short- or long-term capital gain will depend on the date of vesting of the stock options and not from the date of allotment. The gains are certainly taxable in India since you are working in India and a resident in India. Being a green card holder, your tax liability will have to be examined under the US law independently.

As per US-India Tax Treaty (DTAA), if an individual is a tax resident of both US and India under domestic law, the tie-breaker rules enumerated in the DTAA determine the State that can tax the individual as a "Resident".

1. If a US Citizen is a dual resident and if per treaty tie-breaker rules the individual is treated as a deemed Resident of US, what is the residency status of the same person for Indian Income Tax. Is it non-resident/not a resident as specified in the Income Tax Act of India?
2. If the individual is non-resident per treaty in India, which part of Income should be declared for Indian Income Tax? Is it only Indian-sourced Income, under ALL heads covered under DTAA?

For US Tax, IRS has clarified thus: If you are treated as a resident of a foreign country under a tax treaty, you are treated as a non-resident alien in figuring your U.S. income tax.

Canada CRA says the same: You may be a deemed non-resident for tax purposes if you're otherwise a deemed resident of Canada who, under a tax treaty, is considered a resident of another country. As a deemed non-resident, the same rules apply to you as a non-resident of Canada.

So the question is whether the same is true for India too. i.e., If an Individual is considered resident of US under tax treaty, is that individual treated as non-resident for Indian Income Tax Purposes and the same rules and regulations pertaining to non-residents per the Indian Income Tax Act apply?

Test of residence in India is purely a matter of the Indian Income tax Act and has nothing to do with the tax treaty with the U.S. It goes by the period of physical stay in India. The treaty is relevant for examination only with reference to treaty specific reliefs. Once your residential status is frozen the question of world income being taxed in India comes into operation.

I am an Indian Passport Holder with green card and planning to take up American Citizenship and PIO Card but reside more than 182 days every year in India. Please clarify the following:
1) Will the tax liability and exemptions continue to be the same? I am a retired executive and senior citizen aged 71 yrs?
2) Any restriction on holding immovable property that I own now?
3) Can I continue to hold shares, mutual funds, postal deposits, bank deposits and bank accounts?

Yes to questions 1 & 3. No restriction on q 2. On any issues in US please consult US tax specialist.

I was a resident in India and running an export business with 3 partners. I have relocated myself to UAE but I am still a partner in the export firm and I am filing my tax returns as an NRI. There is no income tax in the UAE. Will the income generated by me in the UAE be taxed in India? If I decide to come back after 2-3 years will I have to pay tax in India on the income that I generated while I was abroad?

Taxability in India depends upon residential status. No tax in India will arise on your return, for the income already earned in UAE, subject to the residential status aspect already mentioned.

I have recently (20th August 2005) sold some real estate (a flat in Mumbai), which has been in my name since approx. 1990. At the time, I was still a holder of an Indian passport and an NRI only because I was working in the US. Subsequently, I have taken US citizenship.

The proceeds have been completely reinvested in a new flat (under construction) elsewhere in Mumbai. This amounted to about 20% of the new flat's value. This requires additional investment on my part by inward remittances corresponding to the 80% that remains to be financed.

My questions are:

1) Are the capital gains (original investment of 2.5 lakhs in 1990 - sold for 6.11 lakhs in 2005 leading to capital gains of 3.61 lakhs) taxable?

2) Since I have reinvested the entire proceeds into real estate - the sole flat in my (and my wife's) name, do I still owe any capital gains tax?

No capital gains will arise if the entire proceeds reinvested in another house property.

3) Do I need to set up a PAN with the IT Dept.?

You will need to file a tax return and claim the exemption. PAN is required.

4) If this flat is rented out, can the proceeds be remitted to me in US$?

Yes. There may be a quantum ceiling of USD 10,000 per annum.

5) If and when this flat is sold, what portion can be remitted abroad? What portion must be retained in Rupees?

Entire portion can be repatriated.

6) If I were to finance the 80% portion with some Indian bank (like HDFC or ICICI), are there any tax benefits for me?

Interest on loans can be deducted against the rental income

I want to import car held in our company in Tanzania. What are the tax implications & procedure for importing the car?

Import of a car has customs duty implications for which you may get in touch with a customs consultant.

We are planning to move permanently to India in one or two years. All three of us are US citizens. Where can I get the detailed information on the tax planning before and after our transfer of residence, and also a general guidance on what to do and how, in relation to this proposed move? Do we need to retain a tax planner in India?

While there are standard books on NRIs, which can be of some help it would be ideal to consult a tax specialist for a detailed guidance and for filing of return of income etc.

I am non-resident and so is my wife. She had purchased flat in her name in 1991-92 as a local resident for Rs 2,60,000. We have recently purchased a flat in our society at Bombay for Rs 14,50,000/-. Agreement value is 11,80,000/-. We have paid from our NRE a/c from Bank of Baroda. We have joint a/c as NRE. The flat, too, has been purchased in my wife's name. She is a housewife.

Now, we are getting offer of Rs 10.50 lakh for the flat purchased in 1991-92. My queries are:
Can the capital gains portion be adjusted against the purchase of the recent flat? To what extent can we get exemption? If not, what is tax liability? Where have we to invest capital gain to avoid paying tax & for how many years?

You entire capital gains on the sale on house will be exempt since you have reinvested the capital gains on the purchase of a new flat within the stipulated time in sec 54 of the Income tax Act. The question of investing in other instruments is not required in view of the total exemption on investment in residential house itself.

Follow-up query

I have one doubt, as I have purchased my new property as NRI and entire amount has been paid from NRE a/c. So if the property is sold as local resident & capital gain arises, then can it be adjusted against purchase of property by an NRI? We had purchased flat 12 years back; at that time my wife was local resident.

For this purpose the residential status does not matter. You will still get the exemption.

I left India in July 2000 after serving a Public Sector Company for 15 years. My tax returns were filed regularly until FY99-00. Since I had no income in India, I did not file any return till date. However, now I am disposing a housing society flat with some capital gain involved. Now I have following queries:
1. Can I start filing return from now onwards after a gap of 5 years? Will it constitute any offence for not filing return for previous 5 years?
2. Can I buy 2 residential properties as NRI in same housing project from resale market and still save tax on capital gain?
3. I have a PAN number issued from Patiala. Can I file my return at Lucknow or Gorakhpur where I have relatives?

You can start filing the return of income from now since you have made capital gains this year. There is no offence in the earlier years since there was no income in those years to necessitate filing of returns. You can purchase two housing properties and avail the exemption under section 54 of the Act. Since you are a non resident you will have to file your return of income in the designated NRI circle in the metro cities for which a separate PAN no is necessary.

I am a beneficiary of a non-discretionary offshore purpose trust. I would soon be returning back to India. What would be the tax implication on distributions received by me (both ongoing and final on dissolution of the trust) in India when my status will be that of a (a) non-resident;(b) not ordinarily resident;(c) ordinary resident.

If the distribution entails return of capital there is no tax liability irrespective of the status of the individual. We need more facts to answer this accurately.

I would like to know the Tax implications difference between transferring money via an exchange to my savings account in India and an NRI Account. Will the capital be taxable or only the interest? Also how about tax implications in transfering money from NRI Account to a savings account.

Transfer of money to the NRI account or savings account is not taxable. Interest arising out of the NRE account is exempt. All other interest is taxable.

I am on a deputation to Dubai for one-year period. Please let me know about the tax implications on the money transferred from Dubai to my Indian bank account through some exchange.

Transfer of funds from Dubai to the Indian bank account has no Income tax implications.

About 7 years ago, I bought a few shares of a United States firm at a cost of US$1,000 from my overseas income when I was an NRI. At the time of acquisition, the exchange rate was 35 rupees for one US dollar. Now I am resident and ordinarily resident. I sold all the shares recently for US$3,000. On the date of sale, the exchange rate was 43 rupees for one US dollar. I understand that I will have to recognise long-term capital gain on the transaction. I am not sure however how to compute the capital gain. Is it

(a) 129,000 - 35,000 = 94,000 rupees or

(b) 86,000 rupees or

(c) some other amount?

Long-term capital gains will have to be worked out taking the sale value ie.1,29,000 and reducing the indexed cost of acquisition. For this the index factors as notified will have to be applied. Some exemptions are available for reinvestment of the proceeds and for this the help of a local consultant can be taken.

Once an NRI purchases a property in India, for example, an apartment in Bangalore, what is the ongoing property and other taxes required on an annual basis to maintain this property?

Local property and municipal taxes on the property is question is payable as per the local laws. If the property is let out the income arising out is it is liable to income tax.

I was working for a non-profit organisation since 1993. The organisation built a set of apartments and offered them to the executives for an interest free loan. The organisation gave the loan amount to purchase the apartment. The deal was that one should continue working with the organisation for a period of 15 years from the date of signing the bond to get the flat. If one were to leave the organisation earlier, the flat would have to be returned to the organisation and they will refund some part of the repaid loan.
I took up this flat in 1997 but left the organisation in 2005 and hence had to forego the flat. The organisation paid back Rs.40, 000 (forty thousand) against a repaid loan of nearly Rs 6-7 lakh and took the flat back. I did not receive any other compensation on the flat. The issue is that since the year 1999 or 2000, Govt. of India decided to treat the interest foregone on an interest free loan as perquisite income and added it to the yearly taxable income. I had to pay this tax for 5 years and this will amount to a sizeable sum.
My question is that now that I have returned the flat to the parent organisation and have thus foregone the advantages of the interest free loan, would I be eligible to ask for a refund of this excess tax I had paid over the years? I have lost a fair deal of money on this deal, in addition to foregoing the flat. Will I at least be eligible for some tax refund?

You are right. Interest free loan is treated as a perquisite in your hands for the years in question. Unfortunately there is no provision for recouping the taxes paid on account of the loan being terminated for any reason. May be if the assessment is not complete then the returns could be revised subject to time limit withdrawing the income offered on this account.

I have taken a temporary loan from my PPF account. I could not repay the loan for 5 years now. My PPF account is active. How much interest is to be paid by me for repayment now?

You will have to check this out with the Post office where the account was opened and the loan was contracted.

A Cheque for $8,00,000 from West Africa has since been received as a compensation for inward remittance in India. Can you please elucidate on the tax and Legal implications?

Legitimate inward remittance has to be received through normal banking channel. The Foreign Inward Remittance Certificate (FIRC) shall be obtained from bankers, stating clearly the purpose of inward remittance. The inward remittance stated as "compensation" has to be properly accounted for income tax in India.

I live in USA and I would like to gift money to my parents.
1. How much money can I gift to my father/mother without any tax implications for them and for me.
2. Given that I am in US, is there a limit to how much money I can transfer and save in my Indian Rs. Savings account.

1. There is no limit for gift since it is made to parents.
2. Here also there is no limit.

I am a Canadian Citizen of Indian origin, and a permanent resident of the United States. I have property in India I am contemplating on selling.
1. Upon sale of property, how can the funds be transferred across to me here in the United States?
2. What are my tax liabilities (property was purchased 10 years before I immigrated to Canada)?

1. Proceeds can be repatriated only with the approval of RBI.
2. Sale of property in India will give rise to long-term capital gains taxation. Exemption can be claimed on reinvestment of the proceeds/gains in specified assets.

I'm enjoying a NRI status currently. I have NRO a/c with ICICI Bank. Is W.Tax applicable on my deposits? The bank used to cut the W.Tax quarterly on my deposits.

W. Tax is applicable on interest paid by banks on NRO a/c.

A person of Indian origin who subsequently obtained American Citizenship and stayed in USA for 15 years has returned to India recently and has constructed a house property in India only for his residence. His majority of the assets are located in USA, from which he earns interest, dividends.

As per the amended provisions of Section 6 (6) of the I.T.ACT, 1961, he is Resident and Ordinarily Resident.

But, to bring his income earned in USA to taxation in India, he should be a resident in terms of the DTAA entered into between USA and India in terms of Section 90 of the Income-tax Act, 1961.

As per the said Agreement if he is considered as Resident of USA, then such income earned in USA is taxable only in USA as per its domestic tax laws and not in India.

In our view, since he is an American Citizen having substantial investment in USA, (he is not gainfully employed in India), the centre of vital interest is in USA., he should be deemed to be a Resident of USA and in which case, the income accruing to him by way of interest and dividends in USA is not taxable in India.

Please clarify.

Further, please let me know any good Book on Taxation in terms of Section 90 of the I.T.ACT, 1961 read with DTAA, with detailed commentary, and case laws.

If there is dual-resident issue the DTAA has tie-breaker rules to fix the resident status based on criteria like CVI, as stated by you. If According to DTAA between US and India the residential status is fixed as US, and the DTAA gives right only to the state of residence to tax, then no tax can arise in India despite being resident under Indian law. This determination should be made for each type of income. Many books are available on DTAA and you can pick up by visiting Bookstores like landmark that have online facility.

I often visit our company headquarters in South Korea on a business visa. The stay may vary from 15 days to 3 months. During this period I get Indian salary as well as the travel allowance in dollars given by my company. Do I need to pay tax on the allowance, If I either carry this back to India or transfer to my savings account in India?

To the extent spent, travel allowance is not taxable. Unspent portion may be taxable. The employer should advice you the correct course as they have primary tax withholding obligation.

I have been in Singapore since June 2004. My employer is paying my salary through wire transfer to my wife's (SB) account in India. Transactions amount around Rs 12 lakh. Am I liable for tax in India?

No tax arises in India on the assumption that you are in Singapore and rendering the services there, though the arrangement looks unusual.

I am a NRI holding units of various mutual funds. I understand that long-term capital gains would be subject to TDS for NRIs. I am planning to return to India soon, but I would not be selling these units. Once I sell the units after becoming ROR, would I still have to pay capital gains tax? And how much TDS would be deducted?

System of TDS will not arise upon your becoming ROR. The rates vary between equity and income funds.

My father bought a house in Mumbai for Rs 12 lakh 4 years ago. Last month he gifted the house to me. I paid stamp duty at the value of Rs 16 lakh. Now if I want to sell the house, will I have to pay tax or whether it will be called as capital gains (but it is not my investment)? I have a customer for Rs 18 lakh. How much tax will I have to pay? I am an NRE and stay in Dubai. The buyer is asking for Clearance Certificate from Income Tax. How do I obtain it?

The capital gains will be long-term in nature and worked out on the basis of the cost incurred by your father, which will be indexed for inflation at indices given by govt. There is no system of tax clearance certificate for sale of properties anymore. However, you will need some professional assistance to complete the process and file tax returns.

My husband has taken a loan from the bank to buy an apartment. I would like to know whether he'll get the tax benefit if the apartment is registered in my name. I'm unemployed.

The transaction may give rise to complication as 'benami' in nature. However, legally, the property income will be assessed in the hands of the 'real' owner, who will also get the benefit of deduction for interest on borrowings.

My mother was holding a flat, which she has now sold and the proceeds of the flat she wants to gift to me. The flat purchased by her back in 1974 falls under the capital gains tax.

I need your advise on the following

a) Can I reinvest this money into another property under my name?

It won't count as reinvestment for claiming any tax reliefs.

b) If not, then can we jointly own the new property?

Joint ownership is fine.

c) My mother also has 4 other flats under her name. Is there any law that prohibits you from reinvesting this money into real estate and escape the capital gains tax, as I believe the restriction is to a maximum of two properties only? Is this correct?

Reinvestment in another residential property of the capital gains is allowed under sec 54 without any limit on properties.

d) Is investing the proceeds of this sale under NABARD bonds my only choice?

No. See above.

I hold a demat account with ICICIDirect under the "Resident-ordinary" category. About 3 months ago I came to Malaysia and took up a University teaching job. I am likely to continue to stay in Malaysia for about one or two years. Some money that I earned in India is presently in my demat-linked savings account in ICICI Bank in India. Am I legally permitted to continue to use my existing demat account (resident-ordinary) for online trading while residing in Malaysia, using the Indian-earned rupees in my Indian savings account? If yes, how do I manage the filing of tax returns for any income made by such trading?

The account will be designated NRO a/c and non-repatriable. Taxes are payable as applicable under the current STT regime.

I am a US resident and will be soon getting US Citizenship. I am planning to move to India by April 2006. I was told that in India I would not have to pay tax for the first six months, because of the NRI status. Is it true? Also do I need to pay tax in India for the interest on the assets that I have in US?

For a period of 2 years after your return to India you will be treated as a resident and not ordinary resident and your income earned in the US will not be liable to tax in India.

I am a UK citizen with PIO card, taking up full time employment in India. While I am in this employment (I intend to be there for 2-4 years before returning to the UK):
1. Can I avail of the section 80 etc that enable domestic income taxpayers to claim exemption, as I would be a tax paying resident?
2. What kind of bank account do I operate? NRE/NRO a/c or do I have to open normal resident account?

You can avail of the deductions as applicable to resident assessees. You can open and ordinary resident bank account since you would anyway be paid salary here. You can consult any bank official for this.

I work on a ship and wages are in USD and remitted to India through bank. What are my tax implications? I reside in India when on leave.

The tax liability will depend on the no of days you stay in India during the previous year. If it exceeds 182 days you will be treated as a resident of India and your income earned in USD will be taxed in India.

I have been working in UK for last 2 years on work permit. I shall be paid an annual bonus in December every year, from this year onwards. My taxes are deducted from my salary, but I would like to save on tax on this bonus somehow, as this would be my only hard-core saving. Can I save on tax by any means? I have an NRI account with Citibank also. Please suggest.

On the face of it the bonus is taxable in India if it is earned in India.

I am an NRI staying in US for last seven years. I have a flat in India, which was acquired by me 13 years ago. Now I want to sell that off and buy another flat. Need to know following:

1) Will I be subject to any capital gains on account of the sale of the existing flat?
2) Can I deposit the money from the sale into an NRE account and use that for purchase of another flat?

The sale of the flat will give rise to long-term capital gains at 20% +s/c and cess. You can park the proceeds in a specified bank account (not an NRE Account) and purchase another flat within 2 years to avoid capital gains tax.

A US green card holder intends to come to India and becomes a resident as per norms of 182 days etc. Shall he be treated differently as far as NSC/PPF/Life Insurance etc. is concerned? Any other major change in their respective privileges?

No differential treatment. He will be on par with any other assessee here as far as investment and 80C benefits.

I am working for a US company since Nov 2001. Initially I was residing in US. However in 2003 March, the company decided to depute me to Bangalore. Since then, I am residing in India, though my company provides me salary in dollars in US bank account. I pay full tax in US, but I am not paying any tax in India, as I was under impression that due DTAA we can file tax in either place. Please clarify what is the implication of this? How can I make it clean in India at this stage? As my tax record is clean in US, can I avail any benefit?

You will be treated as a resident in India and your US income will get taxed here. You can get relief of the tax paid in US pursuant to the Double taxation agreement.

We are in USA. My husband is in USA since last 15 years on H1, B1, L1. Filing 1040 till 2002 carryovers of capital losses. During 2003 he was in USA only for 10 days and in 2004 he was in USA for more then 260 days. What would be his filing status for the year 2003? During 2003 he has interest and dividend income in USA, which is less then $100 but he has substantial capital loss carryovers and foreign tax carryovers from 2002.

This being a specific U.S tax query we are unable to answer.

I have short-term capital gains (STCG) of 75,500 in AY 2006-2007 and speculation day trading income of Rs.15,000. I also have a salary income of 1.2 lakh and I invest in SIP of ELSS. What will be my tax liability of STCG and speculation? Will it be taxed at my slab rate or flat rate of 10% (120,000+15,000+75,000-100,000=110,000)? What is the provision of sec 111A for STCG and is there an exemption of Rs. 50,000 available? If yes how it will apply in my case?

Short-term capital gains on shares are taxed at 10% and speculation income at normal slab rates. On this basis you may compute the total tax liability.

I have stayed in UK for 2 years and during this time my India salary was taxed in UK and India. Is it possible to claim the tax paid in India? Can you refer me to a website which helps me in filing the details?

You are entitled to double taxation relief in the country where you are a resident.

I left India on 27th September 2005 and expect to be in Kingdom of Saudi Arabia for at least 3 years. If I come to India for a period of, say, 3 or 4 days will I be classified as a 'resident' for Income tax Purposes? If yes, what is the Maximum duration I can stay in India (I left India by a flight starting at 10.30 am from Mumbai Airport on 27th September 2005).

To be classified as a resident in India you need to stay here for 182 days or more. In your case you will be treated only as a non-resident.

I am an Indian resident on an assignment in a group company of MNC. This assignment is for short period. I have come here on 14-15 Oct05. I shall be paid 2 types of allowances on this assignment of mine: a disturbance allowance for being relocated away from homeland and a daily allowance, which shall payable to me here in this country. I would like to know if I save some money from this assignment what shall be my tax liability in India? I am already paying tax for my earnings in India. What shall be my currency if I bring the same to India?

Allowances per se are taxable in India unless specifically exempt through notifications. Hence the daily allowance is taxable. The savings portion is not taxable. The currency to be brought in will be through US dollars.

I am a foreign citizen of Indian origin. I sold my flat in Mumbai. How can I avoid paying capital gain tax? Can I invest in bonds or keep in a deposit for three years?

You could either invest in bonds within six months of the transfer or purchase/construct another residential house within 2/3 years.

I will be moving to Dubai in the UAE as a resident, and working with a private sector company there. I need to know how to best remit money back to my parents every month, without losing anything to taxes and legally. Can you tell me how this can be done?

There are no tax implications on remittance into India from Dubai. You need to consult your bankers and do the needful.

Whether surcharge and ed. cess is applicable on rates of Double taxation (DTAA)? Further the agreement with USA provides for Tax under royalties @ 15% for first five years of agreement and 20% for subsequent years? Whether first 5 years start from the date of agreement entered with foreign company or the date from which this treaty comes into effect?

The rate given in the DTAA is to be taken as the ceiling and encompasses ancillary levies. The five-year period is of the DTAA and not the individual agreements.

I am a resident Indian and got USD cheques for 1000 US dollars for last three months, which I have deposited in Indian Savings bank account. What is the tax implication on that amount?

It is not clear the reasons for the remittance. If it is anything for services it is taxable.

I am returning to India next year after being in Ireland for 4 years.

a) I want to know what are the tax liabilities on my fixed foreign currency deposits. For how long they are tax free? Suppose I convert them into rupees at any day, will I start paying tax from that day?

Upon becoming a resident and ordinarily resident the amount will be taxable. This may happen two years after your arrival in India. Once converted to rupees, tax will be attracted

b) I have invested in Pension funds here, which will mature in 15 years. Will there be double taxation on this money if I get it in India? When I file my initial returns for tax in India do I need to mention about these pension funds or not? And lastly, suppose I am travelling again to another country after acquiring resident of India status, can I bring my foreign currency out of India to spend along with me? Will I have to disclose this money at Indian airport through which I am travelling?

Pension payments may be taxed to the extent it is not out of past savings; however, the position would need to be examined in the context of the tax treaty between the two countries. Forex can be used by you freely for your travel as there is no longer any restriction on this.

I am a foreign national (of Indian origin) with Indian Wife (NRI). I have flat in Gurgaon in joint name with my wife. I have made all payments from my Overseas account in USD. Please let me know if profit from sale of this Flat will be taxable or not. If yes, what is the rate? I want to get all sale proceeds back to my overseas account.

Will be taxable on the gains made, post the benefit of indexation of the cost of acquisition. Long- term (3yrs) gains are taxable at 20% and short-term at normal rates. Proceeds are fully repatriable.

I need to reinvest my repatriable deposit of USD 50000 maturing next month - what are the tax implications on interest?

Unless you are a tax resident of India, interest on FC deposit is exempt from tax.

I came to USA from India just 80 days before with a student visa F-1. I am a PH.D student and a Graduate Assistant and paid by the University in USA for that. They are regularly deducting my taxes. I am planning to open a NRE account in India. My question is that if I open an account before 182 days then will my principle in the account be taxable in India? Also I have heard from my seniors that for the 1st two years in USA I will be refunded some deducted taxes. If I open a NRE account will that be affected?

The taxability in India is dependent on the residential status in India. From the facts given you may not be a resident for the current tax year and will not be subject to tax on the amount received.

I am a PIO and upon my father/ grandfather demise had inherited some properties in Kerala through a will written by my grandfather. It is only now that we are looking to transfer it into our names. We are told by the Village Officer that we must obtain a permit from the Indian Embassy here. We are unsure on the documentation and procedures involved as we are thinking of selling the properties. Also would we be liable to pay tax on the properties?

We are unable to advice on the procedure for registration and a local property lawyer should be able to assist you. No tax consequences arise on inheritance of property.

I have a green card in the US and am being moved to India by my employer permanently with an Indian compensation package (not an expat deal). I am paying for all the relocation costs myself. I will be starting in India in December 2005 & will have negligible Indian income this tax year. For the tax year 2006 I will be filing taxes in the US but will not be reporting my Indian income for my 2006 US federal tax return under the foreign earned income exclusion clause. Is there anyway to claim a deduction for these moving expenses?

No deduction in India is possible. However, any part of the cost met by the employer will not be taxable in India.

In one of NRI queries you have stated "question of TDS on long-term capital gain does not arise, as long-term capital gain from mutual fund equity schemes are exempt". But for NRIs mutual funds are deducting tax on long-term capital gain. Are income tax rules not at par for residents and non-residents? If they are, why this deduction exclusively for NRIs? If one has no other taxable income, can he file tax return and claim refund of tax deducted by a mutual fund on long-term capital gain? If this is refundable what sort of form to be filled for tax return - is it 2E or Saral form? What documents are required? Is TDS certificate showing capital gain earned and tax deducted, is enough to attach along with the return? Will the tax authorities send the refund cheque at my overseas address or direct to my bank in India? Would appreciate your answering all these questions and also clarifying whether long-term capital gain can be added along with other income in order to arrive at minimum threshold of Rs. 1 lakh or is it treated separately and one has to pay capital gains tax of 10% or 20%(after indexation).

The exemption for equity-oriented scheme is applicable to NRI.

I have bought a house in my name and have taken a housing loan, for which I am claiming tax benefits. Currently we are residing in this flat. Now I would like to buy a flat in my spouse's name and would like to avail of a housing loan for the flat purchase.

1) Can I claim the tax benefits on this loan once my existing loan gets over next year?
2) If I am paying EMI from my salary account, can my spouse claim tax benefits on this?
3) If the EMI is paid from a joint account, can my spouse /myself claim tax benefits?
4) Am I eligible for a tax rebate for my second house, at all?

The tax benefit on interest is available irrespective of the number of properties as long as the specified conditions in Law are met. However, only the owner can claim. In other words, the loan should be taken by the person who is the owner of the property.

If I deposit certain amount of money in USD into NRO account and want to withdraw most/part of it in rupees in India, should I need to pay any taxes? If so, how much? As an example, let us assume I deposited 1000 USD. Can you please briefly explain how much tax would I have to pay if I withdraw the money within 1 mo after I deposit or after 1yr after deposit?

Withdrawals are not taxable, but interest is.

I am an Indian working in a multinational company and I am in Sweden from January 2004 on an assignment. During this period, I had been to India couple of time during project breaks. So, as per calculation I am not an NRI from the year 2004-2005. I have the following questions regarding my tax return filing for 2004-2005.

I got a mail from the tax representative of my company asking to declare the savings in per diem. In his view "Any savings on per diems will be liable to tax in India."

Now my questions are:

a. My tax representative has already filed Income tax return in Sweden for year 2004-2005, on the per-diem that I have received in Sweden. So, I guess I have already paid tax in Sweden for my income in Sweden. So, do I need to again declare savings from that income (per-diem) and pay additional tax in India for that?
Moreover, does savings mean the savings in Swedish bank account, or the money that I have transferred to India during year 2004-2005?
b. If I have sent money to my parent's account in India, then do I need to pay tax on it? I have already filed Income Tax return in Sweden based on my income (per-diem) received in Sweden. So, do I again need to declare this transfer as savings and pay any additional tax on it?
c. Do my parents need to pay any tax on the money that I have transferred to them from Sweden? Also is there any legal implication of transferring money to my parent's savings account in India from my bank account in Sweden?

Please note while answering the questions that I am not falling in NRI status for the year 2004-2005.

The savings in per diem is taxable if you are tax resident in India. However, the practice varies across companies and taxpayers. Benefit of double taxation benefit can be taken. The liability is on the total savings and not on what is deposited in the bank or remitted to your parents.

My husband and I are PIOs and would like to invest in India for investment purposes.

If we were to purchase the residential property using our foreign funds, I understand when the time comes to repatriate the proceeds of the sale we will be able to do so.

Our Questions are:
1) I understand we can get a loan as PIO from an Indian bank. If we use foreign fund to pay the monthly interest payments, is it still considered using foreign funds when it comes time to repatriate back?

Yes. However, have this clarified in writing by the bank.

2) If we were to rent it out is the monthly rental income repatriable?

Yes.

3) What are the tax implications for the rental income?

Taxable with deductions for the interest and a flat deduction for maintenance etc. Please take the help of a tax practitioner to know the exact liability.

4 a) If we sell within 10 years the principle is repatriable I understand, and any capital gains is not. Is that correct?

Full amount would be repatriable, after payment of taxes.

4 b) If we hold the capital gains for the rest of the time until we hit the 10-year mark, then are we able to repatriate the total gains back?

See above

5) At what point would we have to pay out any capital gains tax?

When the sale is effected.

6) Is it possible to repatriate back after paying capital gains within 10 years?

See 4 above.

7) Are we free to repatriate back freely after capital gains is paid off if the property is sold after 10 years?

Yes

From what I have seen in your columns thus far, a US citizen (and PIO card holder) with an IRA (Individual Retirement Account) in the US will apparently be taxed on any "increase in value" of the IRA that takes place -after- the person has spent two tax years in India and becomes an ROR. Even though the tax is covered by the DTAA, it still means a tax is owed on this "unrealized gain" in India and it completely destroys the benefit of keeping your money in the IRA in the first place, the whole point of which was for it to grow tax-free until retirement. My questions:

a) Are there no special provisions in the DTAA between US and India that prevents this tax, which is a new burden?
b) If the answer is no, then is there a special place to lobby the DTAA authorities on both sides?
c) If the answer is yes, can you point me to the appropriate section in the DTAA that deals with this?
d) What if the IRA loses value? Can the "unrealized loss" be also claimed as a tax deduction?

Possibly the earlier clarifications have been misunderstood. The tax arises only on realised gains and if the accruals are not realised, then no tax liability arises.

I have moved to the UK on a work permit and plan to work in this country for 10-15 years by which time I would be 40 years old. I plan to come back to India thereafter and settle down in India. What will happen to my pension contributions to the employers pension fund (invested in private pension funds in UK)? Will I lose it altogether or will I able to transfer the money to a pension plan in India?

This is not a tax issue but dealing with the pension investments. If permitted you may be able to encash the pension benefits in UK or avail it on a deferred basis.

I was an NRI up to 2002-03 financial year for last six years. Then stayed in India for 2003-04 financial year all throughout. Became an NRI again from the next financial year. How the taxation shall be applicable to me assuming no income, foreign or Indian, during the stay in India?

In the year you are a resident in India you will have to pay tax on the income earned in India. Since you do not have income earned outside India the question of taxing that does not arise.

My friend has sold a property worth Rs. 18 lakhs (land worth Rs. 10k 1980 and building 150 k in 1983). What would be the capital gains tax?

The capital gains will be worked out taking the sale value and reducing the cost of acquisition duly indexed to current factors. The rate of tax is 20% plus surcharge. You could avail exemption from the tax if the consideration is invested in specified bonds.

I am staying in Japan from 01/07/04 to 01/01/05 and again 13/02/05 till date. Please tell me if I transfer funds to India will that be taxed? I am here working on deputation but the money I am getting is from Japan subsidiary of Indian company.

For the year under consideration you will be treated as a resident in India and the income earned in Japan will be taxed here. You could avail set off under the tax treaty in respect of the tax paid in Japan on the said income.

I am NRI since the last 20 years. I want to return back to India and I want to know how I should plan about the money in my NRI account& whether it has wealth tax implications?

There are no wealth tax implications. As far as investment is concerned you may take the advice of an investment consultant.

I am currently based in UK (NRI with Indian citizenship). I bought a residential plot in India in year 2003 (less than 3 yrs) and the payment was made through Citibank NRE account. Now I want to sell this land and to reinvest whole amount in another 2 plots of land. I wonder if I have to pay any tax on the amount I will get after selling my land though the whole amount will be reinvested in another plots.

Since this is a sale of a short-term capital asset the capital gains is taxable at normal slab rates. This is notwithstanding your investing the proceeds in residential plots.

Are there any legal tax problems in getting a wire transfer to my account as a lottery gift from a foreign account?

There is no tax problem in getting a wire transfer from a foreign account.

For the tax year ending March 31, 2005:
1.Can an NRI senior citizen use Section 88B deduction of Rs 20,000 for income arising from capital gain, interest income and LIC annuity?
2.Is there a surcharge if gross income is greater than 8.5 Lakhs and how is it calculated? 3.Is there an education levy?

1. An NRI is entitled to claim the rebate under section 88B of 20000. This is withdrawn from asst year 2006-2007.
2. For the year under consideration surcharge is leviable at 2.5% on the tax if the total income exceeds Rs 8,50,000.
3. Education cess is leviable at 2% on the Income tax plus surcharge.

If an NRI returns to India to work for the same company the one was working on in US with long term intention of stay, but the company decides to continue paying the person in USD "what and how" an US employee would get. Could you please provide details about the taxation and the residency status in those scenarios?

You will be treated as a resident in India if your stay exceeds 182 days and the salary earned here though in U.S dollars will be taxable in India. If the same has suffered U.S taxes then it can be set off against the taxes payable here.

Follow-up query
I have a follow up question about how to bring the USD to India. Is it ok to bring via the NRE account (since that has different implications, the person has paid tax abroad) or I need to deposit the FC checks (or via Wire Transfer) to ordinary Indian bank account, since I will be paying Taxes in India anyway? I am guessing the latter, since if you consider resident then I may not even continue to have NRE account, right?

You may continue to have the NRE Account.

Is dual citizenship allowed in India? What is the benefit of such a rule if I go Canada, Australia and New Zealand?

You may have to consult an Immigration lawyer for this.

I am an Australian Citizen. My parents have FCNR account with Citibank where I am 3rd applicant. My parents want to make me first applicant of those FCNR accounts. Do I have to pay any tax in Australia? If yes, how much and where can I get more information on this?

This is not a query relating to the Indian Income tax. You may consult an Australian consultant for this.

My parents bought a property in India couple of years back and I gave some money from US dollars through a NRO account. Now they are going to gift their property to me. In case after few years if I sell the gifted property can I convert the entire sale amount in dollars? If so do I need to pay any tax? Or any other fees?

Sale of immovable property is liable to capital gains tax at 20% plus s/c. Conversion into dollars would entail RBI approval.

My mother owned a flat in Delhi. She passed away in 1992 and I have got the same mutated in my name. I now wish to sell it and have been given to understand that I do not have to pay any capital gains tax if I do not purchase another property with the proceeds, since this property is inherited. Pls clarify.

Even if it is inherited property you have to pay long term capital gains tax at 20% plus s/c on the difference between the sale value and the indexed cost of acquisition.

I am a software engg. Due to my work, in the current financial year, I was out of India for almost 250 days.
1) Will I be considered as an NRI? If yes, what are the benefits that I can get because of this NRI status?

2) During this period I was getting my Indian salary in my Indian A/c and allowance (in USD) in my NRE Account. Should I need to show this NRE Account as well while filing the return?

You will be treated as a non-resident for that year. Your income earned in India alone will be taxable here and the amount earned in US dollars will be tax free.

I'll be returning to India after 11years of working for Ministry of Health. I have a NRE A/c presently. Would I be eligible for a 2 or 7-year tax exemption? Kindly clarify.

You will be eligible for a 2-year exemption.

Being a Marine Engineer has been an NRI for about 28 years through this year when I had to return back from duty due to health reasons. I have been home since August 2005. May I know how long is my NRI status valid in India? I don't think I would start working abroad anymore.
1. How long before my status could change from NRI to resident during my stay in India? 2. Will going to abroad for a short term help me retain my NRI status? 3. I have most of my earnings as FCNR and would like to know whether they get converted by default to INR once I lose my NRI status?

On your return to India you will be treated as a resident if your stay in India for the previous year exceeds 182 days. You can retain your status as resident and not ordinary resident for a period of 2 years from the date of your return and ensure that foreign income does get taxed here. There is no automatic conversion of FCNR Account to a resident account.

If NRI don't open NRI accounts and still maintain their resident accounts, what is the tax impact?

If a resident account is opened the interest thereon is taxable here.

I was in USA for 5 years; I have a NRE account. As an NRI, interest earned is exempted from tax. Now I am back to India. Please let me know what should I do for NRE account, and till what date it interest earned will be exempted from the tax. Also please let me know after returing to India for how many days my status will be NRI and when it will be changed to resident?

Interest on NRE Account is exempt in respect of a person who is a resident outside India. RBI may permit a person to maintain the aforesaid account. You will be treated as a non- resident as long as your stay in India does not exceed 182 days.

I have recently become an NRI. Prior to my relocation overseas (UK), I have been operating normal savings and fixed deposit account with various banks in India and have some INR deposits / savings still lying in India. My question is, if I invest this money in Equity / MF in India, what kind of income tax and other rules apply to me? I have not repatriated this amount from overseas; this is my Indian earnings (while I was in India), which I want to invest.

Investment in equity-linked mutual funds has no tax consequence and the dividends arising thereon is tax free.

I live in US and am an NRI. I have two questions
1. I want to transfer my money to my father's account (resident) in India. Say, my father invests them to get some interest. Is both principal and interest taxable? If the principal is not taxable, is there a limit for the amount that I can transfer?

2. I want to give some money to my friend in India from here. He will repay the amount in installments to my father. Is my friend taxable for the amount he receives and also is my father taxable for the repay he gets?

Transfer of funds to your father's account is not taxable. Once he invests the amount so transferred and derives interest the said interest is taxable. There is no limit for transfer of funds. Amounts received in excess of Rs25000 will be treated as income in the hands of the person receiving the sum of money. Repayment of the instalments to the father has no tax consequence.

Can you please let me know if there some number of years of relief that are available to returning Indians in respect of their income brought in from abroad? I recall there used to be a 9-year period of relief in the earlier days. What is the latest law as of now?

The law now is that you have a 2-year relief from the time you return to India.

I am an Indian citizen and I have been in the US on L1 visa from July 31, 2003. I have been getting my salary in US$ from July 31, 2003 and have not been receiving any salary in India from that time. For 03-04 tax year, I filed the return for my income from April 01, 2003 to July 31, 2003. For 04-05 tax year, I did not file any return since I had no income in India for that whole year and I believe it will be the same for 05-06 tax year as well. Have I done these filings correctly? Now, if I plan to return back to India in July 2006, for the 06-07 tax year, I believe I will not be a NRI for tax purposes since I will be staying for more than 182 days in India for that tax year. In that case, will the savings from my US income for April 2006 -July 2006 be taxable in India keeping in mind that I will pay the taxes for my US income of that period in the US?

Up to 05-06 you have filed your returns correctly and reporting the correct incomes. For 06-07 you still be treated as a resident in India and your US income will also be taxable here. You can get a set off of the taxes paid in US.

I have a query regarding income tax return.
a) How can I file income tax return from abroad?
b) Is it possible to do it online?
c) When should I file the return? Is it possible to do it in February?

You can file it through a power of attorney in India. b. As of now there is no online facility to file the return of income. c. In case of Individual it has to be filed before 31st July.

I am NRI this year. My NRI income I have saved in nationalised bank as NRE fixed deposit account. Does interest on that in the next year become taxable in India?

Interest arising from NRE Account is not taxable.

I'm living in the US for past 7 years and planning to go back to India for good in the next 2-3 years. I am currently investing in 401k (a retirement plan), in which the money is growing tax-deferred. By tax-deferred I mean that I didn't pay any taxes on the money when I put into it but have to pay taxes when I withdraw it (plus an additional 10% penalty when I withdraw before 59.5 years). My questions are as follows:
a. Do I have to pay any taxes in India on the money that I withdraw from my 401k account (assuming NO RNOR status) even though I'll pay the taxes in US?
b. If the answer to the first question is "No", then the follow-up question is: The 401k account continues to grow tax-deferred when I'll be ordinary resident in India; so won't the appreciation that will happen (during my status as ROR in India) in 401k account be taxable in India? Or is it fall under double taxation treaty between India & US and hence I need not pay taxes since I'm paying them in US?

Any accretion subsequent to being a resident will be taxable and the past accumulation is not taxable.

I would like to know if the tax-free interest income on IMDs if brought into Australia as a resident will it be taxable? Is there any clause in India - Australia double taxation agreement which talks about exempted incomes?

This has to be referred to a local consultant in Australia.

I am a NRI residing in US for nearly 6 years now. I want to transfer approx 25000 USD to my dad's saving account in India to help me buy a residential property in India. Are there any tax implications for my dad or me?

Mere transfer of funds does not entail any tax liability.

I am NRI living in US for nearly 6 years now. I am planning to move to India. I will be setting up my own business in India. All my earnings will be from US-based companies. What kind of account do I need to ensure smooth transfer of my earnings from US to India? Also, are there any tax implications of the same in US? I will be paying tax in India for the earnings here, I guess.

Earnings in India will be taxable. You may get in touch with local bankers for the type of account to be opened.

What is tax on capital gains in India when property is sold? Is there a way I can avoid paying such tax after selling my house in India?

The capital gains tax on the sale of property in 20% plus s/c. You could avail exemption if you reinvest the gains in specified bonds or if it is residential property then any other residential property subject to certain conditions.

I am a non-resident Indian for about 20 years. I had stayed in India few months at times, but met the 183 days required to qualify as a NRI. I had never paid IT in India, assuming that I do not earn in India. At two occasions in the past I had served Indian companies and earned partial compensation in rupees. However, I took a PAN card two years back. What are my tax obligations? Have I violated any tax law in India? Should I submit an IT return every year?

Even if you are a non resident if you earn income in India it is taxable and you need to file a return of income here after paying the taxes. It can be regularised taking the services of a local consultant.

I am an Indian resident. My friend in Nigeria, who expired in 1997, made me a recipient for part of sale proceeds of his property there. Now the money has come into India. Is it taxable here? If yes, what is the taxable limit?

Prima facie transfer of funds from Nigeria to India does not have any tax liability.

I am a student from India studying in USA for a 10-month programme. I plan to go back after my studies. I came to USA on 26th August 2005.I am planning to visit home in January last week. Now, if I go back to India in January last week, will I lose my NRI status which I was supposed to get, as before that it will not be 6 months since I left India and after coming back also, I will not be staying here for full 6 months when my visa expires?

NRI status under the tax law is based on the days of stay only and hence in the absence of NRI status, income earned anywhere is subject to tax in India. However you can explore any specific deductions and reliefs as applicable to the type of income received.

I used to work in the UK and had an NRE account in India. I have returned to India in 2003 and have subsequently now converted into normal savings account. I have a savings account in UK and would now like to transfer the funds there to my Indian savings account. Can I do that? If so, will it be taxable?

No tax on the transfer of money.

I am currently staying in the USA as I have been deputed to TCS, USA. My income source here is my salary. If I want to transfer my savings to India to an NRE account, will that be taxed?

No tax.

I am in US for 4 months. I am getting Indian salary as well as US salary in USD. The salary I am earning in US is Taxed almost 33%. Do I have to pay the tax in India for the salary earned in US? And if yes, then can I get any Benefit from Double Taxation Treaty?

The taxability in India of the US salary is dependent on the residential status. If it is taxed here, the tax paid in US will be allowed setoff

I purchased a property from Ansals in 2003. The plot was under construction and the constructed property is being handed over to me next week. I wish to sell this property (its been 2 years now since the purchase). How much tax would I need to pay on the sale proceeds?

The transaction is likely to be treated as short-term capital gains. The rate of tax is the normal rate applicable to individuals.

I am resident in India, student as well as earning income from part-time teaching in Training Institute and also teach online and earn in US dollars. My current website did not ask me for ITIN Number but I have recently applied to another website where they have asked for filing necessary W-7 for ITIN No. and then also file other returns. Being resident but earning foreign exchange, am I subject to pay tax in U.S. and also in India? Kindly advise.

The income earned from US is taxable in India. Taxability in US need to be ascertained from the US tax advisors

I was in Dubai for about a month for some company work. I was paid a sum in Dubai for that month apart from my regular Indian salary paid in India. I saved some dirhamss during that one month. What are the tax implications:
a) If I (cash) deposit those dirhamss in my SBI savings account? I heard that remittances in dirhamss are tax-free. b) What happens if one deposits dirhamss (in cash) to NRE account?

Amount received in Dubai is taxable in India in full on the basis that you are a tax resident of India

I am studying in Canada from last three years and regularly getting scholarships. Now, I want to transfer savings to India and my family will invest the same in their business. I have both NRE and NRO account. Will there be any problem from IT dept. for them if they use my money in their business? How should they mention about this while filing the tax return and do they require any document (gift deed or so) from me to attach with tax return?

The transfer of money into India is not taxable. However, the money cannot be made available to others except in an approved manner, by investing it in your name, with approvals, if required. Gift may be taxable in the hands of the recipients unless it is exempted as close relatives.

On returning to India permanently, how long are NRIs exempted from tax on interest earned on saving & investment?

Once the person becomes a resident and ordinarily resident, the global income is subject to tax. Typically, this may happen in two years from return to India. Please check individual cases.

I am an NRI residing in United States for over 5 years now and have a query regarding the tax laws applicable to investments made in India by my parents, which is being gifted by me to them every year. First: What is the max amount that can be gifted to my parents per annum on which the tax is exempted? Second: Can they invest all this money in equities/Mutual funds/Post office schemes? If so, will they have to pay only capital gains or any other taxes also will be applicable?

The parents would be liable for taxes in their individual capacity as per the limits applicable. No gift tax is applicable in India.

Follow-up query

Just want to make sure I have understood correctly what you are saying. Does this mean as an NRI there is no limit on the gift amount that I can give to my parents every year? So, they would be liable to pay taxes only on the gains they make on any investments with that money. Is my understanding correct?

When you say, "The parents would be liable for taxes in their individual capacity as per the limits applicable", I guess this would be applicable if they are still working. My parents are no longer earning and their investments are completely through the money I am sending. So, that would mean they do not come under tax bracket, as both are non-income members. Am I correct?

No gift tax in vogue hence no limit etc., genuineness of gift needs to be proved. The parent income will be taxed as per the amount individually earned by them.

I'm an NRI planning to retire and settle back in India soon. Please tell me if I would be allowed to keep my US account to remit my social security after I become a resident Indian. I would be transferring the amount to my account in India monthly or quarterly. Also, I would like to know if I would have to pay taxes for the amount I receive as social security?

Keeping money outside is allowed for remittance of social security payments. Amounts received from past contributions and accretions thro' interest etc will not be taxable on repatriation to India

I am an NRI in London, though I have NRI a/c, but would like to send money as draft to my brother's account held in India. Does he get any tax liability on that amount?

No tax liability on sending money to your brother.

Is there any tax on if I sell my ancestral property? If yes, than what type of tax & and at what rate?

Capital gains of long-term nature will arise. Indexation benefit is admissible and market value as on 1.4.81 can be substituted if higher than original cost of acquisition. Tax rate is 20% + surcharge (if applicable) and 2% cess. Tax benefit on reinvestment in select bonds or another house property is allowed

In 2001 my tenant signed a Rent Deed with my brother in India (who holds my General Power of Attorney) to pay rent by cheque. After 2 payments he changed his mind and started paying by cash and my brother did not see that as a serious matter as we were not aware of remittance facility of rental income. However after my learning about it in 2002, I wanted payment restored by cheque. But tenant continued payments by cash without deducting Tax at Source (TDS) and now keeps dodging the issue saying we will discuss in next February.
Since he did not deduct TDS my brother filed my India taxes by paying advance taxes on due dates by making cash withdrawals from another bank account of mine where I had savings from my rental income of years prior to 2001.Cash withdrawals were made as I understand IT department does not accept bank drafts with challans for advance tax. Now I want to apply for remittance of my rental income from 2001 till 2005 through my bank where I have my NRO and NRI account.

My concerns /questions are as follows:
a: Will the remitting bank question cash deposits and if so how can I prove legitimacy of such deposits? The only thing I have is the rent deed signed by tenant on Rs.20 stamp paper and another letter on his company letterhead setting out salient points before signing rent deed. The tenant named is the company and person signing is its managing director. Is there any other thing I should do before approaching my bank to prove legitimacy of cash deposits in case it still might be questioned by bank after showing above-mentioned documents?
b: Since no TDS was deducted I had to pay advance tax in excess of my estimated tax liability each year and I did get refunds from IT department. Question here is I paid advance taxes from another bank account where I had surplus funds from past years. Will this become an issue with remitting bank though I am only going to request remittance amount net of taxes for each year? In other words what I paid as tax from another account will now stay put in my NRO account without being remitted. I can use for my local disbursements.
c: What are my options in case tenant still does not comply paying by cheque? d: Why the IT department in India does not accept bank drafts with challans for advance tax and insist on cash?
e. I have always paid my income/wealth taxes in India since becoming NRI. How many years' records of tax payments need to be preserved for safe keeping by a tax payer (Resident vs. NRI)?

The remittance issue can be sorted out with your bankers and if required you can file an affidavit on the source of income supported by your tax returns. Payment of tax needs to be as per the procedure laid out and possibly even by Internet mode if your banker allows it. You may deal the issue of cash payments by your tenant appropriately with him.

I work for a US-based company in India. For official reasons I am in US since 4 months and I am returning in the next month. As I am not outside India for 6 months I will not get the NRI status. I earned around 20000$ and could save around 8500$ during my stay in US. I have paid around 5500$ tax in US. I know I have to pay the tax for this income in India also but I don't know what is the set off. During this period I was getting Indian salary also; my Indian taxable income is around 4,00,000 Rs. So the tax will be around Rs 1,20,000. I have a question how the tax on the salary earned in US will be calculated in India? And which exchange rate will be applied on that? Or do I have to pay the tax in terms of USD?

The conversion of USD will be as prescribed in Rule 115 of the IT rules. The setoff for tax paid in US will be allowed in India.

I immigrated to USA on 15.9.2005 and my status would be "Non-Resident" for previous year 2005-06.My questions are as follows:
1-I was living in Patiala (Punjab) until 31.3.2005 but shifted permanently to (Kalka) Haryana.
As on 31.3.2006 I will be living in USA. Hence, where I will file IT return? In Patiala (Pb) or in Kalka (Haryana)?
2-What permanent address I should fill in Form-2D/2E?
3-Can I file online? If yes, how?

You can obtain a PAN at Haryana and file the return there. Online filing has to be done through an approved intermediary and details on this are available on CBDT website.

My query is that I sold my house for Rs.5 lakh in 2005-06, which was inherited through WILL legally in 1993-94 from my father with fair market value of Rs.1.10 lakh. In 2001-2002, I sent money from Canada through rupee bank draft of Rs.90000 legally for renovation. My wife did not get any receipts for expenses on wood work, construction labour, bricks and cement etc. Can I add it in cost of transfer and index it before arriving at tax payable on long-term capital gain from house property?

Cost of improvement can be deducted in the capital gains working but proof may be insisted by the tax officer.

Mr X is an NRI in the USA for the past 7 years and is a holder of a green card. If he desires to return to India permanently, what are the rules that govern the investments (stocks/bonds) etc that he has there? How will the investments he has made in India be treated? Any timeframe relief is available under the Laws governing his return?

The tax position will depend upon residential status. However, the investments can be maintained as it is without any change.

I am a Resident Indian. I hold stock options (ADRs) of my parent company. I have sold some of these stock options in 2005, at Nasdaq in a cashless transaction. The net proceeds (sale price less option price) are received by me in USD.

1) Would this be treated as short-term capital gains in India? 2) Can this money be put into EEFC account? In this case is there a tax liability?

The amount is taxable as a short-term gain; in some cases the tax authorities have treated it as remuneration also. No additional tax if the amount is deposited in EEFC a/c, assuming it is permitted.

I am an Indian citizen and I have been in the US on L1 visa from July 31, 2003. I have been getting my salary in US$ from July 31, 2003 and have not been receiving any salary in India from that time. For 03-04 tax year, I filed the return for my income from April 01, 2003 to July 31, 2003. For 04-05 tax year, I did not file any return since I had no income in India for that whole year and I believe it will be the same for 05-06 tax year as well. Have I done these filings correctly? Now, if I plan to return back to India in July 2006, for the 06-07 tax year, I believe I will not be a NRI for tax purposes since I will be staying for more than 182 days in India for that tax year. In that case, will the savings from my US income for April 2006 -July 2006 be taxable in India keeping in mind that I will pay the taxes for my US income of that period in the US?

The filings are okay. Your savings in US are not taxable upon your becoming resident in India

My husband is on a short trip to USA. For this accounting year he is resident & ordinarily resident. What will be the tax liability regarding money received by him abroad? Will FEMA regulations be applicable?

Income received in US will be taxable for a resident and ordinarily resident. No FEMA implications on the earnings per se and money can be retained in forex itself.

I work in MNC in Noida. During financial year 2005-2006 I stayed in France for 1.5 months and these days I'm in US on L1 visa for my same company. I get salary in India only, but to stay outside India I get per diem. Do I need to pay tax if I live outside India for more than six months (cumulative of both the countries)?

If your stay outside India is more than 183 days and if you qualify as a tax resident of another country with which India has a double taxation avoidance treaty, it would be possible to claim exemption from tax in India on salary received for services rendered abroad.

I am under education visa and have been outside India for more than 183 days in both years:

2004-2005
2005-2006

but was completely resident in India previously.

I have transferred Rs 2,33,000 and was going to transfer another Rs 3,60,000 before 31st Mar 2006. What will be my taxable liability, if any? All income is after tax and accrued and paid in UK.

I might be back in the country in July 2006 which will make me a resident for the year 2006-07, and I will be again transferring Rs 3,20,000

What will be my taxable income then? Should I transfer the whole amount before Mar'06 to avail any non taxation benefits?

Please suggest me the status and taxable liability.

Since you are a non resident for the 2 years given and the income is question is earned in the U.K the transfer of funds to India has no tax consequence in India. For 06-07 you are a resident in India and the income earned in UK will be taxable in India.

My mother owned a flat in Delhi. She passed away in 1992 and I have got the same mutated in my name. I now wish to sell it and have been given to understand that I do not have to pay any capital gains tax if I do not purchase another property with the proceeds, since this property is inherited. Please clarify.

Even if it is inherited property you have to pay long term capital gains tax at 20% plus s/c on the difference between the sale value and the indexed cost of acquisition.

Follow-up query

In case I purchase a property on Power of Attorney with the sale proceeds of my current house do I get exemption from capital gains tax or does it have to be something that is registered in my name?

It has to be registered in your name.

I have been working in Indian based company for the last 12 years. Our company entered into a JV with Georgia (former USSR) - based company. Since Nov05 I am working in the JV in Georgia on behalf of Indian co. My salary in India is deposited in my SB account. Now I am getting some amount in USD in Georgia. I intend to send my savings from USD to my SB Account through Western Union Money Transfer. Shall I pay any income tax on transfer of my money to India?

On the face of it you will be treated as a resident in India since you have worked here from April to October 2005. Your global income will be taxable here. You can get a set off of the taxes paid in respect of US income.

What is the rate of TDS that a tenant should deduct and deposit with Indian income tax department for paying rent to an NRI landlord?

15% if the landlord is an individual and 20% if the landlord is a company. This is to be added by surcharge and cess.

I am NRI with ancestral property in Bombay, which I intend to dispose. I understand that the tax liability can be reduced by investing the sale proceeds in another home. To avail of the tax benefit, need I invest the entire sale proceeds or only the capital gains portion? Further, when I buy a new property, can I buy it under joint names - my wife and myself? Will there be a tax problem if I do so?

You need to invest the capital gains portion in the new property. It can be made in joint names but the funds have to relate to the sale of the original property.

I am an NRI. Two years ago I and my wife bought a property (single floor) in joint name in Haryana where my wife is the primary owner. The flat is not registered in our name as the registration of single (independent) floors is currently not open in Haryana. The builders (Unitech) have promised to get it done once it opens. If we sell this property today (before registration) are we liable to pay capital gains tax on that as well?

Capital gains tax is to be paid by the person who bought the property originally and sold it now. Who paid for the purchase is the critical factor and not is whose name it is registered.

Follow-up

My question is that do we have to pay capital gains tax even if the property is not yet registered in our favour?

Yes. You will have to pay.

My brother is an NRI. He wants to give Rs 5 Lakh to his father from his NRO account. Please let me know what tax treatment it will attract as per Income Tax Law for FY2005-06.

No tax implications for this transaction.

My father has gifted me some shares which he has been holding for more than 3 years. If I sell these shares as soon as my father gifts me, will the capital gained be considered as a long-term capital gain or short-term capital gain?

It will be treated as long term since the holding of the previous owner will also be reckoned.

For making gift to any blood relation what formalities are to be undertaken by the donor and receiver to avoid tax?

Gift to specified relative has no tax consequence. A gift deed is desirable particularly where immovable properties are involved. Stamp duty implications need to be taken care of.

I have been outside India for an year now in US. I have transferred the post tax income I made in US to India and bought shares under my stock options. I want to sell them and invest in a residential property. Will the reinvestment of short term capital gains from shares in housing help me reduce the tax liability? Is there a flat rate for short-term capital tax?

No exemption for reinvestment in the case of short term capital gains on sale of shares. If these shares are listed securities then the rate of tax is 10% plus s/c.

My father in law wishes to sell his personal property (house) and would like to distribute the cash earned to his 5 children.

a)I understand that the sale will attract capital gains tax, but there would be no element of gift tax involved. Is this correct?
b) If the property value is beyond Rs.25 lakh, is there any need to obtain any statutory Govt. clearance?
c) What are the methods to get exemption against paying capital gains tax? In case if the original acquisition cost is Rs.40 Lakh (building constructed 5 years back) and now the property is being sold for Rs.50 Lakh, what would be incidence of capital gains tax and methods to get exemption?
d) What is capital gains tax percentage - Is it 10% or 20% on differential value between sale cost and acquisition cost?
e) In case if he has to invest in some bonds to get exemption, what would be the lock-in period?

a. Sale will attract capital gains tax and there is no gift tax
b. There is no need for Govt. clearance now.
c. You could avail exemption by reinvesting the capital gains in another residential property or the net consideration in specified bonds.
d. The capital gains tax rate is 20%plus s/c.
e. The lock in period for bonds is 3 years.

In one of queries to which you have responded earlier, you have stated:

Query:

I have separate PPF accounts for my wife, two kids and myself. I am the only earning member of the family. Is it possible for me to deposit Rs. 70,000/- per financial year into each of these PPF accounts (i.e. a total investment of Rs. 280,000/- every year) and still able to attract the 8% interest rate for all four accounts? Of course, I understand that I can only deduct 20% of Rs. 70,000/- from my taxable income while calculating my yearly net tax.

Response: Yes. This is permitted.

But, I have also read elsewhere that the Central government has amended the PPF Scheme through G.S.R. 908(E) dated December 6, 2000. The application form, under the scheme being Form A issued through G.S.R. 908(E) makes it clear that no interest will be paid to a subscriber on the deposits made in excess of Rs 70,000 in a financial year. In computing this limit, only the deposits made in the following names need to be aggregated:

Self-account
Minor(s) of whom the individual is the guardian.

Please clarify.

On the follow up query if each of the 4 accounts is separate interest at 8% will be eligible for all the accounts.

What is tax law for in India for an NRI? Suppose I keep depositing my money in my Indian accounts (let's say Rs 25,000 per month), do I have to declare it to Indian Government?

Yes you will have to declare if your income exceeds the minimum limit you are liable to pay income tax.

I am permanent resident of USA. I have investments in India like CoD and real estate. Can I take PAN number online? Do I have to file taxes to have clean record?

There is at present no facility of taking PAN online. You will have to do it through a power of attorney. If you have income arising in India you will have to pay the taxes and file the return of income.

I would greatly appreciate if you can tell me about gift tax. Last year I gave money to my parents and they invested money in various government schemes. Now some one told me I can not do that. I am a US-based NRI and all the money was sent from the US by bank.

Prima facie, it appears that the money given to your parents and their investing the same in Govt. schemes are in order.

Mr A who is NRI had to give 10 lakh rupees to Mr B who is also NRI. So Mr A gave draft of 10 lakh rupees to Mr B from his NRE a/c. And Mr B deposited that draft in his NRE a/c. So now please let me know

1. If either of them has to pay tax?
2. What Mr B has to show in his books- received loan or gift?
3. What Mr A has to show in his books - given loan or gift?

If the transaction has taken place in India it can be treated as income in the hands of the receiver. Better to get this validated by a consultant.


I am an NRI and am receiving my salary outside India. Is it okay for me to receive an additional salary in India - for some services provided there? If so, what are the Taxation rules under the same?

Salary earned for the services rendered in India will be taxable in India.

I and my two children are planning on selling a property (house+ land) bequeathed to me by my late husband. What are the capital gains tax implications? I do intend to buy another property in the next six months. Will I have to pay income tax?

Once you reinvest the capital gains in another residential property there will be no capital gains tax.

I have Rupee Checking account. If I earn any interest on the money in that account, will it be taxable in the US or in India?

Interest is taxable in India. If it earned in NRE Account it is exempt. Taxability in the US may be checked at that end.

I have an NRE account and would like to transfer (gift) some money to another NRI, having an NRE account. Do I need any documentation/approvals to make this transfer? Will the recipient be liable for any taxes?

No documentation is required. This could involve income in the hands of the recipient for which the facts are not sufficient.

I have bought real estate in Hyderabad as an investment and will keep it for at least a few years. I would like to know the short- and long-term capital gains tax that would have to be paid if I need to sell it within a year.

This will attract short term capital gains tax at normal tax rate the max being 30% plus s/c.

I am investing Rs 500/- per month in Franklin India BLUECHIP FUND (Growth option) through Systematic investment purchase (SIP) since Jan `2005. Initially the SIP was for a year, got maturity on Dec'05 which I got renewed again for further investment for a year i.e. given 12 more post-dated cheques of Rs 500/- each to be invested every month( 20th of every month). Till date I have around 90 units of the same in my account.
a.I would like to know that if now I would redeem some of my units (while SIP is still continuing) will there be any capital gain tax or any other tax applicable? If yes, what will be the rate?
b. Please also specify is there any kind of Securities Transaction Tax or any load chargeable in doing so?
c. As these sale transactions are outside the employer's purview, these may not be included in the Form 16 or Form 16aa issued by the employer so should it be treated as source of income and I have to show it in filing IT returns?
d.I would also like to know is there any kind of tax benefits by investing amount through SIP in this fund that I can avail?

a. Redemption after 12 months will be long term and hence no tax. If before 12 months it will be short term and will attract tax at 10%plus s/c.
b.This will be taken care of by the fund.
c.The transaction will have to be reported in the return of income.
d.No tax benefits are available for the investment.

I am a Non-Resident right now and am planning to return to India. Can I continue to keep my investments in UK and also keep investing them in securities here? Is there any limit? If yes, then how will my tax be computed on this investment once I become a resident Indian?

Once you are resident in India the global income will get taxed in India.

At what rate is tax to be withheld on any professional fees paid to US citizen? Can any declaration of residency be given by the US citizen for non deduction of tax?

Withholding tax will apply at 30% or the rate as per the DTA Agreement, whichever is lower. There is a provision for lower deduction of tax by making an application to the Assessing officer.

I was NRI for 15 years and I had invested as single name in SBI IMD Bonds in the year 2000 from Bahrain. However I don't have documentary proof for source of investment as my VISA is housewife. For the year 2005-06 my status is RNOR and my husband continue to be NRI. The IMD proceeds are reinvested in resident Bank deposits. Whether the IMD interest and future Bank deposit income will be clubbed to my husband's income? How to show the details while filing the income returns without considering as Gift?

Clubbing will arise only if the assets are transferred in the name of the husband. You can report the IMD interest in your return and Bank deposit interest can the reported in the return of your husband.

I intend investing in India a lumpsum of money earned entirely overseas. If I want to live in India, permanently, living on the income from the investment, will I be paying tax on the income so earned?

Income earned on the investment in India will be taxable in India.

I am a NRI with an Indian Passport living in Australia. Is it possible to apply for a PAN from overseas by downloading the appropriate application forms?

You can apply for PAN no through a power of attorney in India.

I am an NRI working in Saudi Arabia. I am retiring from service in May 2006. How long my NRI status will continue and what are the formalities I have to complete regarding banking (NRE A/C) and taxation?

On your return to India you can retain your NRI status for a period of 2 years.

Is wealth tax to be computed including PPF balances, bank deposits and GOI tax-exempt bonds?

No. It is applicable only to specified assets and the list does not include the items listed by you.

I am a NRI residing in the US. I have never worked in India and have no income in India and as such do not have a PAN number. But I am the nominee on a number of investments, including RBI 8% taxable savings bonds and post office MIS accounts, now held solely by my father (following the deaths of my mother and uncle). I know that nominees for the RBI savings bonds can be NRIs but I am not sure if this is also true of the post office MIS accounts. Do you know the answer to this? In the event of my father's death, I realize that I need to have a NRO account for the principals of these investments to be deposited. But will I also need a PAN number? I checked out form 49A and found that non-residents can be represented by a representative assessee. In my case, given that I only have my father (retired) living in India, and no siblings, who can be a representative assessee?

You can apply for a PAN no through a valid power of attorney in India.

For this year, I have been in India for 187 days. I switched to a UK firm and am based in London. For the remaining months, I get my salary after TDS in UK. Do I need to pay any additional tax on UK income? Do I need to pay any additional tax when I transfer > 1lakh to my parents/brother every month? I also want to make a transfer 2 lakhs to my grandmother. Does she or I have to pay any additional tax? Actually the money will be put into a joint account of my mother and grandmother - does this make a difference? Is there a restriction on the use of the funds thereafter by my grandmother ex: can she gift it forward?

Since you are a resident in India for the year under consideration the salary earned in UK will suffer tax in India. You can avail set off the taxes paid in UK. There are no tax implications on transferring funds to parents or grand parents. The income earned on those funds will be taxed in their hands.

I am an NRI working in Boston USA. I recently purchased an apartment in Bangalore via a housing loan from a nationalized bank in India. Is there any way I can save on tax being paid in USA? I presume I can save tax if I get housing loan for a property in USA. Please advice.

There is no possibility of saving tax paid in the US in respect of the loan repaid in India.

I am an NRI with American Citizenship. I have an immovable asset in India for over 25 years purchased when I was an Indian citizen. I am planning to sell the asset and would like to repatriate those funds to US. What are the tax implications and would I have to open an NRO account? Any other options to minimize the tax burden?

Sale of the immovable property would attract capital gains tax and the amounts can be repatriated.

I was investing in Indian Equities through ICICI Bank by a scheme called Portfolio Investment Scheme(PIS).I had made both long-term capital gain and as well as short-term capital gain. While deducting TDS, the bank had not only deducted tax on the profit made by me but also on the notional profit made by me on the difference between the exchange rate prevailing on the date of Purchase and the date of sale. All the transactions were in Indian rupees and the sale proceeds in Indian rupees were not remitted back to Singapore but left in the bank a/c itself. In the TDS form issued by the bank, this deduction was not shown separately but shown in total as this was a capital gain. This had happened before the abolition of the long-term capital gain. Please advise whether this is correct as per the Act.

You can file a return of income and claim the excess TDS as a refund.

I am an NRI staying in UK for past few years. I have got Rs 10 lakh in my NRE account which I want to gift to my father. Is there any documentation required to be done other than giving the cheque to my father? Will either him / me need to show this in our income tax returns?

No particular documentation is required. A letter should suffice. There is no need show in the return of income.

I have been an NRI since last 6 years. About 5 years back I had bought a property in India with a NRI status. And had been paying mortgage through my NRE savings account. Now when I intend to sell the property, I am making no profit based on the balance amount I need to pay to bank and the mortgage I have paid so far. I am wondering if I will be taxed. If yes, then at what rate?

On the face of it you will be liable to long-term capital gains tax at 20%. In case the proceeds are reinvested in specified bonds this tax can be saved.

Follow-up

Can you let me know if I invest the amount in another property do I still need to pay tax? If I don't need to pay tax on investment to another property, then what's the time frame for the investment?

You need to purchase within 2 years or construct within 3years to save capital gains tax.

I am married to a British national. I am an Indian national and will be travelling abroad to do some seminars. If I would like to invest in UK the funds earned abroad, what tax am I liable for? How can I repatriate funds in my account if I wish to settle in the UK?

If you are a resident in India for the year the income earned in UK is taxable in India. Otherwise the said income is taxable only in the UK. You can repatriate the funds in consultation with the bankers in the UK.

I am Indian Citizen. I am expecting income from Europe for consultation services to the company in India. Do I have to pay taxes on Foreign Income earned?

Payment of tax depends on residential status. On the basis that you a resident ordinarily resident in India, tax is payable.

I have got interest free personal loan for the reconstruction of my old house from my brother who is staying at USA as a NRI since 1999. I have deposited the dollar cheque in my saving account. Due to a delay in the process of reconstruction, yield on the money deposited is getting accrued.
1. Shall I pay any tax the amount received from my brother?
2. Shall I pay the tax against the interest yield in bank?
3. Can I repay the amount after 3 more years?

Tax is payable on the income earned but not on the loan. Repayment will require RBI approval.

I am a PIO with US citizenship, but currently working and living in India. Many times not only myself, but also the banks and other financial institutes here are confused and don't know whether to apply NRI or Resident Indian rules to me. Could you tell me which one should apply to me?

For tax purposes the position is clear, based on period of stay in India. For FEMA purpose, the banks should apply the relevant RBI guidelines on this.

I am an NRI for almost 14 years planning to return back to India for good by end April 2006. I am eligible for an end of service benefit to the tune of INR 25 Lakhs. Will this amount be liable for taxation since I will not be an NRI in the financial year 2006-2007 since I am not fulfilling the criteria of 182 days of stay abroad? Please advice.

If this amount has accrued to you upon retirement, the payment subsequently when your residential status has changed shouldn't make it subject to tax.

At what rate is tax to be withheld on any professional fees paid to US citizen? Can any declaration of residency be given by the US citizen for non deduction of tax?

The proper approach is to obtain a tax withholding order under section 195 of the IT Act, from the Income tax officer as determination of the tax depends upon many factors like residency, nature of the service, the constitution of the service provider etc., You can approach the tax officer dealing with NR taxation in your city.

A person (of Indian Origin) is deputed by a foreign company to India. The services rendered will be that of technical services. What will be the tax liabilities for the company and in the hands of employee?

The tax liability to the person deputed and the employer depends on the duration of stay in India, the country of residence etc. The question is quite devoid of information to give any precise answer.

Follow-up query

The stay would be for at least 2 years. Country of residence is Poland.

Both the individual and the deputing company would be exposed to tax in India. The issue not being very simple may be discussed with a professional advisor for further guidance.

When I invest in India from the overseas earned savings that are deposited in a NRE bank account, will the returns be taxed by the Government of India? If so could you please let me know the rate of taxation?

Interest on FCNR is tax free. Rupee a/c is taxable.

I am an NRI, staying in Tanzania for the last 5 yrs. Now I would like to return to India permanently. If I need to take the car used here to India, how much will be the tax/duties to be paid on the car? Can you advise me about the legalities?

The matter should be handled through a customs clearing agent at the port where the car would be imported. The benefit under customs rule that give persons returning to India permanently certain concessional duty on used personal items should be sought.

I am an Indian citizen and the owner of a limited liability company registered in the US. My company pays tax in the US based upon applicable rates. As the only shareholder, all the profits accrue to me. I have been living in India for the last eight months and plan to continue for another two years. I have no other source of income. Do I need to pay income tax in India? If so, at what rates? Do I need to show my entire profits as personal income in India?

Income of the US Co. is generally not taxable in India even if the share is held by a resident of India. However, dividends when declared will be taxed in India.

I am holding ESOP's which my company gave while joining. I am now going to sell them. As the company is listed in NASDAQ, I'll receive a dollar-denominated cheque, without any tax deductions, once I sell my shares. How much tax I need to pay? I joined the company last March and vesting of shares started six months after that.

The net gain is taxable as salary income. If no tax is withheld by the employer, you will be liable to pay advance/self-assessment tax.

My son is employed by a shipping company. He would get salary from his company which would be credited to his account in India. Is this taxable? How to save tax?

If the shipping Company is registered in India, he will be liable for tax in India. There are certain specific intricacies on taxation of shipping employees and necessary professional assistance may be taken.

I have been working in the UK for past 6 + years on deputation by an Indian company. Last month I took UK citizenship.

a) What are its impacts on taxation in India?

None.

b) I get a part of salary paid in India including PF etc and allowance in the UK? Can it continue even after I become UK citizen?

Looks no issue.

c) Now I am returning to India to work from India. I have got PIO card. I have been told I don't need employment visa to work in India or to do any business in India. And while in India I can work as a normal resident with PF, pension applicable to me. Is it correct?

Yes.

d) I have ESOPs vested in me by my company in India. Can I exercise those now once my citizenship has been changed and have a PIO card?

Makes no difference.

I am an NRI having NRE savings a/c in India. I don't transfer money to this account. But I send money directly to my dependents. Will this money be taxable as receipt in my dependents' hands?

No.

I am working in Japan subsidiary of an Indian company for whole of current fiscal year except for three week vacation. I get salary in India as well as allowance in Japan. For filing income tax in India do I need to fill up Japan income as well? If I repatriate money to India out of Japan savings, what will be my tax obligations?

You are liable to tax only in Japan and no liability in India. No tax on repatriation in to India.

I have been granted OCI (Overseas Citizen of India) status recently and waiting for the Registration Certificate. In the meantime I am exploring the possibilities of buying properties in India.

a) Will the rental income I generate be taxable in India? If so, at what rate? Can I repatriate such rental income?

The rental income is taxable as per the normal schedule rate of taxation.

b) Specifically, I would also like to know if there exists a DTAA treaty between India and Australia.

There is a DTAA between Australia and India.

I was earlier working in India. I opened a demat account with ICICI and started investing in shares. Now I have become an NRI. I have a few questions now.

1. Is it ok for me to continue to invest the same account or should I open a new NRI account?
2. If I have to open an NRI account, can I transfer the existing shares into new account? I do not want to sell them.
3. Now that I am NRI, how can I pay the taxes? What is the process?

1. You can operate the same demat account. You need to inform ICICI about the change of status and they will facilitate the process.
2. ICICI will transfer the demat account to another account and do the needful.
3. There are no tax issues since dividend received is tax free.

I have been an NRI for 11 years. I am in the process of returning to India for good this year .This financial year (2005 -06), I will be in and out of India in such a way that I would spend more than 60 days outside India. Will I be treated as NRI for this year too? Can I maintain my NRE account and not pay taxes? When do I have to declare my return so that my deposits could be converted to RFC?

You will be treated as a resident in India only if you stay for a period exceeding 182 days in 05-06. Interest arising out of NRE Account is exempt from tax. Once you have income taxable in India you will be required to file a return of income.

I have NRI savings a/c opened in US. At year end will I get US 1099-Int or I have to pay taxes in India? In short will I be reporting interest income and paying taxes on the income in US or India? I am a US citizen.

If you are a non resident then the interest income is taxable in US and not in India.

I am working in UK for an Indian company. I hold Indian passport. I get Indian salary as well as UK allowances. My Indian salary gets taxed in India. My total of UK salary and Indian salary gets taxed in UK. Can I claim tax paid in India through TDS back as I have already paid taxes on Indian salary in UK? If yes, then what is the procedure? What is the difference between transferring my money from UK account (in GBP) to Indian account and from UK account to NRE account? Is there any benefit in transferring money to NRE account?

The TDS reflecting the tax paid in India can be set off in the UK. Transferring of funds from UK to India is possible for which you may consult the bankers.

We are NRIs with an apartment in India which we bought over 30 years ago with local currency as an Indian citizen; we also lived there for 15 + years. We are selling our property. What taxes will we incur by selling our apartment? Any TDS? Capital Gains? Any special NRI tax? What percentage would tax be? In addition, we would like to repatriate those funds to USA. What is the most tax efficient means of doing so?

Sale of property will attract long term capital gains tax at 20% plus s/c of 10%. You can reinvest the proceeds and avail exemption. Repatriation of the proceeds is also possible.

Me and my wife are returning to India from US after 9 yrs. We have Mutual Fund investments in US. When we return we will become non-resident aliens (NRA) for IRS purposes. IRS taxes US dividends for NRAs at 30% flat, but doesn't tax cap gains (long & short term). Questions: (1) Does India tax me on the US mutual fund cap gains? If yes, how much? (2) Does India tax the US mutual fund dividends as well (although this has already been taxed by IRS)? (3) How do we avoid double taxation on dividends? (4) In order to avoid double taxation, do I have to disclose my US assets and mutual fund income when I file to India IT dept?

If you are a resident in India your US income will get taxed in India. That includes the capital gains and dividends from US mutual funds. The tax paid in US can be set off in India.

I am NRI. I have got shares in inheritance. If and when I sell some or all of these shares do I have to pay capital gains? I understand all shares are few years old.

If they are listed shares and long term in nature there is no capital gains tax. Other wise it is taxable at 10%.

Follow-up

Do I open NRO savings and NRI Demat a/c?
I hear now the PAN is a must for all Demat a/cs? If so how do I get a PAN?
Is there one separate for NRIs?
When I sell shares do banks take out tax deduction at source?
If there is no tax liability do I still have to file a tax return?
Can I draw money by sale of shares and use it for any purpose?
Can this money be taken out in dollars?

You need to open an NRI demat account. A PAN no can be obtained through a power of attorney in India in any metro city There is no TDS on sale of listed shares and no need to file a return of income on this score. They money can be used for any other purpose in India as they can be properly explained. Money cannot be repatriated out of NRO Account.

Our company is the authorised reseller for a software from a US based firm. The firm invoices us and we wire the amount back. However to wire the amount, the bank requires that I apply TDS. So can this TDS be claimed by the US firm as income tax credit? If so, can we pay the invoice amount minus the TDS amount and have them file for a return? What is the correct process for such a transaction?

You need to remit the amount net of TDS and remit the TDS certificate to them. They can avail of the credit for TDS in the US.

I'm returning to India for good in few months time. Is it possible for me to deposit my savings (Pounds) in any of the account which can give me tax-free returns in coming years?

Best is to put it in NRE account for starters. Thereafter mutual funds equity schemes give tax free returns. You may check with a financial consultant on this.

On RNOR status, should one volunteer to prove this once having returned and whilst filing income tax for the first year after return? How does the Govt ascertain that a person has qualified for the 2-year window?

It has to be indicated in the return of income.

Is there a long-term Cap Gain on Stock on "buy-back" transactions i.e. due to a merger, the acquiring company acquired the share through the transfer agent and paid directly to the stockholder? No securities transaction tax was paid. If yes, what is it?

The query is more in the nature of corporate restructuring and required detailed examination. It would be better to consult and expert on this.

Would you be able to tell me where I can get information regarding tax-exempt bonds in which I can invest the capital gains portion from sale of property? From where can I purchase them? Must the capital gains be invested only after the sale is complete or can the installments received be invested before the sale is finally complete to save time?

You can invest as and when you receive the money. Any bank can assist you in getting the info about the bonds.

Does an NRI require a PAN number? If yes, what are the procedures to apply and get the same? What documents should be attached?

There is a standard form to apply for a PAN no and it can be done through a power of attorney in India.

I am in USA since Jan 2005 and returning in March 2006. I am planning to transfer some money that I earned during this period ($25000 in March and remaining $25000 in April). How would the taxation apply to me? I was resident in India between March 2004 and December 2004.

For the period 04-05 and 05-06 you will have to find out if you stay in India exceeds 180 days. If so you will be treated as a resident in India and your income earned in US will be taxed in India. The tax paid in US can be set off against the taxes payable in India.

Follow-up

I have not stayed in India for more than 182 days in India during 05-06 period. But I was in India during 04-05 period. Can I be considered an NRI for 05-06 period? If I transfer my US Salary earned income during 05-06 period to India in the year 06-07, will there be any changes to my tax liability?

Then you will be treated as a non resident for 05-06 and the transfer of money earned in this period to India has no tax consequence.

I am a PIO. I intend to open a NRE account in India. My questions are:

1. Is interest earned from a NRE account is taxable in India? If it is taxable, is it the whole interest amount or above certain limit is taxable?
2. Do I need to submit a tax return in India, assuming NRE interest is my only income in India?

Interest earned in NRE Account is tax free without any limit.

I have an NRE account with Citibank. Planning to relocate permanently to India in 2006. I will acquire US Citizenship and returning to India on OIC certificate.

Questions:
1] Sale proceeds of immovable property in US is taxable in India? (it will be already taxes in US)
2] Investments like mutual funds, stocks held in US can remain in US or has to be brought back to India?
3] Are the sale proceeds from these investments Taxed in India? (already taxed in US) 4] Income earned in India while in India is taxed. Is it true?
5] How can I invest in Indian stock market as an NRI with OIC certificate? How are these investments taxed?

1. Till you retain your status as a non resident the sale of immovable property in the US will not suffer tax in India.
2. Investment in mutual funds and bank deposits can remain in the US.
3. Sale of these investments in the US are not taxable in India.
4. Income earned in India will be taxable in India.
5. For investments in shares in India you may get in touch with an authorised dealer.

We have some export order for steel items and need to pay commission to overseas agent. Shall we pay TDS? It so, what we be the rate?

TDS rate will depend on the country and the Double taxation agreement. Normally it is 30%.

Is the revenue out of sale of inherited land taxable (for NRI)? What is the best form of investment for such income?

Sale of inherited land gives rise to capital gains tax at 20%. If the consideration is invested in specified bonds then exemption can be availed.

If an NRI sells property (purchased in 1990) in India and has a long-term capital gain, can they use the cost inflation index to adjust the cost basis of purchase?

Cost can be indexed to arrive at the capital gains.

I am an NRI residing in US (on a work VISA) since last 5 years. If I purchase and sell Indian stocks within 6 months, do I have to file for Income Tax in India separately and one in US Separately or do I aggregate Income and file in US? Also, my PAN number was filed several years ago; however I have not received it. Who can I contact and where to follow up?

Tax return is required to be filed for Indian income in India. Old PAN is fine. Position in US may be verified locally.

My uncle wants to gift a flat to me which is approximately 400 sq ft. Is gift tax applicable to this transfer/ transaction? If yes, how much is the same? Will stamp duty be levied or not?

No gift tax is applicable in India.

I was working in Singapore from Jun 2000 till May 05 after which I was deputed to an Indian company and still my salary was credited in Singapore until Sept 05. I joined an Indian firm by Oct 05. I have paid tax in Singapore for all the income I earned until Sept 05. I would like to know if I have to pay tax in India for all the income credited in Singapore from Apr 05 to Sept 05 or can I claim exemption on this amount?

Tax liability in India would arise on the salary for the entire period from May'05 due to the residential status. Tax credit should be possible in Singapore on taxes paid in India.

My daughter, a resident Indian till Nov.'05, has resigned her job in India and joined a job, with work permit, in December '05, in UK.
1. In the I T return for her income in India till Nov.'05 for the fin. year 2005-06, to be filed, is she to be declared as Resident or Non-Resident?
2. The salary income received after deducting Taxes in GBP, in UK, for the period Dec'05 to March'06, is it to be added/declared in the I T return to be filed in India for the fin. year 2005-06?
3. If it is to be added/declared, what is the exchange rate to be applied to show in Indian rupees, in the IT return? Will she be able to get relief for the Taxes already deducted in UK for the salary income for Dec05 to March'06?
4. Citibank in India has converted her Savings a/c.into a NRO a/c and is deducting 30% tax on her interest income in NRO a/c. While claiming refund of Tax which was deducted in excess by her previous employer in India, can she claim for refund of Tax on interest income of NRO a/c.?

Salary will be taxable in India as she would be a resident in India for tax purpose for the whole year. Since the UK salary will be taxable in both countries, tax credit will be available in India. The forex rate is the month end rate of the preceding month. Interest in NRO a/c is taxable and the amount deducted by the bank can be claimed as credit in the tax return.

I am a PIO residing in Australia. I am planning to build a house in India for the purpose of staying in that house when we visit India. The cost of the house will be paid from my NRE account. During my absence from India, my brother-in-law will take care of the property. I will not derive any income from it. Will I have to pay any Wealth Tax in India for the proposed property?

Wealth tax arises if more than one house property is owned by an individual.

I have salary income from more than one employer. Both of them have considered the deduction of 1,00,000 since my second employer didn't have form 16 from my first employer. By when I have to pay the corrected tax amount? Is it 31st march or I can pay it while filing the return? What if I don't pay it by March 31?

Tax should be paid by 31st March to avoid interest liability.

I am a non-resident for more than 20 years. Now I am planning to return to India. I would like to know how best I can invest my funds that I will bring into India. Can I continue FCNR accounts until term completes? What is the liability of tax on interest received from RFC account?

FCNR interest is tax free as long as your status remains non resident. RFC is taxable. Please consult a financial consultant on the investment advice.

I want to know the details of recent agreement of double tax avoidance treaty between India and Japan specifically for professors, teachers and researchers working in Japan on the invitation from the government recognised universities or institutes to work their for short period of less than six months or more than 6 months. Will their salary be taxable in India if it is paid by Japanese institute? If there is exemption of income tax in Japan then will it be also exempted in India?

Based on our information the changes proposed have not yet been duly notified and hence unable to comment on this aspect

I am a resident of India and house wife.I have a friend in Saudi Arabia who wishes to gift $11000 to me and my son who is 1 year old. Is the gift taxable here in India? What is the best possible way of transferring the money from Saudi Arabia to India without having to pay huge service taxes which some money transfer companies charge? Is demand draft or cheque the best possible way? I don't mind the delay in remittance. Kindly provide me with the details.

Gift from unrelated persons can be deemed as income and taxed at normal rates. on the second part of the question please consult the banker on the cost effective way of repatriation

I am an NRI landlord of a residential property in India. My tenant is a company who pays me rent each month after deducting tax at source (TDS). What document/s is the tenant obliged to provide me and how often (monthly or quarterly or yearly) is it to be provided as proof of having deposited the TDS with Income Tax Authorities on my behalf? Is the tenant supposed to Quote my PAN and tenant's TAN/TIN on documents supplied to me? So far the tenant has provided none of that to me for FY 2005-06.

Tenant should give the TDS certificate annually, quoting your PAN details

I am a NRI in the process of selling my self-acquired property.

a. Kindly advise if I can invest in any approved securities such as bonds to avoid paying capital gains tax. Is RBI & Income Tax permission/clearance needed for repatriation of sale proceeds of self-acquired property being sold?

b. Also into which bank account the balance monies remaining after the repatriated amount of sale proceeds are to be deposited. If NRO account what is the annual income tax rate applicable to such (NRO) account balances?

a. The facility of reinvestment in securities is available, and your bankers can help to subscribe to them. repatriation is also possible.
b. The proceeds will go to NRO a/c and the banker will assist in dealing with this.

I am working in the Merchant Navy and am NRI .Kindly tell me which form I should use for filing my IT Returns and what documents and details I have to provide to the IT dept. to prove my NRI status. Do I need to show the amount of income earned by me in USD or is it just enough to state my NRE A/C Number? I will be filing NRI returns for first time. Also please inform me to how to compute tax on capital gains by means of stock profits.

You can fill Form 3 for the IT return. The status of NRI is normally proved by the entries in the passport. Your questions on computation are fact specific. Please consult an Income tax consultant to get the right guidance.

After residing 40 Years in U.K. I have returned to India. Now I am resident but not ordinary resident. My queries are (i) I retired in U.K. in 1990 and got my U.K. pension in U.K.from the pension service part of the department of work and pension. Now I returned to India in financial year 2005-06 permanently and I have transferred U.K. pension to State bank of India, which is crediting in my saving account. I want to know: Is my foreign income (U.K.Pension) exempt from income tax as I am RNOR? If yes, under which section?

After your return to India your foreign income is not taxable for a period of 2 years under section 6(6) of the Act.

I am an NRI residing in the US. I work for a company based out of India. I get my salary in the US but they also pay me a base amount in India which is about 20k Rupees per month. This money goes into an NRO account in my bank in India. My question is, is this amount taxable? Do I need a PAN number and declare/file a tax return on this income in India even though I live in the US?

Money earned in India and credited to your account here is taxable in India. You can apply for a PAN no through a power of attorney and file your return in India.

I am, an NRI for last 14 years and now, planning to settle down in India. Therefore, I need some explanation on the following tax related points:

a) If I come back to India permanently before Sept 2006 ie staying less than 182 days in current F.Y:

1) What would be my status in current financial year (2006-07)?

A resident but not ordinarily resident.

2) What would be my tax liabilities for the income earned outside India from 1st April 2006 till my return?
2.1) Do I have to pay any tax on it?

No.

2.3) What type of documents will be required for disclosure to Tax Authorities?

Proof of how income was earned.

3) I have got some money in bank outside India and going to receive final settlement from my company which I would like to transfer back to India on/before my return.
3.1) Whether the above-mentioned funds transferred to India is taxable or exempted? If taxable, what would be tax on it?
3.2) What should I do to pay less tax?
3.3) What should I do so that I can pay less tax or get some year exemption (fully / partially) from tax on the income (like interest) generated from these funds in current and coming year/s?

No tax on transfer of past earnings outside India.

4) What about my interest Income on my Fixed Deposit in Indian Rupees for the current and coming F.Y.?
4.1) Is it taxable?
4.2) If yes, How to save tax?

Income earned in India on other than FCNR deposits will be taxable. You can make eligible investments to save tax. Please take proper professional help.

5) What would be my tax liabilities for income earned (short-term capital gain on sale of shares) in India for current year?

Exact tax rate/computation depends upon the amount/classification of income, which can be provided by a professional.

6) I have got portfolio of Shares. What should I have to do after returning to India? Do I have to notify the companies / authorities about my change of status? How to transfer NRI portfolio to non-NRI portfolio? Any tax to be paid at the time of the transfer?

No tax on change of status, since these must have been purchased thro an AD as NRI. Please take the help of AD to advice the companies on change of status.

b) What are the benefits I will get if I return to India on or after 2nd Oct 2006 i.e. after staying more than 182 days outside India in current FY?

Your status as non-resident. This makes no significant change to you in the current year. You can remain as not ordinarily resident for two more years if you return after 2nd Oct.

Our Head office is in Korea; now we have opened liaison office in India. In this case, should we apply for a PAN or not?

Yes.

I have recently acquired OCI (Overseas Citizenship of India). We are planning to return to India in 2007 after 10 years abroad. Are we eligible for 'Transfer of Residence', as currently it appears to be eligible only for NRIs?

Looks that NRI status is not impacted by the OCI, as the rules do not seem to discriminate such cases

During my stay abroad for last 20 years I have taken several NRNR deposits in Banks, which are joint with my daughters in law and my grandsons. Now I have come back from U.K. permanently. Some of these deposits will be matured in this fin.yr. And rest in next fin.yr. I am earning very low rate of interest on these. I need your guidance on the following:

a. I am a senior citizen. I want to invest this money in domestic fixed deposits so that I can earn maximum interest. Can I convert these NRNR deposits into domestic term deposits without penalty?

This aspect needs to be clarified with a bank keeping the deposits.

b. Can I gift these deposits to my other joint holders i.e. my daughters in law and my adult grandsons?

Yes.

c. If I gift these deposits to my daughters in law what will be my tax liability?

None.

I inherited a residential property in Delhi from my mother which she bought in March 1984 for INR. 2,16,000. In April 2006 I sold the same for INR. 47,00,000. Could you please tell me as to how much of the sale proceeds

a) is exempted from long-term capital gain tax if I re-invest in another residential property and

b) how much will be exempted if I put the money in NHAI or REC bonds?

In both the situations the capital gains should be invested in another residential property or the designated bonds as the case may be to avoid capital gains liability.

I am an NRI. I purchased NSC of Rs1 lakh in 2004 by drawing money from NRI account. Can I gift them to my mother now?

Yes

Can you please advise the difference and all the implication in being resident and non-resident for holding equity shares in India? My friend was an Indian resident when he bought some shares in Indian companies. Then he moved overseas while retaining these shares. Over period of time he got some of these shares dematerialized. The dividend still goes to resident Indian bank account. Can you please advice what are the implication if he were to declare himself non-resident?

a) Is there any difference in how the dividend/interest is taxed differently for resident and non-residents?
b) Is there any tax deducted at source and if yes then how we claim refund of the same from I Tax department or can we have exemption from this Tax Deducted at Source?
c) Is there any difference in how the short-term and long-term capital gains tax is applied for residents and non-residents?
d) Is there any difference in how the sale proceeds are taxed differently for resident and non-residents?
e) Is there any disadvantage in declaring oneself to be non-resident?
f) Can one purchase/sell these equity shares while being overseas using same demat account?

Dividends are tax free in India and capital gains on shares listed on stock exchanges on which security transaction tax is paid, is treated alike for resident and non resident. Purchase of shares by non resident can be routed through an authorised dealer only and may require a separate demat account

I purchased some NSC and KVP by drawing money from my NRI account. Can I show accrued interest income of these instruments in my IT return? These NSC and KVP were purchased in Dec.2003. Can there be any legal or any other problem?

Income has to be reflected in tax returns on accrual basis. Kindly check with the agent who deals in this on restrictions for purchase of such instruments by non-residents.

I have worked in US for 6 years and only recently returned having stated in India. Will I have RNOR status for two years if I have been in India less than 200 days during these 6 years? Before coming back, I entered into a contract with a US company with no operations in India - whereby they would pay me in dollars for software-related work I did for them over the Internet. Is this income taxable while I am in RNOR status?

For the RNOR status you should have been in India for less than 730 days in the previous 7 years. On the taxability of the income, assuming that you qualify as RNOR, it is important to demonstrate that the income accrues outside India. In this case if the work is carried out from India, it would not be so.

I am an NRI. I would like to know if I can deposit Rs 5 lakh from my NRI account towards Kisan Vikas Patrika in my wife's name. Will there be any taxation on the Rs 5 lakh deposited?

The investment in KVP is not allowed for NRI. However if your wife is not NRI, you can gift her money and she can buy the KVP. Income of spouse on gifts will be clubbed in the hands of the donor.

I have a PAN number that was acquired before I became NRI 14 years back.

a) Should I cancel this PAN number as it does not reflect my status as NRI? The only investment I do in India now is NRE deposits which are tax-free anyway.

No need to change this.

b) If I decide to invest in Mutual funds or securities, do I need, as a NRI, a PAN number? If I don't have PAN number, can the broker firm deduct whatever capital gain tax at source and I don't have to file the income tax?

The existing PAN should suffice.

c) Can I update the status of my existing PAN to make sure that income tax dept understands that I am a NRI? This might be important if I decide to settle down in India in the future (to get the status of resident but not ordinary resident).

NRI status is not permanent. it is to be mentioned in the respective tax return.

At what rate TDS is to be done on payment of technical fees to non-resident if no specific Article/provision in DTAA and no agreement is entered between NR and Indian concern?

The rates would depend on the status of the recipient and date of the contract. the local tax officer should be contacted for this.

When does a merchant mariner's income come under taxation?

This depends on the resident test and place of receipt of income.

Is it possible for me to take a Life insurance policy for my niece and claim tax rebate for the same?

No

I purchased a house in 2002 in Indirapuram with my Indian savings (Rs) for 16.00 lakhs and now the price has gone up to 40.00 lakhs. I have become a Permanent Resident in Canada and want to sell off that house. I also want to transfer that entire amount to Canada to pay off my mortgage for the house I have purchased here. My question is can I sell off the house after three years, can I repatriate all the profit and the original cost and can I avoid paying any capital gains tax as that money will be used to offset another house here. Please advice.

You can sell the house. But repatriation is not possible unless you get the approval of RBI.You can save capital gains tax by reinvesting the gains in another residential property.

Follow-up query

I understand that I could save on capital gains if I reinvested the capital gains in another property in India. However, since I have acquired a property in Canada for which I am paying mortgage, I wish to know whether there would be exemption of capital gains if I reinvested the sale proceeds to pay off the mortgage for the Canadian property.

On the face of it repayment of mortgage loan is not entitled for the exemption.

I have funds in my NRO account which are a legal legacy - I am a lawful beneficiary and I would like to repatriate the same. Is it possible to do so? Do I have to pay any tax on these funds before I repatriate them out of India? If so how do I go about doing it? I have a PAN number and file yearly income tax returns.

Repatriation out of NRO account is possible only with approval of RBI. There are no tax issues on repatriation.

I am planning to move back to India. May I know what are the tax rules and rates for NRIs when we move back? Are they the same as resident Indians?

The basic rates are the same. For a period of 2 years your overseas income need not be offered for tax in India. After that your global income gets taxed in India.

I am NRI based in Los Angeles, California from last 6 years and I am thinking about buying a house in Pune. Want to know if I require PAN number for transaction? If yes, then can I apply on Internet from USA?

PAN no is a must and can be obtained through a power of attorney in India. There is no facility of Internet application.

I am an NRI and I have business income in Malaysia also I am holding certain percentage of shares in Indian Pvt Ltd., companies. I need to know the answer for the following questions.

1. Can I lend the money to the Indian company where I am holding shares out of the profit (dividend) I am receiving from the Malaysian company?

2. Is there any forex restriction to bring the profit of Malaysian company to India and investment in new ventures in India? Also whether it would attract any tax liability in India?

3. I hold various properties in India, and I would like to buy more properties in India out of the dividend profit from Malaysian company. Will it attract any tax liability?

4. What will be the tax implication if I lend to a Pvt ltd co., in India out of the dividend (profit) from the Malaysian company? Is it possible to do in the first place?

1. Money can be lent to the Indian company but this is subject to RBI and Company law restrictions.
2. There are forex restrictions for investment in real estate in India. There is no tax significance.
3. Purchase of property will have to be established with the source of profit. RBI approval is required for investing in more than one property.
4. Lending to a company in India has only company law and RBI implications.

I was on H1 work visa in US from May 1998 to May 2005.Now moved back to India and not sure if I will go back. I have taken temporary job and applied for H1 again. I am working in India now from June 2005 till date. I have FCNR and NRE Fixed Deposits and US funds. What will be tax implication for 2 years from the date I arrived in India (11th May 2005)? Since I was in US for 7 years (98-2005) is my status is RNOR for 2 years from date of arrival? Any benefit on taxation? How about tax on interest income on US funds?

Interest earned in NRE Account is exempt. Income earned in the US is not taxable in India for a period of 2 years after your return to India.

SEBI recently has made PAN cards mandatory for opening a demat account. PAN cards help government track different accounts of the same person. I am a student studying in India and would like to open a demat A/c for trading in stock market. Will applying for PAN card make me liable for paying tax on returns from my investment? Also will transfer of money from an NRE A/c be taxable (not as an income), considering that I am student? If not, how will you account for the transferred money while filing the income tax if at all I am subjected to?

Application of PAN card per se does not mean that you are liable to tax and transfer of money from NRE Account is not taxable as income.

After staying for 21 years in Saudi Arabia, I have finally returned to India on 22-05-05. As per FERA act I am NRI up to 22 July 2005 and as per I Tax act I am Resident But Not Ordinary Resident Indian (RNOR) for the financial year2005-06 .I am having NRNR & NRE deposits by foreign remittance with Banks in India, which will be maturing in 2006- 2007. What are the income tax liabilities on the interest earned on these deposits during the financial year 2005-06 & and subsequent years? Is the interest earned exempt from income tax till maturity of these deposits under chapter XII.-A? Special provisions relating to certain income of NRIs & for RNORs.

1. Interest earned out of NRE and NRNR Accounts is not taxable.
2. The application of Special Chapter will arise only if there is a tax liability.

I have been abroad for more than 20 years. I would like to return to India. Can I keep my investments abroad? Do I need to pay taxes on income from these investments? Do I need to inform tax authorities about the investments and income? On returning to India I will have no income as I would be taking the retirement.

The investments can be kept abroad and income thereon is not taxable here.

Follow up

I understand from one of the articles on Internet that income from investment abroad is taxable and the investment abroad is to be shown in tax returns once NRI returns to India to settle there. If the person is RNOR (Resident but not ordinary resident) then he is not taxed for two years and if he is Resident as per tax law then he has to pay taxes on world income.

Kindly therefore clarify when you say that no taxes would be paid on investment abroad.

The said income is not taxable for a period of 2 years on your return and thereafter you will be treated as a resident and ordinary resident and your global income will be taxable in India.

I have four queries:

a) I had taken a loan and have been paying for instalments of a flat booked in my parents name through my NRE account. Now there is a need to sell of that flat so as to make payments for a different flat booked at a new location where they plan to reside. Who will be taxable for the capital gains through the sale of this flat-my parents or me?

b) I also don't have a NRO account in India. Can it be opened while I am out of India?

c) Also till date I had no financial earnings in India and therefore I did not file any income tax return - can I file it now and if there is no Income then at what rate should I file it? How can a person away from India file the Income Tax Return?

d) Can I still continue payments to my LIC policies and my PPF account as these were opened before my travel abroad?

1. Capital gains will arise for the parents who are the owners of the property. Payment of instalments through NRE Account has RBI implications.
2. NRO Account can be opened from outside India.
3. There is no need to file a return of income if there is no income in India.
4. LIC payment is possible but not PPF.

I am an NRI who has misplaced my complete tax returns file & have no records for any of my tax returns over the last 10 years. However I do have a PAN No. which I remember. How & where (in which circle) to I file my current years return pertaining to last financial year? On the basis of my PAN no. can I trace in which circle my past returns have been filed?

Will be difficult to trace old records. Better to file the returns from the current year in the NRI circle quoting the existing PAN no.

I am a US citizen of Indian origin. Please let me know if I should pay taxes in India for gains accruing from sale of property (held for more than 10 years). I have heard if the proceeds of the sale are held in an NRO account, then no taxes are accrued.

If the property is located in India then the sale will give rise to long-term capital gains subject to reinvestments in another property or specified bonds.

My son is an NRI in USA. He wants to send Rs. 2 lakhs to me as gift which I would be depositing in my bank account in India.

a) Please let me know whether this gift would be subject to any gift tax or not.

b) I visit him for 1 to 2 months every year. Can I open and maintain an account in USA out of funds (gifts) received from him in USA. What would be my tax liabilities in India on this account?

a. There is not gift tax on the funds gifted to relative.
b. Funds can be maintained in the US and they are not taxable in India since the income is not earned in India.

I am now a US Citizen of Indian origin. I had bought a residential land in Chennai out of Indian Rupees when I was a resident Indian (i.e. prior to migrating to the US). The property has been held for more than ten years now and I intend to sell it now. Since I do not have a PAN, is my US Passport considered a sufficient and valid document when the sale formalities take place?

You still have to get a PAN no and file your return of income reflecting the capital gains on the sale of land.

My father is an NRI and has a demat account with ICICI. He buys and sells shares online. The demat account is 'resident'. Does he have to get a PAN number -does he have to pay tax on the capital gains from the demat account? Is there a NRI demat which gives tax benefits?

1. PAN no is a must irrespective of your residential status.
2. Capital gains tax is applicable depending on whether it is short term or long term.
3. NRI Demat does not give any special tax benefits.

I am currently a citizen of US. Can I open a NRE or NRNR account and if so, is the interest income exempt from local US taxes? Also, can I use these accounts to send money to India? What are the legalities and tax implications?

You can open these accounts and interest arising thereon in tax-free in India. As far as US is concerned you have to check the US law on the subject. These accounts can be used to send money to India.

Our head office is in Korea and Liaison office in India. we have the following query for fill Pan Application Form.
1. What should be mentioned for Date of establishment & Registration Number of Company? Whether it is Korea office establishment date & Registration number or not?
2. Whether Citizen of India?
3. What should we mention for Status? (Company or Firm; in Korea it's a Company).

1. The date and no of the Liaison office should be mentioned.
2. Not a citizen of India.
3. Company.

I am a senior citizen. My grandson will complete 18 years of age in November 2006. If I give him gift some money and he deposits it into post office M I S. Is the interest earned by him will clubbed with my income or interest income will be treated his income? Secondly is their any limit of gift amount, which I give to my grandson.

There is no clubbing once the donee becomes a major. No limit on gifts to close relatives as provided under section 56 of IT Act.

I am an NRI. I purchased NSC of Rs1 lakh in 2004 by drawing money from NRI account. Can I gift them to my mother now?

Yes

Can you please advise the difference and all the implication in being resident and non-resident for holding equity shares in India? My friend was an Indian resident when he bought some shares in Indian companies. Then he moved overseas while retaining these shares. Over period of time he got some of these shares dematerialised. The dividend still goes to resident Indian bank account. Can you please advice what are the implication if he were to declare himself non-resident?

a) Is there any difference in how the dividend/interest is taxed differently for resident and non-residents?
b) Is there any tax deducted at source and if yes then how we claim refund of the same from I Tax department or can we have exemption from this Tax Deducted at Source?
c) Is there any difference in how the short-term and long-term capital gains tax is applied for residents and non-residents?
d) Is there any difference in how the sale proceeds are taxed differently for resident and non-residents?
e) Is there any disadvantage in declaring oneself to be non-resident?
f) Can one purchase/sell these equity shares while being overseas using same demat account?

Dividends are tax free in India and capital gains on shares listed on stock exchanges on which security transaction tax is paid, is treated alike for resident and non resident. Purchase of shares by non resident can be routed through an authorised dealer only and may require a separate demat account.

I purchased some NSC and KVP by drawing money from my NRI account. Can I show accrued interest income of these instruments in my IT return? These NSC and KVP were purchased in Dec 2003. Can there be any legal or any other problem?

Income has to be reflected in tax returns on accrual basis. Kindly check with the agent who deals in this on restrictions for purchase of such instruments by non residents.

I have worked in US for 6 years and only recently returned having stated in India. Will I have RNOR status for two years if I have been in India less than 200 days during these 6 years? Before coming back, I entered into a contract with a US company with no operations in India - whereby they would pay me in dollars for software related work I did for them over the internet. Is this income taxable while I am in RNOR status?

For the RNOR status you should have been in India for less than 730 days in the previous 7 years. On the taxability of the income, assuming that you qualify as RNOR, it is important to demonstrate that the income accrues outside India. In this case if the work is carried out from India, it would not be so.

I am an NRI. I purchased some NSC and KVP by drawing money from my NRI account due to ignorance of rule. Can I show the interest income of these instruments in my IT return? Can I have to face any problem if I do so? What type of problem I have to face? Can I gift these instruments (NSC) to my mother now? These documents are in joint name with my mother. Which procedure I should follow to gift them? Whose will be tax liability after gifting them?

The tax is attracted on the income, though the bonds are not allowed to be bought by NRIs. Gift does not attract any tax. The income after the period of gift will be taxed in the hands of the recipient. Since these are transferable instruments you get the post office to transfer to the name of the mother.

I am an NRI. I would like to know if I can deposit 5 lakh rupees from my NRI account towards Kisan Vikas Patrika in my wife's name. Will there be any taxation on the 5 lakh deposited?

The investment in KVP is not allowed for NRI. However if your wife is not NRI, you can gift her money and she can buy the KVP. Income of spouse on gifts will be clubbed in the hands of the donor

I have a PAN number that was acquired before I became NRI 14 years back.

a) Should I cancel this PAN number as it does not reflect my status as NRI? The only investment I do in India now is NRE deposits which are tax-free anyway.

No need to change this.

b) If I decide to invest in Mutual funds or securities, do I need, as a NRI, a PAN number? If I don't have PAN number, can the broker firm deduct whatever capital gain tax at source and I don't have to file the income tax?

The existing PAN should suffice.

c) Can I update the status of my existing PAN to make sure that income tax dept understands that I am a NRI? This might be important if I decide to settle down in India in the future (to get the status of resident but not ordinary resident).

NRI status is not permanent. It is to be mentioned in the respective tax return.

At what rate TDS is to be done on payment of technical fees to non-resident if no specific Article/provision in DTAA and no agreement is entered between NR and Indian concern?

The rates would depend on the status of the recipient and date of the contract. The local tax officer should be contacted for this.

When does a merchant mariner's income come under taxation?

This depends on the resident test and place of receipt of income.

Is it possible for me to take a Life insurance policy for my niece and claim tax rebate for the same?

No.

Since LT Cap Gain on Equities and Dividends are tax-free, how should it be shown on the IT return? Should I:
1.Not include it at all
2.Include in Total income and Non-Taxable Income
3.Show it only in Non-Taxable income

Income that does not form part of taxable portion may be separately mentioned and not included in the main computation.

I have been wrongly transferring my salary savings accrued abroad into a ICICI NRO account, instead of the NRE account. Now I find I am liable to both TDS and tax payment. Can you suggest anyway I can get this error fixed and get the funds correctly classified as NRE and save on tax payment?

This looks like a practical issue at bank level to sort out. I doubt if the income tax treatment for the past can be changed.

Is the amount got from sale of ancestral property in a rural area in India exempt from capital gains tax? If tax is to be paid, how is it calculated?

There is an exemption only for an agricultural land. The market value as on 1April 1981 can be the base and this can be indexed to get the cost figures. Kindly take some professional help to get this computation right.

I recently returned to India permanently after staying in the USA for about 6 years (On work visa). I am still in the employment of the USA-based company working on contract basis. They have no offices/branches in India. I get my salary every month wired to my bank account (wired in USD received in Rs). What are the tax laws pertaining to my situation (I have heard that there is a flat tax of 10% for such individuals)?

If it is under a contract of employment it is likely to be taxed normally as applicable to any resident, since the employment is exercised out of India. However, if you are seeking to find some alternatives, you should consult an adviser with full facts to examine the scope for it.

I am a NRI currently residing in India. My query is regarding Double Taxation Treaty. I have bought some shares in India last year. I have already paid tax in USA, while exercising the options based on "Tax Deduct at Source". Questions:

1. If I sell these shares in India, do I need pay tax again on capital gains? (Currently the shares that I own comes under long-term investment ( >12 months))
2. How can I prevent TDS while selling those shares?
3. What kind of document do I need to submit to my bank so that tax on capital gains is not deducted?

1. If the shares are listed securities and long term in nature and suffered Securities transaction tax there is no long term capital gains tax.
2. The question of TDS does not arise.

I am an NRI working in the USA for a multi national company with head quarters in India. I was awarded ESOPs which I vested last month. I had to borrow funds from my relatives in India to exercise my ESOPs. I would like to repay this loan now. How will this transaction be treated?
For example: I had borrowed 50 lakh rupees to buy the Stock options from my employer for the ESOPs to be remitted in my demat a/c. After the transaction was completed, I requested the broking agency to sell X number of shares sufficient enough to repay my loan. The proceeds of the sale are remitted into my checking a/c in India. What are the tax implications of this transaction? Can I issue a check to this amount to my relatives? What is the proof required to be submitted in case of any queries from RBI or Income tax dept.?

The loans given by your relatives may have to be approved by RBI being loans given to NR by residents. Your repayment is fine.

I am an Indian citizen but NRI for last 8 years. I am going to buy a flat in Noida. Do I need to have an Income Tax PAN for buying a property? Or any other Tax information needs to be submitted at the time of final registry in the court?

Better to get PAN. Otherwise you have to file a declaration for registering the property.

I am a NRI for the last six years. I was mailed a check of 40,000 Rupees by my last employer around six years back. Other than this I get a check from LIC for Rs 5000 on and off. That is my only income in India. In addition to this I also have a couple of NSC accounts with post office. Am I required to fill an income tax return? What is a PAN and how can I get it? Am I allowed to invest in Post-office NSC and Kisan Vikas Patra?

Not required. PAN is the account number for tax assessees and increasingly mandatory to identify oneself in many financial transactions. NRIs are not permitted to invest in the instruments you have mentioned.

I am a NRI. I had two NSCs in India before I left country which I renewed last year and will mature next year. Also my mother bought a Kisan Vikas Patra and put me there a joint owner (E/S) on the KVP.
1. Can I still continue to invest in NSC? In case I accept the US citizenship will I be able to keep my investments in NSC or KVP?
2. Is it possible for me to get the money after maturity? If yes, what is my tax obligation after the NSC matures?
3. What is my tax obligation with KVP if my mom decides to gift the KVP to me? If the amount of gain is Rs 80,000 over a period of six years, do I need to file tax for it?

NSC/KVP investment is not possible for NRI. Old investment can be encashed on maturity. Gift doesn't attract tax in India. Income is taxable on accrual basis.

I am currently on H1B visa and work in the United States. For some of my projects, I am sent to Indian for 3-4 month periods. My questions are the following
1. How will I be taxed? Do I pay dual taxes?
2. If my company credits my payroll to my US Citibank account, can I withdraw it in India?
3. Is this considered as a transfer?

Less than 6months stay in India should not attract any tax. Since some fact specific information on residency status may be needed, please take professional help. Dual taxes can arise in some situation with facility for full credit.

I am a senior citizen shortly and will be settling in India as a Resident Indian. Please advise me whether I can keep unlimited amount as term deposits in nationalised banks getting 8% tax-free interest? Does interest attract income tax if it exceeds the exemption limit for senior citizens?

There is no restriction on the amount to be placed as a fixed deposit with banks. But if the interest exceeds Rs 5000 in a year per branch there will be tax deduction at source.

Follow-up

I have some doubts arising from your reply as follows:-
1. Did you say Rs.5000/- per annum or is it 50,000/- per annum?
2. Is it that one can open with as many banks as he wishes, the only criteria being per Branch (as mentioned in your reply) interest should not exceed the exemption limit?

It is 5000/- per branch and planning is possible placing deposits in multiple branches but this is also under scanner and fraught with some risk.

I have five queries. They are:

a. The amount in NRE savings account and FCNR account are tax free till what time after I return to India?

Till you become an ordinary resident, may be 2 years, but specific facts of stay needs to be seen. This of course is the interest. No tax on principal at any stage.

b. Is there any time limit to keep the above accounts even after returning to India?

Normally on maturity the bank will convert to resident a/c.

c. Is there any time limit for repatriation of the fund from this account after I return to India?

Not clear. You can repatriate money as long as the FCNR status remains.

d. Suppose I get the fund from U.K and after 6 months I go to US, can I repatriate to US? I mean is there any restriction as to which country the fund can be repatriated?

No such restriction.

e. Is there any time limit within which my foreign earnings has to brought back to India to keep it tax free...or can it be brought back after any period of time? The reason being I am not sure when I would get an overseas job again, so would like to keep some money in my overseas account as safety for my next visit as a buffer.

This is fine. No time limit on repatriating money back.

Currently, I am a citizen of India and now I am eligible to apply for US citizenship. I do own property in India and have minor income in India. As far as I gather, the dual-citizenship between India and US is in flux. If I become the citizen of US, what are my tax implications? Can I own property and have income in both the countries? Can I still open and operate the NRI bank account?

Dual citizenship has no connection with taxation. You can have income in both the countries and the taxation would depend whether you are a resident or a non resident. You can open and NRI bank account and the interest thereon is exempt.

Mr. X currently holds a green card. He holds an Indian Passport and is currently a resident of India. When he used to be a resident in the U.S. he maintained a bank account and a DEMAT account in the U.S. itself, which he continues to maintain till date. In the event he gives up his green card is it legal for him to continue to maintain the said accounts. If the answer to the previous question is 'Yes', are there any formalities or permissions [from either RBI or Tax Authorities] he will need to undertake in order to continue to maintain both those accounts in the U.S.

No problem on continuing these after giving up the green card.

I hold ESOPs of my employer, which is listed on NASDAQ in US. These were vested over a period of 4 years and the first date of vesting was sometime in October 2003 for me. When I exercised the rights (these were more in the form of Stock Appreciation Rights) in early 2006, the company deducted 33.4 % tax.

I want to find out if these should have been taxed as a long-term capital gains tax of 20% plus surcharge.

I have been going through some literature and I find that this should have been treated as a long-term capital gains tax and taxed accordingly. As it is a NASDAQ share, the rate of tax should have been 20% plus surcharge. Is my understanding correct?

Stock appreciation rights typically don't qualify as long-term capital gains as there is no holding of the shares per se. They are taxable as remuneration only.

Is there a double taxation agreement with Hong Kong? If so can I get to see it?

None, we presume you are referring to India as the other party

In the case of a returning Indian having NRE fixed deposit which will mature after five years from now, I want to know whether the interest earned will be taxed or it is tax-free till maturity date. Please advice.

It will be tax free till the status is not changed to "ordinarily resident"

A senior citizen residing in India would like to sell his agricultural land which is in India and has been inherited from his father. Will he have to pay tax on it after this land has been sold? In case he wants to gift a part of the proceeds to his children then what is the procedure? Will this be again taxable? In order to save tax, what is the alternative?

Tax may not arise if the land is beyond the prescribed territorial limits. Gift can be given without any prescribed formality and no tax is attracted, if it is to close relatives.

Follow-up query

This land was an agricultural land but, prior to its sale it has been converted into industrial land. Will then the senior citizen be eligible for tax for this industrial zone? If yes, how much per cent? In order to avoid tax, what is the best source of investment? Could you please explain what the meaning of the prescribed territorial limits is?

Tax will arise in this situation. However, investment in approved CG bonds can help to avoid/reduce tax.

I am an NRI in Saudi Arabia owning property in Hyderabad. I intend to sell the property there but wish to retain funds in my NRO account for use by my family living in India. In case my daughter was to remit the sale proceeds into my NRO account, will the bank ask for my PAN number? Further, will the IT department come to know of my property sale and levy capital gains tax?

IT department monitors transactions very closely and send notices.

A 61-year-old lady citizen of USA but NRI, how much standard deduction can she take from Indian infrastructure (rural electrification bonds)? She had Rs.1,15,500 income last tax year.

Deduction u/s 80C is possible up to a max of Rs 1lakh from the income.

How much money(according to latest 2006-7 laws) can a NRI send to his parents residing in India without any taxes on either side and till what kind of legal documentations are required for sending gift money to parents on either side for any amount?

No specific limit on giving money to parents in India under the tax laws

A friend of mine was an NRI in UK between October 1991 to September 1997. He still has an account in a UK bank. Nine years of his status of resident but not ordinarily resident will be completed in September 2006. Can he continue to maintain this account in UK after September 2006 and transfer funds to India whenever needed? If yes, what would be the tax liabilities, if any?

The RNOR position has changed since 2005 and the nine years is now replaced as two years. However maintenance of account abroad is not restricted by this. Such account can be maintained with simple RBI approval.

Do software development & maintenance fees received in convertible foreign exchange attract service tax?

Normally, no. However the export rules and the exemption for software may be gone through to see if your case is well covered.

I had purchased a land in Andhra Pradesh in 2001 for 2 lakh & sold the same in 2006 for 6 lakh. What is the capital gain? Is it short term or long term? How can I avoid the tax? Please advice.

Long-term capital gains; tax saving by investment in approved bonds.

I am a Korean Citizen and now I am in charge of liaison office, which is in India. I have the following queries.
1. If I get the salary from Head Office (Korea) in US dollars, is it taxable in India?
2. If I get the salary in India rupees, then what are the tax deductions I will get?
3. As a liaison office, is it compulsory that I have to get the salary in Indian rupees?

Your salary is taxable irrespective of how you get it. You can get deductions for approved investments u/s 80C.

I bought a flat in India for 2.5 lakh in 1989 and sold it in 2006 for 5 lakh. I have deposited the proceeds in a NRE (rupee acct). Do I need to pay capital gain taxes? Do I have to file a return or inform someone of the sale? If yes, how much time do I have to inform or file taxes?

You need to pay the tax and file the return.

Whether the interest on RFC account is taxable on not ordinary residents?

This won't be taxable in India assuming you are either non- or not-ordinarily resident when the money is received.

I bought brand new car a couple of months back. I am getting good job offers from India. I have been in the US for the past 10 years. If I decide to return back to India, can I bring my car with me? If so what would be the tax on the shipment? Since it is only 2 months old car does it fall under Used Car category for Customs?

Import of the car would be permissible. The basic rate of customs duty is 60% and there are additional and special duties also. The exact working can be obtained from a custom house agent in India where you plan to import.

My wife and I are PIO and Australian Citizens. We are planning to relocate to India for a long term (many years) or permanent stay. We plan to invest in India separately in my name and in my wife's name, out of the funds taken from here. My question is: for income tax purpose in India whether those investment earnings will be treated as income of two different individuals or they will be clubbed together and taxed as income of one person?

As long as the capital of the two of you is independently owned, the income will be taxed separately.

I am an NRI in the process of disposing property that I own in India. I'm informed that one needs to get Income Tax clearance before selling the property concerned. Is this correct? Please advice.

The system of tax clearance is no longer in vogue.

I started working in Middle East from 1st April 2003. During the year 2003-04, 2004-05 & 2005-2006 I was an NRI as I remained abroad for 337 days, 321 days & 334 days respectively. Now from Sept.22nd 2006 my job is going to be over. Thus during the year 2006-07 my stay abroad will be only for 137 days. Pl let me know that my salary earned in Middle East from April to 22nd Sept 2006 will be taxed in India. if it is to be taxed then if I stay abroad on tourist visa with my relative / friend for the balance required period will help to save income tax?

The salary earned abroad will not be taxable in India in the case mentioned.

If a person of Indian origin with US citizenship opens an account in India with US Dollars either in FCNR or NRE a/c is the interest on these taxable in India? If the person decides to reside in India permanently or spends extended time in India then does the interest income become taxable? Any other legalities about living in India with a US citizenship?

In either case interest arising out of NRE Account or FCNR account is not taxable.

I am an NRI. I have some money in my NRO account earned in India. I have some money in my NRE account earned in foreign country. What procedure I should adopt to invest the money of both the account in mutual fund schemes? Is the procedure same or different? What type of return form I should use to file income tax return? Am I eligible to get deduction under Section 80C?

There is no specific procedure for investing out of NRE Account. You may still check this up with the Mutual fund. The investment in mutual fund is entitled to 80C deduction up to 1 lakh. You will have to file form 2D/Form2E or form 3 depending on the components of income.

I am an NRI. I want to open a NRO term deposit accounts in India. My total income in India from all the sources is well below the taxable limit of 1lakh. But NRO term deposit attract 30% + surcharges TDS. Is it possible to avoid TDS? What is tax exemption certificate? How to obtain it? How much time it take practically to obtain such certificate?

You can apply for a lower or nil deduction of tax at source in a prescribed form before the TDS officer. The time limit for obtaining the same will vary depending on the place and the officer concerned. It could take say a month.

I am an Indian Resident working for a Sydney Based Private Ltd. Company on 457 work permit Visa. Since I'm working on Projects I have been outside Australia for major part of the year. I also have a well-maintained PAN card in India. Based on the double tax agreement between Australia and India am I eligible to get a tax refund?

Since you are a resident of India your overseas income will get taxed in India. But you can avail credit in respect of taxes paid outside.

I have been in the US for the past 15 years. I will be returning to India and assuming my status will be an Ordinary Resident, I want to understand the India Tax Obligation for the following incomes.

1. US Social Security Income

2. Income from Employer Pension

3. I have a ROTH IRA and I have contributed in US with After Tax Dollars to this Retirement Savings Plan. Per US Law, withdrawals are Tax Free, if withdrawn after 59.5 years of age.

3a.This account internally will have interest income, capital gains and loss, all of which NEED NOT BE EVEN REPORTED FOR US INCOME TAX PURPOSES. How will Indian tax law consider the gains with respect to its account value? Is it reportable / taxable?

3b.How will India law treat the Withdrawals from this account which is Tax Free by US Law?
Is it reportable / taxable?

4. I have an Employer sponsored 401k (which has been rolled over from my employer to an investment company custodian and called RollOverIRA) PLUS Traditional IRA (This is not Employer Sponsored, but per US Law I was allowed to contribute $3000 every year). I contributed to this Retirement Plan with Pretax dollars and Per US Law, these accounts grow Tax Deferred and Withdrawals at Retirement only (after 59.5 Years) are subject to US Tax as ordinary income.

4a.The Interest, Capital Gain, Dividends are Tax Deferred until withdrawn per US Law. These need not be even reported to US until withdrawn. How will Indian tax law consider the gains with respect to its account value? Is it reportable / taxable?

4b.How will India law treat the Withdrawals from this account which is Taxable by US Law.

Is it reportable / taxable?

5. I have a Revocable Living Trust for which I am the Trustee and My wife is the primary beneficiary and my children are the secondary beneficiaries. The investment into this trust has been done with After Tax Dollars.

5a.How will Indian tax law consider the gains with respect to its account value, which are Taxable by US Law?
Is it reportable / taxable?

5b.How will Indian law treat the Withdrawals? Withdrawals are Not Taxable per US Law as TAX has been paid on the Capital Gain / Loss.
Is it reportable / taxable?

6. For all my other Investments like CD (Fixed Deposits), Mutual Fund Assets, Stocks in US, the Dividends, Interest, Capital Gains / Loss, is subject to US TAX.
How does India tax law treat these transactions? Is it reportable / taxable?

7. For my Retirement Accounts (401k, IRA, ROTH IRA), in the process of managing these accounts, I may be transferring money from one Mutual Fund to another Mutual Fund. Will Indian Tax law interpret this as opening a New Account? If I am not satisfied with my Current Custodian, I may also close the entire account and Transfer the proceeds to another Custodian. Will this event result in any Indian Taxes? Are these events reportable / taxable?

After you become a resident in India your interest accruing in the US will get taxed in India. All withdrawals up to the point you are a resident of the US will not be taxable in India. After you become a resident in India the withdrawals will get taxed here.

I am a NRI and I own a immovable property in Mumbai in my name which was purchases using my NRI funds transferred into the NRE account, I am thinking about giving this property on lease for which one of the tenant is ready to pay @ RS 45000 per month; the tenant has agreed to the rent, but he is only ready to pay Rs 38000 per month after deduction of TDS. I don't have a problem in paying any govt. tax and I am aware that rental income generated in India is taxable. I spoke to the bank and they said that they tax 30% on the interest that is generated on the amount deposited to my account.

My questions:
1. What the tenant is deducting as TDS (RS 7000 on 45000), is it a general practice?
2. Will I still need to pay tax on the rental income? If yes, how do I pay that?
3. Will the bank still deduct TDS on the deposits?
4. Will I need to ask anything fro the tenant?

1. TDS is applicable at the rate in the schedule or the Double taxation agreement whichever is beneficial.
2. The rental income has to be offered to tax as income from house property and credit can be taken for the related TDS.
3. TDS on interest on the deposit is an independent process and has nothing to do with the TDS on the rental income.
4. You will have to ask the tenant to issue the TDS certificate to you to get the credit.

I have a trading a/c in India (PIS scheme).I have capital gain and losses as well for last year on account of dealings in listed company shares. I have the net capital gain as nil. Please advise the taxes applicable, if any.

On the face of it you can be treated as a dealer in shares and the resultant income can be taken as business income. Since your net income is nil there is no tax liability.

Are balances in savings accounts or FDs in banks now exempt from wealth tax irrespective of amount or is there a threshold limit above which Wealth Tax is payable?

They are fully exempt.

My husband works in the merchant navy for a foreign company. He has been an NRI for the past 10 years. He has got a new role as an inspector on the ship and makes frequent short trips abroad as opposed to the longer trips he used to make. I understand that if he stays in India for more than 182 days he will get taxed. There is a possibility that it could happen so to prevent him losing his NRI status could he take a few holidays abroad during his leave. Is that allowed or will he still be taxed?

If this stay in India during a financial year exceeds 182 days he will be treated as a resident in India irrespective of the holidays taken. Entries in the passport will be the evidence for his stay in India.

I'm NRI living in USA since 1990. In 1993 I've inherited a house after death of my father, since then house is vacant. I'm ready to sell it now. Please let me know how capital gains tax will be calculated in this case.

I suppose the house is situated in India. The capital gains are arrived at by reducing from the sale consideration the indexed cost of acquisition. The rate of tax is 20% plus surcharge. In case of specified reinvestment there are exemptions.

I am a seaman working on a board cruise ship for past 13 years. I work on contract basis for 6 months on and 3 months off the ship. I remit money to India in US$ in form of Money Order. Am I liable to pay income tax?

Since you are a non resident as per Income tax law your earnings in the ship outside India is not taxable in India.

I am Citibank NRI account holder and I have NRE and NRO accounts with the bank. I have been transferring my savings thru these accounts to India on which I have already paid tax? Am I still liable to pay taxes in India? Somebody told me if I use NRO account I am not liable for any tax. Is it true?

Interest arising from Non resident External Account is exempt and interest arising out of Non resident ordinary account is taxable.

I'm working in merchant navy. What are the tax implications for merchant navy officers? Do they need to file tax returns? Please advice as the case is very complicated because we work on ships but our address of residence is in India.

You tax position will depend on the no of days you stay in India during the previous year and you income earned in India.

I am a Singapore-based NRI wanting to sell a property purchased in India in 1997. What is the sales procedure? Do I require Income Tax clearance at any stage before I can sell it? If yes what is the procedure for getting such clearance? For capital tax calculation what documents do I need to submit to CA/Income Tax dept?

Capital gains will attract on the difference between the sale price and the indexed cost of acquisition. There is no clearance required. A return of income needs to be filed reflecting the capital gains tax.

I came to out of India for the first time on 25-June-06 to UAE on Visit visa of company who offered me job and that was changed to Employment Visa within 1 month. Now, I am planning to return permanently to India on 1-jan-07. Whether my salary earned in UAE will be subject to Income tax in India? During this period, I am continuously getting salary every month from my present govt job (from which I came here against my leave balance). Please guide me whether due to DTAA, if I will stay in UAE for more than 182 days and return to India permanently in same FY, my income earned in UAE will be taxable in India?

Leaving aside the issue of being in a Govt job and taking employment simultaneously, the absence of more than 182 days from India on account of employment results in NROR status at least whereby income earned outside India will not be taxable.

I am an NRI and my parents in India have decided to dispose off their house there and gift the proceeds to me. Do I need to have a PAN number to receive this gift? Is any paperwork needed (such as documents from a court) to receive the gift?

No PAN would be needed in this case. You would require a gift deed, though.

I am NRI for last 4 years and working alone abroad while my family is still in India. I bought an agricultural land in India in my name from funds from my NRE account. The cost of land was say 15 lakh. I did development of the land for 10 lakh from money from my NRE account. Now (after 2 years) I get an offer to sell the property for 30 lakh. What is the tax liability? Please advice.

The investment in agricultural land is not allowed for NRI unless you had obtained permission. The tax officer may use this as a reason to disallow exemption for agricultural land. Tax @20% on the gain is applicable + SC and cess if the agriculture exemption is not extended to this case.

I recently sold our house in June 2006, which generated long-term capital gains after considering inflation indexation. I have no intention of buying another house. I want to invest in capital gains exemptions bonds under sec. 54EC.  Currently none of the bonds are open to buy and I believe, I have to invest before Dec. 2006.  If these bonds are not open before then, are there any other options, to avoid capital gains tax other than investing in other capital assets?

You can invest the proceeds in National highway Authority of India bonds or Rural Electrification Corporation Bonds to avail capital gains exemption.

Follow-up

I know we can invest in REC and NHAI bonds to get capital gains exemption under Sec. 54EC. Currently these bonds were closed and not going to be open for purchase until March 2007.  I need to invest the money in these bonds by the end of December 2006 (6 months from the date of sale). We sold the property on June 30, 2006. 

My question to you is, can I buy these bonds in March 2007 and still claim the exemption from capital gains?   9 months from date of sale of property vs. 6 months per Sec. 54EC. If the bonds are not available for purchase within six months of sale of property, does tax authorities allow extension of time to buy these bonds?  Are there any other options? I am not planning to buy any new property

You can, on account of the reason mentioned.

I have a NRI Rupee Checking Account with Citibank and have returned to India around 4 years back. What is the time frame by which I should convert my account to normal resident account and what is the amount of money that I am going to lose in converting my account to resident account. Will there be tax only on the interest income earned only or on the full amount?

You could check with the bankers on the conversion rates and the time limit. Interest arising out of NRE account is exempt. Interest on conversion into ordinary account will be taxable subject to the overall exemption limit for individuals.

I bought a site in Bangalore on August 1, 2003, built a house on it and got possession by June 11, 2004. I am planning to sell the house this year (by 2006 year end).  Will the proceeds be considered long-term capital gains or short-term?

The view would be short-term capital gains based on the date of possession as the criteria.

I am a NRI. Since my brother needed some finance help for his business, I sent him RS 10lakhs through his bank account over the last one year. Should he need to pay income tax for this amount which I sent him or he can treat this as a gift from me? But I did not give him anything in writing that this money I sent this is a gift.

There is no income tax liability and gift to brother is also exempt from income tax.

I am a NRI for the past 6 years. I have recently won a lottery for a significant sum. Can I bring this money into India and will it attract tax? Any other procedure to be complied with?

Since the lottery is won outside India it is not taxable in India since you are a non-resident. The money can be brought in through banking channels.

I am NRI. My son is resident of INDIA. He is major.
 
My son is holding an agriculture property (namely medicinal plants) before I became foreign citizen by way of a rent deed that is he has taken an agricultural land on rent.
 
Since agriculture income is tax-free he hasn't kept formal accounts for it and invested earnings in developing the said land (greenhouse etc).
 
The problem is:
 
(01) He receives all payments in cash.
(02) He has to make all payments in cash.
(03) Many parties don't have bank account with whom he deals for agriculture (selling what is produced) or preferred banks are not easily accessible.
(04) Further the other agriculturists tell him that why he wants to deposit in bank money when they cut tax on withdrawal?
 
Almost many of the people doing this agriculture cultivating business keep money in cash as they receive it in cash.
 
This year because of his investments (out of earning of agri) etc done in agriculture (for which he has rough account) he is to get handsome money of more than Rs.50 Lakhs out of selling the medicinal plants etc and previous cash he is holding.
 
This amount he wants to invest in buying an apple orchard (agriculture land).
 
He plans to deposit the money / sale proceeds of plants (whether received in cash or by cheque) into his new bank account opened 1 month ago
 
My query is:
 
(01) Is it compulsory for an agriculturist to keep accounts if they have no other income?
(02) In case of my son, there is no corresponding bank entry in respect to his earnings in previous year as he had invested in the farm the earnings. Is it compulsory for him to deposit all his earnings of agriculture (got in cash) into a bank account?
(03) In case he gets an enquiry from I. Tax that from where he purchased agricultural land whose registration value is worth Rs. 50 Lakhs? Can he not show his rough account, rent deed and get away? Or would they make it a problem since the amount was not deposited in bank?
 
Both the lands (one he is renting and one he is planning to purchase) are situated outside municipal limits and are being cultivated.
 
In case it is going to be problem, I can as NRI gift him Rs 50 Lakhs out of my funds here. I am capable to do it and can prove it. However as NRI I am not allowed to buy agri land and my loaned money can't also. Can my gifted money buy it?
 
Please advise what would be better. He wants to invest his own agriculture income for purchasing agriculture land. I have highlighted the limitations (no bank deposits/entry in previous years). Can he go ahead with his own income? Or do I need to gift him from here (USA) the amount?

This is a contrived tax-planning question. The brief answer is that even if you have agricultural income you will have to maintain accounts to show the accumulations and the end use of funds for further investments. This is critical since if you have non-agricultural income it is aggregated with agricultural income for rate purposes.

I am an NRI in the UK. I want to invest in a real estate project in India. Will I have to pay the Indian Govt any tax on the income earned from the project if I want to repatriate my funds back to the UK, and if the yes, how much will it be?

Tax is payable in India - if it is business then at the max rate of 30% plus s/c. There is no tax on repatriation but RBI clearance may be required.

I moved back from US in April 1994 after living there for around 10 years. I still have an account in US with US dollars. I now want to transfer the amount to India into a regular savings bank account. What are the rules related to tax liabilities?  Do I have to pay tax on these transfers?

There is no tax liability on the transfer of funds into India.

Follow-up

Can I please seek additional clarification?
 
1.  How long is this valid (it is more than 2 years since I came back)?
2.  What documentation do I have to maintain and submit if I am questioned?
3. Can this dollar (converted to Rs) be transferred to any account, Indian regular savings or should it go to NRO account only?

1. Since the income is earned in US there is no tax in India.

2. You may check with the bankers on the documentation.

3. Again you have to talk to the bankers on converting to NRO Account.

After I open my NRE account, I would like to gift a car to my father. My questions are:
a) As my father will be the mandatee for the NRE account, can he sign the cheque for the car purchase (the car would be under his name)?
b) What kind of tax implications will my father have because of this? in other words, how will he be supposed to justify the car purchase with the income from the NRE account?
c) Can I (or my father) take a car loan with the NRE account?

There are no tax implications on gifting from NRE account plus gift to relative is exempt. The procedure for cheque signing and related queries may be checked with the bankers.

I am an NRI and want to gift one-lakh rupees. Can I gift it to my brother, brother’s wife, sister or sister’s husband? Is a gift deed necessary for this purpose or a simple statement is sufficient? How much money stamp paper should be used for writing a gift deed?  

Gift to brother and brother's wife is exempt. But gift to sister and sister's husband will be treated as income in the hands of the recipient. The whole amount will be taxed since it exceeds the exemption limit of 25000. Documentation can be through a letter itself from the tax point of view.

I am an Indian passport holder with Polish temporary residence card for 4 years now. I work as a consultant now to an Indian Pvt Ltd company and I used to work as an employee before for 2 years. I stay more than 182 days out of India. I am paid in India a bit for my services and a bit as foreign currency towards my daily expenses in Poland. I am making a good amount of savings with my foreign currency paid in India when I leave Poland every time. I travel every 3 months back to India for a week. I have a good amount of savings which I can’t put it into any Bank account as it has been registered in Company as perdiem which is daily expenses. I don’t know how to get this money into bank account. I don’t have any NRI accounts. I pay tax in India and also in Poland for my income earned in India, but I have not disclosed the savings done on my daily expenses pay. What should I do?
 

If it is established that the per diem expense is earned and relatable to Poland and not India then there is not tax incidence in India. If the same is earned and relatable to India then whether the amount is banked or not will be taxable in India.

Follow-up query

What do you mean when you say relatable?

Means contracted and earned in Poland.

I am an NRI and wish to gift a sum of money to my relatives in India. I’m told that gifts are tax exempt. Will this be the case regardless of the amount I gift to my relatives? Also what should be the nature of relationship (parents, brother or sister) for the gift to be tax exempt? What would be the paper work needed?

Gifts to specified relative are exempt in the hands of the recipient. The list for relative covers parents brother and sister inter lia others. There is no limit and a simple letter would suffice.
 
I am an NRI living in Australia and have income in India from sources such as bank FDs, PPF and shares that exceed the exemption limit of Rs 1 lakh. Should I apply for PAN and file my tax returns?

As income is earned in India and exceeds the minimum limit you will have to file for PAN no and file your return of income.

I am a salaried persons working for a BPO in Pune. My gross salary earning is 1,36,000 p.a. My parents are working abroad and they send money quarterly.i.e Rs 1,50,000 .I usually deposit the money in my saving account. I do not have a Pan Card so far. I would like to know that how to go about filing my returns i.e. if I apply for a PAN card will my bank account be on a constant check and be taxed heavily for the income that is coming in such huge sums? Or should I not apply for a Pan card and not file my returns?
 
PAN no has to be applied if you are having taxable income. Inflow into bank account is independent of having taxable income. interest on savings bank account has to be added to salary income. If the taxable income exceeds the threshold limit of 1 lakh then tax has to be paid the return of income has to be filed.

My friend was an NRI when he purchased shares in Indian stock market. Now he is no longer an Indian citizen but a PIO. For sale of those shares, I believe he needs to apply for a PAN card for tax purposes. Can you please give information and the provisions for PIO or OCI, and this needed PAN card etc?

The provision to apply for PAN no is in sec 139A of the Income tax Act and requires every person to apply for a PAN no if his income is assessable under the Act. There is no separate provision for PIO or OCI on this.

I want to gift a sum of one-lakh rupees to my daughter .For this purpose of how much cost stamp paper should I use to write a gift deed?

There are no tax implications for gift to daughter and a simple letter would suffice.

I am a Indian citizen by birth but have recently qualified for British Citizenship by naturalization (having worked in UK for 5 years after my MBA) and have been asked to complete the oath ceremony in next 2 weeks. However, I am now living and working in India and want to know what will be my exact status in India after I have completed the oath ceremony and have been awarded the British citizenship and till the time I can apply for a PIO or OIC card to the GOI? How long can I hold to my Indian passport and what implications will my new status as a British citizen have on current my job in India? What will be other implications relating to tax issues and bank accounts? My wife continues to be an Indian citizen.

Citizenship has nothing to do with tax laws. Your income earned in India will be taxable in India whatever be your status.

I purchased a flat in June 2004 and want to sell it and buy a bigger property. Will I have to pay short-term capital gains tax as I am selling the property within 3 years although I am investing in another property?

Since you are selling the property within 3 years you will have to pay short-term capital gains tax.

If I give a gift of say Rs 200,000 /- to my mother, will the income earned from it (say Rs. 16000/- per year) be clubbed with my father's income? Will my father need to pay any tax on that income OR will it be treated as my mother's separate income and will it be tax-free because her total income is not over Rs. 100,000 per year? My mother is a housewife and do not have PAN number. Will she need to file tax return?

On the face of it such income will be treated on a standalone basis and will not be clubbed with the income of your father. Since her taxable income is below 1 lakh your mother need not file a return of income.

I am a PIO and now an Australian citizen. I live in Sydney. I intend to give my brother Rs300000 (Rupees three lakhs) as a gift. He is an Indian Citizen and lives in India. Will my brother have to pay any tax for this gift amount?

There is no gift tax on this amount.

I am employee of a company in India; I pay tax for whatever I receive in India. I am also doing a consultancy for a company registered outside India & I am out of India for more than 183 days in year for the past 3 years. I receive consultancy fee which is paid by my employer every quarter in Cyprus, who DIRECTLY credits my NRE a/c in India. Since I receive less than 10,000 Cyprus pounds there is no tax liability (Zero Percent tax for earning less 10000 Cyprus pounds). My questions are
 
1) Do I need to pay tax for what I ever I receive in my NRE a/c?
 
2) Can I receive directly to my NRE a/c, because I do consultancy & travel all around the place, I cannot open account in any country as I don’t have a work permit for that.
 
3) Also when I visit the clients, they pay living allowances for me, if I save that & bring it to India, is that a taxable income?

1. Since you are not a resident in India your income earned in Cyprus and credited to your NRE Account is not taxable in India.

2. You can open and NRE account - but nevertheless you could check with your bankers on this.

3. If the living allowances are earned outside India they are not taxable in India.

I signed an agreement in Jan 2003 to purchase a flat in Mumbai that is only now due for possession.  Will I be liable to tax if I sell this flat today and reinvest the entire proceeds in another residential flat? I have no other residential property.

It is likely to be treated as short-term asset, though alternative arguments may be feasible, and charged to normal rate of tax, without the ability to use any tax shelter investments.

My uncle in abroad (my dads real elder bro) is quite old. He wants to gift $300000 to me or my dad. Which option is tax-free?
 
a. Under these circumstances how a gift-deed is to be prepared? What would it typically cost for Gujarat state?
 
b. Will his filing affidavit or writing on stamp paper of foreign country that he is giving this gift by so and so ac through wire transfer and his bank certifying that he holds so much funds with them enough proof for I. tax authority?
 
I have been studying so far. I am major. 23 years old hence I have never filed an income tax return. Do I need to file an income tax return with these documents? once I get gift to be sent in 6 installments of $50K spread over 6 weeks? The money is to be sent from SWISS account. What other documents do I need? Can I get his sign on Indian gift deed and get it registered besides his affidavit in foreign (without his presence here)? Since he is in his eighties, (the matter is quite old), we don't have any proof that he is brother of my dad as such except some photographs (family), some written birthdates in Gujarati in my granddads handwriting on a cardboard of all of his three sons. And of course the relation is obvious from name? In short what documents will we need since this is large amount?

Gift from the brother of your father is exempt. This may be duly documented and kept on records to handle any investigation in future. No specific advice can be given as to how the relationship can be proved. but given the facts, this may be questioned by the tax authorities and solid evidence should exist. Please take profession al advice in your city for this.

I am an Indian citizen. I arrived here in Congo on 12 Jun 03. I am working here for a foreign based non Indian company since then (employment - initially up to 30 Sep 04, then extended by one year to 30 Sep 05 then further extended  to 30 Sep 06.). I have been going on leave for about 65 days every year to India. Accordingly I was an NRI during FY 2003-04, 04-05 and 05-06 because my stay in India was less than 182 days in India and salary earned here was not taxable in India. My salaries have been going regularly every month into my NRE account.

In this FY i.e. 2006-07, I was on leave in India for 47 days in (08Apr-23May06).

My present term is expiring on 30 Sep 06. I am about to depart after this date from here for settling back in India thereafter. As far as I knew, I would have got the RNOR status for two years on return and salary earned here was not taxable in India. But as I checked on some internet sites I understand that the rule for RNOR status was revised from the year 2003-04. Now I have doubt whether I will be getting the RNOR status or not on return as per change brought out. I think I may not get RNOR status as well as I will not be an NRI this year as I would be in India for more than 182 days in this FY (06-07). In that case the salary earned by me here during Apr 06 to Sep 06 may be taxable in India. I have some confusion on this as I read some contradictory statements / regulations.
In short my query is: If I return now on 30 Sep 06, whether income / salary earned by me here (i.e. abroad) during Apr 06-Sep 06, will it be taxable in India. Or can I be on RNOR status (Resident but Not Ordinarily Resident) in FY 06-07 and need not pay tax on this income back home? Any suggestions please so that I need not pay tax in India. After returning to India if I go again on some trip abroad for 47 days will it help? Or I must go again on Employment somewhere? Employment extension is not agreed here. Also in my case if I return on 01 Oct 06 instead of 30Sep06 will it help so as to be on employment for 184 days (although visited India on leave for 47 days in Apr/May06)?

Since you have been a NR for 3 years past, you will satisfy the RNOR status for the current year, even if your stay in India exceeds 182 days and hence income earned abroad will be not taxable in India.

My foreign friend gave me in 2002 shares of a new small business corporation unlisted in a stock exchange in foreign worth $10,000 (par value as the company was new).
I wasn't earning more than Rs.50, 000 so I never filled any return. Since there was no gift tax I hadn't filled a return in 2002. However I have the gift deed on a stamp paper and physical certificates proving the gift and the year of gift as 2002.
 
My questions:
1. Was my taking this gift in any way illegal?
2. Have I done any mistake?
 
I recently got an offer from 3 people of foreign origin offering to buy the said shares at $300,000 to $350,000 My questions:
 
1. Do I need to pay any income tax, if I sell the shares and receive $300,000 - $350,000 through foreign citizen’s bank account (purchaser) to my bank account (seller)?
2. Since long-term capital gains tax has been abolished. And I am holding the shares for more than 3 years, do I need to pay any tax?
3. I guess I will have to get RBI permission before selling these shares? How do I proceed with it?

Accepting such a gift is not illegal. You can go ahead and sell the shares and pay the appropriate capital gains tax on the same

I am an Indian working in middle east & an NRI since 1st April 2003. My pension & interest money in India is less than the taxable range. Is it necessary for me to file Income Tax returns? Secondly I have purchased a plot & made a house from the money earned abroad. If I have to file IT returns then is it necessary to project this fact & if I have not to file IT returns how the acquisition of property will be projected to IT authorities?

No statutory need to file return unless you have taxable income.
 
I am a Singapore passport holder with a PIO card. But I do not have a PAN number. Can I open a demat account so that I can trade online using my Citibank NRI account?
 

PAN may be necessary for any kind of banking/market operation

We have a friend from the US who has been volunteering with a local non- profit social organization. Does he have to pay income tax?

If any income is received from the NPO taxes would arise.

I am NRI and have NRO & NRE account in bank. I want to purchase property in India. From which account money should I purchase property? Is the use of NRE accounts money more beneficial? Will there be any difference in tax liabilities? Can I loan my money of NRE and NRO account to any proprietary firm or joint firm? Will the firm deduct any TDS on my interest income?

Investment from NRI a/c provides flexibility for repatriation if property is sold later. otherwise there is no difference in the way tax operates on ownership or the sale later. lending to a firm etc will require RBI approvals.
 
Does a US citizen, who holds an OCI card, have to file a nil return of income in India even if he has not lived there and generated any income whatsoever?

No need to file tax return if no income earned. I have been sent on deputation to the US. I get a per diem in the US for my expenses whereas my monthly salary is being credited to my Indian bank account. I have been in the US for more than 182 days in the year. My question is regarding the taxability of the per diem allowance. Will the same be taxable in India?

Per diem is generally not taxable in India. however each case to be examined on its facts by the employer.

We have an NRE account with ICICI Ahmedabad Branch. We are currently located in the Middle East. I am into freelancing wherein I can get job from the US, do the work in Kuwait and send it back to the US.
The payment will be made by wire transfer from US to ICICI Bank India. The freelancing contract would mention the subcontractor's (my) address as in India.

1. Can this money be claimed as NRI income?

Yes, if it is earned by working out of Middle East. However you may receive it first in a foreign a/c and then transfer to India)

2. Do we have to file Tax Returns for this income earned for work done in Kuwait?

Please check with local Kuwait advisor.
 
I have purchased a land in my wife's name (She is not working). We have obtained a home loan jointly from SCB and started paying EMI.  Presently I am working in UAE and shortly plan to come back to India. Can I get Income tax exemption for the home loan EMI paid?

If there is any income taxable in India, then a part or whole can be claimed subject to whether the property is let out or otherwise.

I am a PIO-NRI, and non-resident for Indian tax purposes. I have non-resident fixed deposits (NRE FDs) in India. I may have to become an Indian tax resident in the current financial year. To avoid the interest from my NRE deposits being taxed when I become an Indian tax resident, I plan to gift them to my PIO wife by transferring the deposits to my wife's NRE accounts. My wife is, and shall, remain a non-resident in the future. My wife has no tax liability in India as such and is not assessed to income tax in India. Will the clubbing provision apply in such a case, and can I avoid paying tax on the interest once the deposits are gifted to my non-resident wife?

Clubbing provision will apply on any gift to a spouse and tax cannot be avoided.
 
I am a NRI owning a residential apartment in India. Is it necessary to have a PAN number to sell it? Can I sell it without a PAN?
 
You will certainly need a PAN
 
Is a nonresident Indian getting pension in India required to file IT Return in India or in USA or in both?

Required to file in India for the same is taxable here. On the US aspect, clarification form a local advisor is suggested

The withholding tax on interest earned on NRO account I understand is 30%+cess.  Is TDS on such income applicable even if the concerned NRI is not liable to pay any income tax in India because his income in India is less than the minimum amount liable to be taxed?  If so, is he entitled to file Form 15G and claim exemption from TDS?

A nil TDS order from ITO can be obtained.

I am currently employed in Taiwan for a Taiwan company. I am liable to pay tax in Taiwan for the salary I am receiving here. I was regular in filing the returns in India and up to 20th October 2006 I was employed in India and the company has deducted TDS from my salary. When I file the form 16 up to October 2006 next year, will I be required to pay Tax in India also for the period November to March 06 for the income in Taiwan?

The situation depends on residency in India for which the no of days stay is key condition.

I had been working till last March 2006 in India and there after have come down to US on H1B as Software engineer. I wish to know that when I return back to India after a year or so, will I be liable to pay tax on the amount earned here in US as on H1?

As long as the status is non-resident no tax liability in India will arise on US income.

Please note that I will have completed a continuous period of over eleven years as an NRI by next August when I intend to return to India.
 
I would highly appreciate your response to a few questions in this regard:
 
1.         For how long after my return does the RNOR status last?

Typically two years

2.         What are the tax and other benefits, if any, that accrue to an RNOR?

Overseas income is not taxable

3.         I understand that I can continue to maintain my account(s) in any foreign bank located outside India. Clearly, such an account will come under the purview of local taxation laws.  
•           Does the interest on the deposits in such an account in a foreign bank located outside India also attract income tax in India?  (Presumably, the capital amount is not taxable in India.)

Once you are ROR, every thing will be taxable

4.         Please note that my son and my daughter are both NRIs residing in the USA.
•           Suppose I open a joint account with them in a foreign bank located in the USA and continue to maintain it even after I return to India. Clearly, such an account will come under the purview of US taxation laws.
•           Does the interest on the deposits in such a joint account in a foreign bank located in the USA also attract income tax in India? (I presume that the capital amount is not taxable in India.)

Please consult a tax expert in the US

5.         What is the limit on the amount I can gift to my NRI son / daughter?  

No limit under Indian Laws

•           What are the tax implications, if any, in India on such gifts?  

Such gifts are not subject to tax.

I am working for an Indian company in France and getting salary in Euro in France bank account; my employer is deducting the tax at source in India and remitting the net amount .Now my question is whether will I be taxed in France also? Secondly I was in India for half of the FY and receiving the Euro salary for the remaining Half FY. Will i get two forms 16 from and need to file them together? And refund if any need to claim there

As your source of employment is in India and you will be taxable in India. Your employer in India will give you one Form No 16 covering both the Indian and the French part of the salary and you will have to file your return for both in India. On the France part of the regulation you may check up with a consultant locally

I am judicial officer. I am having rent-free accommodation by State Government. However, since the government accommodation is not available, with permission of the competent authority, I am staying at rented premises and the amount of rent is paid in my salary and I used to pay the same to the owner of the private rent premises. Whether the said amount is taxable?

If it is paid as an allowance it is taxable and the rent paid is allowed subject to some limits placed in the Act.

Why is there is a differential treatment with respect to capital gains from the sale of shares vis-…-vis capital gains from other assets? Is such differential treatment justified?

More a policy matter but I guess the idea is to facilitate large participation in the stock market and bring the investors into the equity cult.

Shall appreciate your referring to relevant sections for Indian/Canadian Tax Liability and Relief for a Canadian Citizen working as an Employee or doing business in India

The Indian tax will be computed as per the Income tax Act 1961 and the sections relevant would be 28 to 43B, assuming the income to be only from business and conducted through an entity regarded as a tax resident of India. On the Canadian part, advice should be sought locally

If a person is NRI and want to invest in Indian mutual fund or insurance or real estate is he taxed if yes how?
Please provide the address of website where i may get full information?

As per Section 10(33) of the Income Tax Act, 1961 ('Act') income received in respect of units of a mutual fund specified under Section 10(23D) is exempt from income tax in India and the mutual funds are subject to pay distribution tax in debt-oriented schemes. Hence all dividends are tax-free in the hands of non-resident investors and no TDS is applicable on the same.

Under Section 2(42A) of the Income Tax Act, units of the Scheme held as a capital asset, for a period of more than twelve months immediately preceding the date of transfer, will be treated as a long term capital asset for the computation of capital gains - thus attracting long term capital gains tax rate.

In all other cases it would be treated as a short-term capital asset and would attract short-term capital gains tax rate. Hence depending on the period of investments, long term or short capital gains and tax thereon is applicable on redemption's.

Though there is currently no long-term capital gain tax liability for redemptions from equity schemes, there is a liability at the time of redeeming from the debt schemes.

For further information read the offer documents of the any New Fund Offer through their web site.

Currently I am planning to buy a land and construct house OR buy a constructed house OR just buy land by applying HOME/Land LOAN. My question is, after buying the land/home through home/land Loan, if I need to sell it after 2 or 3 years, should I need to pay the entire loan amount before selling OR what is the process??

If you have taken any mortgage loan at first place you have to settle the loan before venturing into selling. Alternate you can have an agreement with the buyer and take a part of the total money clear your loan and then you can precede the sell your property.

I purchased a land and constructed house at Rs.8, 00,000/- in year 2001 now I want to sell it for Rs.20, 00,000/-. I had purchased second readymade residential property six months back for Rs.5, 00,000/- how much tax I have to pay and how to save tax? Can i buy shares of public company to save tax?

If you want to sell your residential property the money realised from the proceed have to be invested into real estate or you can invest in capital gains bond. Investing in shares will not save your tax. For tax calculation use year 2001 index as benchmark to calculate the tax.Pl.consult your chartered accountant regarding tax calculation

Can a company that is based in Ukraine, hire a United States citizen to be a Transfer Fund Agent. The position requires you to open up bank accounts in your name. Clients in the US transfer payment to your account then you transfer money to Ukraine account? Is this legal? Is there any limit or tax implication on money being transferred to Ukraine?

Pl.consult your local attorney.

Can you please tell me whether the DTAA provisions with UAE in any way help an Indian leaving India for job after 182 days of stay in India?

WILL APPLY TO THE EXTENT INCOME BECOMES DOUBLY TAXABLE IN BOTH COUNTRIES

I have misplaced the Saral form (2D) acknowledgement for IT files the for last 2 yrs. will i get another one if i go to the IT dept. I need this to apply for VISA

TECHNICALLY POSSIBLE.MAY ENCOUNTER PRACTICAL DIFFICULTIES IN LOCATING FILES etc

I am an NRI, purchased an acre of agricultural land (in near future can be converted to industrial purpose) at Bangalore Ramanagaram out of my NRE account. Registering procedure is completed at sub registrar's office. Know I am waiting for the Khata in my name. Want to purchase attached to which another half-acre industrial converted land for which I applied for required NOC. Will there be any problem in purchasing such industrial converted half- acre land. And also want to know about already purchased agricultural land out of NRE account. At the time of registration no one including sub registrar objected to this. So all the above is legally carried out.

AGRICULTURAL LAND CANNOT BE BOUGHT BY NRI. NON AGRICULTURAL LAND CAN BE PURCHASED

Kindly guide me about the following:

Ms .X an assessee was residing outside India for nearly ten years. After her marriage she returned to India for the first time on 10 April 2007.
At the time of her return she had Dollar 10000 in her NRE account.
Subsequently three months later some more of her foreign funds were deposited in her NRE account. Kindly guide me whether the above amount deposited subsequently to her date of return in India will also qualify in light of Sec 5(V) of W.T.Act, or not.

Yes. They qualify for wealth tax exemption

For Assessment year 2005-2006, isn't the Section 88(B) rebate of Rs. 20000 available to NRI Senior Citizens? We just got a demand from Income Tax authorities in Delhi disallowing the rebate.

This provision applies only to a resident in India.

I shifted from India to UK around a month back and joined a company based out of UK. Prior to this I was working for India operations in a different company till Jan'07. Can I file my tax returns from Mar'06-Jan'07 at a later date when I come back to India? Also is the money in my NRE and NRO account taxable? Also what are my tax implications henceforth in India if any?

Return for YE March 07 is due by July 31 07 and delay can lead to fine etc., if taxes are due and not paid by then. The income from UK employment will also attract tax this year due to the residency status (tax paid in UK can be set off). Money in NRE a/c doesn't attracts any tax subject to the point made earlier. Henceforth income arising in India alone will be taxable

I have a Canadian corporation, which is looking at possible contract with a corporation in India. As of now we are submitting information to each other. As of now the Indian company has agreed to retain 10% of the gross of the contract for taxes to the government of India. Are there any other extra taxes our Canadian company would have to pay to India?

We do not render advice on corporate tax matters since there may be several connected factual issues to digest

My parents hold various investment assets in their joint names with either my sister or me as nominees. Is their will the assets will go to the survivor)(my father or mother) and then equally to both of us. Question: which takes precedence for inheritance - the will or the nominee assignments in the investments

The Will takes the precedence; it may be better to change nomination to avoid any difficulties.

1.Which account for NRI s is not taxable in India? What about Saving Account? Is the interest taxable?

Answer: Interest arising on NRE account is exempt and interest from savings account is taxable.

2. I am an NRI and my wife is also an NRI. I want to buy a house in my wife's name using my own funds. Is it legal?

Answer: There is nothing wrong buying the house in your wife's name.

3. Kindly note that I am out of India since 18.8.04 on employment with a Dubai based company, having office at Jebel Ali Free Zone. I am currently posted at Baku, Azerbaijan. My salary is being remitted from Dubai by the company every month directly to my NRE account with a bank at Salt Lake City, Kolkata. I am also getting a salary to maintain myself at Azerbaijan against which I am paying income tax here.

In view of the above would you kindly let me know the following:

    1) Is the amount deposited in my NRE account taxable?

    2) I have a plan to go back to India permanently in the month of November or December'07. Do I have to pay any income tax on the amount accumulated in my NRE account once I go back or when I loose my NRI status.

    3) I am filing my income tax return regularly in India. Do I have to show the interest income of my NRE account in my return?

    Answer: 1. Not taxable.

    2 For a period of 2 years from your return to India there is no need to pay tax on your accumulations.

    3. Not required.

4. I am an NRI (FY 2006-07 onwards) and planning to return home after 3-4 years. My wife (house wife with no personal/ professional income) and daughter (at present in 12th Std.) live in India and most likely will continue to be Residents.

I have an elder brother (same parentage as mine) who has been adopted by my (late) Uncle (my father's brother who was issueless). In all his personal records, my uncle's name has been mentioned as his father. My brother took care of my higher studies after demise of my father.

I request your kind advice/ opinion on the following points:

    Questions and Answers: 1. I send money to my wife for household maintenance in India. If she makes savings out of this money and earns an income by investment (shares/ MF) / interest, whether same income will get clubbed with my income.

    YES

    2. If I gift money in excess of Rs.50,000/- p.a. to my daughter (after she attains 18 years in Nov 2007 but still a student), whether income from such gift (by STCG/LTCG/ investment/ interest) will get clubbed with my income ?

    NO

    3. If I gift money in excess of Rs.50,000/- p.a. to my brother, will he be liable to income tax on the gift ?

    NO

    4. If my brother gifts money in excess of Rs.50,000/- p.a. to my wife, will she be liable to income tax on the gift ?

    NO

    5. Suppose, I gift Rs.2 lacs to my Mother-in-Law / brother and she/he in turn gifts Rs.2 lacs to my wife; how the transaction would be treated. Will it be construed as a gift by me to my wife for clubbing purpose?

    LIKELY TO CONSTRUED AS ROUNDABOUT GIFT TO WIFE BY YOU

    6. If my wife becomes an NRI (as house wife without any income), can I gift her, say Rs.2 lacs, during NRI status of myself & my wife, and whether the income on such amount will get clubbed with my income after we become residents.

    YES

    7. What is the best way I can avoid clubbing of my wife's income with that of mine.

    NOT EASY.

5. I am an NRI. I paid RS 3 lacs to a plot holder in the form of two cheques of Rs 1.50 each. as an advance money. Later I changed my idea.I purchased it in the name of my parents by paying the owner the remaining amount from the account of my parents in the form cheques. I got the plot registered the joint name of my father and mother. Please guide me if I can show the amount of advance money as a gift in my IT return or i should show it as credit money to my parents.

Answer: Either way is fine

6. What is the time limit (in years) after which Income Tax cannot ask you to provide details on investment including source of money for investment?

I am a NRI from Singapore living overseas for 15 years who has purchased a residential property in India in 1997 wholly out of foreign remittances thru NRE account. Today I plan to sell it. Can Income tax take my case under scrutiny today & ask me to provide source of income for original purchase of the property almost 10 years ago?

Answer: The time limit for reopening/initiating proceedings for income escapement being 6 years only, the case cannot be taken up.

7. Can NRI by virtue of fact holding more than 5%shares of an indian company while his tenure as Resident, continue to hold the same when he turns into NRI ?

Answer: He can continue to hold the same.

8. I am an NRI. I want to create a HUF and build capital by introducing about Rs. 2 to 3 lacs every year. My income is taxed in UK and I have excess fund in UK which i want to gift to my HUF every year and then invest through HUF there. I am aware that HUF status will be NRI as well as mine is NRI.. Could you please tell me about tax implicaton of this?

Answer: The tax implications of NRI both for individual and HUF is that the income earned in UK will not be taxed in India. The income earned in India will be taxed in India.

9. I am selling a flat in India, bought 4 years back. I am currently a permanent resident of US but a citizen of India. I need to know if I need to pay any taxes in India and also can I get the proceeds from sale converted to US dollars and bring it to USA? Also do i have to pay any taxes in USA ?

Answer: Tax will be payable in India if you do not reinvest as allowed under the Indian Law. Repatriation is possible. Taxability in US should be checked with a US tax advisor.

10. I am selling a flat in India, bought 4 years back. I am currently a permanent resident of US but a citizen of India. I need to know if I need to pay any taxes in India and also can I get the proceeds from sale converted to US dollars and bring it to USA? Also do I have to pay any taxes in USA ?

Answer: Tax will be payable in India if you do not reinvest as allowed under the Indian Law. Repatriation is possible. Taxability in US should be checked with a US tax advisor.

11. I am NRI, Nationality British and Indian origin living in UK for 40 years now retired, 77 years old. I am planning to spend 6 months in India for next 2/3 years then return and settle in India .I get State & Private Pension in UK transferred to my UK Bank Account. Please advise if I would be allowed to keep my UK Account to remit my Pension after I become Resident Indian .UK Govt deducts Tax at the source. I would be transferring money monthly or quarterly to my NRE Account in India. Will there be any Tax liability

Answer: Any pension by UK Govt will be taxable only in UK. Private pensions will be taxed in India, if you are a resident and ordinarily resident in India in the year of receipt. Withdrawing money from a bank a/c doesn't create any tax liability.

12. My brother lived for a while in the USA and went back to India. Whatever money he earned in USA, he deposited in savings account there with my nephew as a joint account. My brother passed away a year ago. He has children and grand children. He has no will. Now my nephew says he has to pay 40% taxes in India. Is it true?

Answer: No tax is payable in India on this.

13. I am a person of Indian Origin and now an Australian citizen and resident. I am registered as an OCI (Overseas Citizen Of India). I worked in private sectors and have retired from the service. I receive an income stream from Allocated Pension. The allocated pension fund (private pension) is managed by a private financial company. Currently I pay some tax on allocated pension but from next financial year, July 2007, the allocated pension amount will be totally tax-free.
I am planning to move to India, however, I will retain my Australian citizenship and I will keep my pension fund in Australia and continue drawing pension from it. I will be very much obliged if you could advice me on the following matters:

    (1) Will the pension amount drawn be taxable in India?
    Pensions are taxable in India upon your becoming a ROR
    (2) Is there any tax treaty between Australia and India in this matter?
    yes. it is based on the treaty
    (3) If it becomes taxable, after how many years of moving to India I have to pay tax?
    typically, after about two years
    (4) If it is taxable, on which portion I have to pay tax? That is, if X is the balance of the pension fund prior to becoming resident in India and since that time the fund earns an income of Y and an amount P is drawn as pension, is it the entire amount P will be taxable or PY/(X+Y) will be taxable?
    if the amounts are clearly identified to you then only income arising post your becoming ROR should be taxable. However this is an untested issue and you may seek detailed tax advice and also take an advance ruling.

14. Is it perfectly legal for a tenant of an NRI landlord to deduct TDS @30.6% and deposit with Treasury for a particular month but issue a post dated cheque towards rent for the same month that gets credited 3-4 months later or sometimes even bounces for lack of funds? Despite reminders to pay on time, the tenant has persisted in this practice for whole of FY 2006-07 with the result that landlord received payments for only 7 months out of 12 months and all other payments are overdue in arrears for FY 2006-07 and not yet credited in his account although FY 2006-07 has ended; yet the tenant is going to give 12 TDS certificates. How is the landlord supposed to file his IT returns in such a situation and claim refund?
Please suggest what remedial measures can be taken in a situation like this.

Answer: This is a practical problem faced in TDS matters. As per law the credit for the TDS is to be given in the year in which the income is assessable. You will have the persuade the tenant to pay the rent on time and synchronise the same with the TDS.

15. I intend to travel to UK as UK Working Holidays visa holder. How much should I pay for the taxes (in percentage of my total income during my stay at UK)? What kind of taxes involved?

Answer: You will have to check this out with a UK local consultant.

16. Is the dividend received from investments in Equity linked mutual funds NOT taxable in the hands of the NRI investor?

Answer: Dividend received from investments made in equity-linked mutual fund is tax free in the hands of investors.

I am a NRI who purchased a residential apartment in India for Rs 66 lacs in 1997. Rs 55 lacs was paid out of my NRE account, Rs 5 lacs out of my NRO account & balance Rs 6 lacs was paid out of my old resident rupee account in India.

I plan to sell the property now. What amount of money can I repatriate into Singapore where I reside?

Sale proceeds of one property can be repatriated and the fact of part investment through NRO funds should not pose any problem.

Can a resident individual borrow on repatriation basis from NRI on interest and to which extent of amount?

Only with RBI approval.

I am an NRI. I had invested in KVP 3 years back thro NRE a/c. This year I bought a flat in Chennai using my NRI funds and loan from ICICI. As I cannot repatriate KVP I am thinking of using KVP money to repay partly my ICICI home loan. I don't have any PAN and do I have to declare the KVP income and is it taxable. Can I get any relief since I am repaying the home loan?

Repayment of loan from proceeds in NRO (KVP redemption) a/c is allowed. Tax relief is available to the extent of interest paid on borrowings and repayment of housing loan subject to specific limits applicable.

I am a resident Indian and shortly moving to USA on Green card. My question is whether I can transfer thro a Bank Like HDFC Bank $1,00,000/under Liberalised Remittance scheme to open an account in my name in a local bank there as I read in RBI FAQs.

The remittance is restricted to permissible investments and the remitting banker to guide you on this.

Can I remit $12,000/ as gift to my nephew each year as the limit is $1,00,000/under Liberalised Remittance scheme (can remit the entire amount of LRS as a gift as per RBI FAQs) But banker is telling only $5,000/ can be sent?

Gift is restricted to 5K only and the banker is right.

Hello I am Indian resident for my whole life. I have bought all the shares in a UK company, I now own all of the company and I wish to sell soon. There will be a large financial gain on the sale of these shares. I have owned the shares for less than one year. What is the taxation on this gain? Will I be taxed in the UK or India and how much is the tax rate?

Taxable in India as short term capital gains and attract the normal slab rates. Position under domestic law of UK should be verified with a UK tax advisor. If any tax is payable in UK, the same can be reduced from taxes payable in India.

I am planning to buy a flat in Malleshwaram and not sure how I would know the current rate is and what additional cost I might incur in buying the property. Also, do I need to have my own lawyer for conveyancing when buying the property from a builder.

To know the current market price it's better to go through local newspapers and find from the advertisement. Since the guideline values and the market prices differ widely most of the upcoming places. The additional cost, basically stamp paper and other charges like EB, metro and the rest based on the value add provided by the builders. It is better to have a lawyer and check the relevant papers before making a buying decision.

My uncle (father's elder brother) who is NRI and based in USA, wants to give me monetary gift, kindly advice what are tax implications.

Money received in excess of Rs 50,000 will be treated as income in the hands of the recipient.

I need your kind guidance in the following matter as I have lot of confusions regarding the interpretations of the laws applicable to people going abroad on deputations.

My son, working for an Indian software company, went on deputation to USA on H1B visa on 27/04/2005 for on site work. He was in India for less than 60 days during the financial year 2005-06 and also he had gone on H1B VISA. I understand that his status for income tax purpose in India is NRI. He used to get salary as Indian component and foreign component (allowance). He has paid tax for the foreign component in USA and for the Indian component tax has been deducted from salary and form 16 was issued. As he was abroad I filed the IT returns on his behalf for the financial year ending Mar 2006 (Asst year 2006-07). He had savings under sec 80C in the form of PF contribution, premia paid to his existing LIC policy and also contribution to TAX saving MF, which he did in Dec 06 when he was in India for a short time. As he was not aware of his NRI status he had paid for the LIC PREMIA and MF out of his account which continued to be resident account and the status in the ELSS(MF) and LIC policy continued as resident. While filing the return I filed it as resident along with the FORM 16 issued by the employer and TDS certificate issued by the banks where he had Fixed deposit jointly with me. In fact the fixed deposit was made by me in his joint name so that he got interest income for his educational needs when he was a student. Now, I would like to know whether I should have filed the return as NRI.I understand that a revised return can be filed before end of next asst year i.e. 31/03/2008.In case I do it, will there be an objection for not converting the bank deposit to NRO not withstanding the fact that there is no tax evasion and I have accounted the bank interest income in the return. In fact I have to get a big refund having paid more tax than required after taking rebate U/S 80C and the tax on bank interest for NRI is flat 20% while I have paid 30% at the applicable tax slab. Only thing is TDS at the bank has been done @10% applicable to residents.

My son has returned to India on 1st June 07 and is now working here. He has his US VISA up to August end. Will he have NRI status till the validity of VISA. Regarding the resident accounts, we informed the bank when he was here for a short visit in Dec. 06 about his status and asked them if he needs to change the account to NRO account. We even opened an NRI account as he wanted to send some money. We also told the bank that he will be returning shortly (he was expecting to return in Feb 07). On knowing about his plans to return shortly the bank advised us to continue the resident account as we needed to surrender the pass book/cheque book etc and also it would create problem for getting his salary credited due to change of account No. We had given the same No to IT dept for receiving refund. Hence the status of the accounts was not changed. Now that he has returned as expected the status has again become resident. I will be highly grateful for your suitable guidance in the matter.

While as per law the return has to be filed as a non-resident considering various issues mentioned in the query it is advisable to maintain status quo and regularise matters next year i.e. financial year 2006-2007.

Visa has no relevance to the test of residence. He will be a resident in India for the financial year if his stay in India exceeds 182 days. On the conversion of bank accounts you may by guided by the bankers.

I am naturalized US citizen and OCI card holder. My US company has sent me to India in Aug 2005 on deputation to head the India operations (approx for two years). My company was paying my salary in US$ and depositing the same in US bank a/c. I am earning part of my salary in US and part of my salary in India. As per India income tax law I have filed and paid my India income tax for the year 2005, 2006 on my worldwide income. I had opened NRE and NRO account while I was in US. I informed the bank about my US citizenship, OCI card and my deputation in India. I asked if I need to change my NRE/NRO bank a/c to some other a/c. As per the bank I can continue to operate NRE/NRO as long as I intend to go back after deputation period. Recently my company has asked me to consider extending my stay in India for another two years. Can you please let me know from FEMA perspective can I operate NRE/NRO a/c or do I need to change to resident a/c? Also, for all the financial purpose !
(e.g., opening Demat a/c) can I show myself as resident or NRI?

It is suggested that you approach your bankers with facts of your case. NRO/NRE Accounts are to be operated only by non-residents. By shifting residential status to non-resident (or vice versa) you can always re-designate your NRE or NRO Account into regular account. It is not consistent with facts when you work here as employee (resident) yet have non-resident account.

If a person pays to the company for not serving the notice period before resigning, whether the same should be deducted from the income from salaries?

When an employee gives his own house for lease to the company where he works and stays in the same house as company provided accommodation, whether it will be taxed as Perquisite tax or income from house property.

This is contentious. While there is a case to make out that it is deductible from salaries the law is unclear on the matter.

Lease income will be taxable as income from house property and perquisite tax will apply for rent-free accommodation.

I am having funds in NRO account by way of dividend, interest, capital gains etc. On my lat visit to India my banker told me to produce CA certificate and fill out form to repatriate this fund in USD. However on production of CA certificate they asked for source of this income (balance) in NRO account.
My question is when all deposits to NRO account is by way of ECS mandate and check why do we need this?
Is there any other way this fund can be repatriated to US?

While repatriation will not be stopped by Bankers, they are asking the standard operating procedures as they have been directed to ask from their Customers from RBI. So, give them the source proof and CA Certificate and they would help you to comply with law. ECS mandate / Check does not mean source is explained. Also, the nature of source would give them the scheme under which repatriation can be done.

I am an USA citizen and hold PIO card. I am planning to move to India and work for an Indian company. I am assuming each month I will save some money and intend to repatriate all my savings when I decide to move back to USA after few years. Please advice me in which type of account should I deposit my savings every month for easy repatriation and the procedure to repatriate this money.

If your family is going to be abroad, then you may repatriate the part of salary earned in India towards maintenance of your family. If your family is also in India, then you may place all your savings in modes as suggested by your bank (without investing in Small Savings Schemes such as PPF, Post offices etc.) and remit them later under Remittance of Assets Scheme for PIO. You may approach bankers for further procedural compliance

I am looking to buying an Open Land in the outskirts of Hyderabad. It's supposed to be a gated community. I would like to know if there is any checklist that I need to follow to check the validity of the deal. How do I check the authenticity of the seller. Is there any website that provides me such details.

The help can be secured from a local property lawyer and it is important that proper background check is undertaken before any investment is made.

When I was a citizen and resident in India, I had purchased property. Now I am a US citizen. I have two questions:
1. Can I continue to hold on to the property? What are the tax implications - assuming that I am not renting the property.
2. If I want to sell the property, what is the process? I don't have a PAN No.

If you have to sell the same it gives rise to capital gains tax - you will have to go through the process of getting a PAN No and filing a return of income disclosing the transaction.

I am an Indian Passport holder, now residing in UK. My mother owns 10 acre of coffee plantation in India, She wants to gift it to me. As me being an NRI, do I need to take permission from RBI. It will be of great help, If you kindly advice.

Gift of plantation property requires RBI approval.

Many thanks for the info, Further clarifying, My mother is still alive, she is gifting the plantation property during her lifetime to myself. As I understand inheritance will be applied only after one's death. Just wanted to confirm whether it will be a valid gift according to FEMA or whether I have to seek permission from RBI.

As NRI, you are inheriting the Plantation property in your name from your mother (a resident). The same is permissible under FEMA.

We exported finished goods in packing material, which was returnable. The same mentioned on commercial invoice. Our customer did not send back the said Packing material and offered to pay. We had capitalised the packing material. Pl guide.

If the invoice contains price for both contents (finished goods) and packing material, and the customer had returned the finished goods, but paid for the packing material, then you may have to take this up with banker as to why full value of export proceeds under the circumstances could not be realised. Given them proof for return of finished goods and realisation of packing material.

I am NRI and 6 years back I gave some Indian rupees to my friend when I was Indian resident. Now he wants to give me back and I have NRO account. Can he deposit that money in my NRO account or not and what is the maximum limit to deposit? Is there any permission he has to or I have to take before depositing the fund. Can I deposit any fund from India in rupees in my NRO account or is there any rules please let me know.

Any legitimate due of the NRO Account holder can be deposited into NRO Account. Withdrawals are regulated. The loan repayment is your legitimate due and you may deposit the same in your NRO Account.

I am an NRI planning to return to India from UK shortly. My wife is a home-maker but she has funds in her bank account too in the UK. On our return to India are we both allowed to file separate tax returns in India so as to avail the maximum tax benefit. In other words if she remains a housewife upon return to India but invests her funds separately can we both file separate tax returns?

Fine. However, the source of the money for the spouse can be raised anytime.

Also can I deposit some of my money in the name of my parents (senior citizens) and can they file separate tax returns too instead of clubbing with mine?

Yes. No clubbing will arise.

Kindly inform what will be tax implication on the monetary gift given to me by my uncle (father's elder brother) who is retired practicing doctor.
I am a salaried individual and a regular tax-payer.

Any gift received from other than relatives defines as (father, mother, brother, sister and in-laws) is taxable for the amount above Rs 25,000.

I have an NRO account, my query is regarding remmiting the proceeds of sale of flat which are deposited in nro account.Amount deposited after paying capt gains is 4000000. Kindly advise if i can remite this sum to my us bank as i am working in us on H1 visa.

Repatriation up to 1,00,000 US dollars are possible and excess thereon required RBI approval.

I was an Indian citizen born and brought up in India. Now I live in UK and have British citizenship. I have not acquired a PIO card or OCI card. I am buying an apartment in India. I also hold Reliance shares for many years. I have been informed by people that to buy the apartment I need a PAN card. Also to sell or buy shares I need a PAN card. I applied to have a PAN card but it was rejected. Nobody seems to be able to tell me what documents I need to submit to successfully apply for a PAN card. Can you advise ?

Documents like proof of residence, Credit card etc are required. A local consultant can help in expediting the process.

I bought a residential plot 10 years (approximately) back in Bangalore. I am a US citizen, with a PIO card. I am planning to sell the plot. My purchase price was approximately 5 lakhs. It should sell for lot more. I am planning to repatriate the entire sale proceeds to US, in USD.

You can repatriate up to 100,000USD and excess if any with RBI permission. Taxes will be payable as long- term capital gains approx 23%. Reinvestment in another property can help to save the taxes. Other tax transaction costs but other costs as per your commercial arrangements.

I have taken a ING Vysya policy in the name of my son, Mohsin Mohamed Khais and paid the Ist instalment on 1st July 2006.How to pay the next instalment?

Pl. visit the website and you can make online payment (if the insurance has provided the same). Alternate you can send DD to the insurance company mentioning your policy No.

Many thanks for your mail. Appreciate if you can further guide me on following,

1) Any specific format to be used for sale deed or to contact some lawyer.
2) I am a NRI. I took flat possession in the year 2002. How much CGT I have to pay and how ? If any special CGT rate for NRI then what documents I need to submit to prove myself as NRI.
3) I understand that CGT is not applicable in case I invest the sale proceeds in certain kind of investments like NABARD etc. What are such investment types and minimum duaration as I intend to keep my money in India only.

We will not be in a position to recommended any lawyers pl check locally. Capital gains would be 10 per cent without indexation with indexation its 20 per cent. If you redeploy the same to buy another flat if the value is equal to your total sale proceed then entire value is tax exempted.

For capital gains bond its three years. At this point of time no such a bond is available for investment.

I wish to sale a flat at Pune, which was purchased in 2001-2002. Please let me know the,
1) Sale Procedure
2) Legal charges
Also please let me know whether I can deposit sale proceeds in my NRO A/C? I wish to keep that money in India only.

For selling a property, sale deed has to be made and the expenses are borne by the buyer. There will be no legal charges for the seller. However, there will be a capital gain tax, which the seller ought to pay. If you are not planning to repatriate you can park the money in your NRO account.

Can our parents in India pay our mortgage company in USA. If yes will there be any tax implications to them in India.

No tax implications arise in India, but the payment may need RBI approval.

Since 1997 I am working in abroad I opend a NRE account in 1998 from year Feb 2000 for one year. I was in India. In May 2001 to May 2004 I was in abroad . After that I stayed in India for eight months and then I left for abroad. I have not deposited any amount in this account from India. I used it to deposit only the amount from abroad which I send. I will be pleased to know do I have to file or pay any tax return on this amount.

No tax arises on any deposits perse, unless any income was in fact earned in India.

Thank you for your immediate response to my email. I really appreciate if you help me out to know further details on how to invest in Indian stocks and mutual funds as an NRI.

I opened Demat account with ICICI last year. And then they informed me that I can't Buy/Sell shares through their online site www.icicidirect.com. I went to Sharekhan office in Hyderabad when I visited India in last January. Even Sharekhan not allowed me to apply the brokerage account as a NRI.

My demat account with ICICI is idle for an year and thinking of closing it since I am paying $50/year as maintenance fee.

Please advice me How/where can I apply the trading account in India. What brokerage houses allowed online trading for NRIs living in USA.

For online trading you can approach Kotak Securities. Regarding investments into mutual funds you ought to take rupee denominated draft payable at Mumbai for the respective schemes.

For further details pl do visit the respective fund house site for more information.

I am in USA for last one and half year. I have NRI accounts. I am getting ESOP from my Indian company. I am planning to buy that with the USA dollar, which I have in my USA bank. My question
1. Which demat account do I need to open?
2. If I sell that ESOP after some time. I believe the sale proceed will be in INR. So will I be able to use the sales proceed in USD?
3. Is there any tax implication in India and USA?

ESOP taxation in India currently is on the employer and please consult them for knowing the details. The US tax issues should be consulted with a US tax advisor. Repatriation is permissible for NRI.

I am selling my products to international market by using different portals. like eBay, Yahoo, and all others, All my clients pay me amount in US $, but when payment comes to me by cheque or draft it was converted into Indian Rs. and payable at India. As I am using PayPal. So any FIRC required for me as I am not dealing with any bank directly. Pay Pal gives me draft of Indian Rs. Please guide.

As for the foreign exchange law is concerned, it states that all receivables for export shall be received through normal banking channels. The "Pay Pal" system has to be checked with your bankers for its authenticity as per RBI directives in this regard. In addition to receiving payments, even exports need to take place only following certain procedures such as Invoicing, GR form and receiving payments within the prescribed time etc. Since most of it is procedural, it is suggested that you contact your bankers with full facts for compliance.

The owner of the land a builder proposes to rebuild our building (a co-operative Society:- Residential cum commercial) and is willing to give us 20% more of the carpet area and two years of rent. We have claimed depreciation on our office. What would be the legal implication for the additional space.
Can I opt for a residential flat in lieu of the office. If yes, what would be the tax/legal implication.

If the replaced asset is used for business the impact should be neutral as the wdv will stay intact. If the classification changed to residential the same can be construed as 'exchange' and the current value of the new property can be taken as the value to work out the tax on the exchange of the original asset. The terms etc may become important to work out the tax and hence if the value involved is high take a proper tax advice.

Thanks for quick reply. I want to invest around 200 thousand rupees and horizon will say 5 years will be perfect.

First and foremost try to fix your goal before making an investment. Unless the goals and time horizon are known it will be very difficult to say, which is best. Pl. tell us the both we will try to help you.

Is there any bank/brokerage firms that allows US NRI to open demat account and invest in Indian stock market or mutual funds.

Pl. check the same with Kotak Securities.

Thanks for your quick response. ICICI and HDFC banks don't support NRI demat account for US NRIs.. Is there any rule from RBI that US NRIs should not invest in Indian stock market?

As NRI you should disclose the status with your existing demat A/c and invest in stock market complying with procedures for NRI investments with registered Stock Brokers.

I am not an NRI. My grandfather emigrated from India around 1912, before partition. I assume this means that I cannot qualify as a PIO. Can I own residential property in India and let this to local tenants?

You can as a resident own and let out residential property. If he is a foreigner he required RBI approval to acquire immovable property.

Do any foreign company can invest any money without any RBI permission, which is fully owned by the foreign directors. If yes how much money can be remitted to current account at a time?

The query is not complete in information. What do you mean by fully owned by foreign directors? Is that fully owned company in India or outside India? What is the Business Activity? Please share these info to serve you better.

How much tax I have to pay, if I gift Rs.10,00,000/- to my son?

There is no gift tax and since the recipient is the son there is no income tax implication.

I am staying in Dubai since 1 year. I haven't visited India since last 6 months. I have gold approx of 100 gms in form of Jewellery.
I had check on web it is like I can take up to 10,000 gms and need to pay customs 250 Rs/10 gms. Please can you guide what is exact process.
Does it require to pay any customs on such small amount? If yes, please how much for this amount as per current customs? Thanks for your help.

Pl consult customs expert since we are not dealing in this subject.

My son is a NRI and often he sends funds to my wife (his mother). Shall the recipient liable to pay income tax for the funds received from her son?

It is not taxable at your end.

I am a US Citizen and planning to get a PIO Card. I was in the process of buying a flat in India before I became a US Citizen. Now I need to provide a Power of Attorney to my Father-in-law to do some transactions on my behalf. Is there any problem in my doing this, since I have a PIO card? Who should be signing the Power of Attorney that I make? Will the Indian Consulate sign this for me?

You may have to make a Power of Attorney (General or specific depending upon need) after consulting your Indian lawyer, sign it before Indian Embassy for identification. The completed Power of Attorney shall be sent to India and here it will be validated in Sub-registrar Office paying a nominal fee for such process. Thereafter, the power of attorney (your father in law) can do the entrusted job. For details or contents you have to depend on your Indian advisor only.

Perdiem (Food & Conveyance Allowances) given to staff who are travelling to abroad on onsite, is it necessary that original bills have to be supported for their allowances.what is the implications on tax if the bills are not supported by staffs, and in case of forged bills.

Per diem allowance is not taxable in the hands of the employee. The company giving the allowance has to pay Fringe Benefit tax on the same.

Hi, I am deputed to Tokyo for 4 weeks. My onsite allowance was tax deducted to 20%. I wanted to know whether all allowance given to an engineer for living expenses would be taxed in India itself?

Since this is a short-term deputation and you are a resident in India the said allowances will be taxed in India.

I am an Indian living in India for past 3 years (after returning back from US). Now I have a job offer, where I can work from home from India for the US-based company without any branch in India. Can I do that? What are the tax implications for me and for the company in India? Can I be offered stock options by the US Company?

On the face of it taxable in India. However, by virtue of some conditions in the India-US treaty exemption can be claimed. As far as the US company is concerned one has to examine with more facts whether it will be treated as a permanent establishment in India. Stock options can be offered.

In case of FDI up to 100% under the automatic route, 2 person resident outside India invest in a co. Rs 1 lakh. At the time of paying the minimum paid up capital, one of the investor was not able to make inward remittance and has to withdraw money from ATM in India due to urgency and deposit the same in the co.account (for issue of E.share). How can we solve this problem, what could be the penalty, or what else? We have increase the Auth. S.Capital, can we invest more money by inward remitt. without any anxiety for the future?

All subscription moneys under FDI shall only be invested by remittance of foreign exchange into India, not by other methods. Therefore, the suggestion is that you remit all future subscription only through foreign exchange through banking channel, by complying with necessary procedures, including increase of Authorized capital

Can a foreign national of Indian origin (PIO) purchase an immovable property in India out of rupee sources generated out of income in India? Can the sale proceeds of the property so purchased if and when sold be repatriated? Is there any lock-in period for the sale?

Repatriation of proceeds from sale of immovable property is permitted up to 1 million US dollars in a calendar year.

Can a resident give guarantee on behalf of a non-resident?

If you could give some more details it will be easy for us to clarify.

I want to import a mobile phone i-mate Jasjam, which costs USD 660 through Internet. The same mobile available with dealers in India cost 50% extra. What is the import duty inclusive of CVD and other surcharge etc. I learnt from a site Tech2.com that all import of mobile phones have been waived of customs duty till 2009. Is it so? If not what is the total duty on mobile phones? Thanks and waiting for your reply.

Pl. consult customs expert since in this space we would address query only on personal tax.

I was working( on H1 Visa) in a US company from May 1996 until Dec 2000. During this period I had contributed/invested to 401K plan. In Dec 2000 , I took a transfer to its Indian fully owned subsidiary of US company. Now the balance is fully (100%) vested. I am planning to withdraw my account balance from 401K and it will call for automatic deduction of 20% federal tax in US. Could you please let me know what will be the tax implication in India. Will it be double taxed, i.e 20% in US and 33.66% in India?

Withdrawal of the 401K balance will not be taxed in India.

We have received certain funds from foreign nationals as an investment Company & assure them to give proper return after two years. But our Company is not any banking Company or investment Co. in India Can we bring this Forex in India without registered ourself with SEBI. We are not in the position to go for IPOs Pl suggest me .

We try to address queries, which are general in nature and pertain to individual tax and banking related. If it's too much of commercial beyond a point, we will be unable to give suggestion since it may involve more of technical nature.

What should be done to the domestic savings/ current accounts (e.g. Smarthome loan A/C) of HSBC once one becomes NRI? I am interested to know the legal and tax issues involved. I would also seek your suggestions for the existing Demat accounts.

All the local accounts will be characterised as NRO A/C and the interest income will be taxable. These can be operated to discharge local expenses/payments. As long as your account under NRO there will not be an issue in your demat A/c.

I am NRI/PIO and I am trying to sale a property in India. The property was bought using NRE funds. I have spent good amount in the property for painting/plumbing and electrical work. I bought the property for 30L and spent another 5L on it. Now if the property is sold for say 45L, can I repatriate 30+5L and remaining 10L less the capital gains?

You can repatriate with RBI approval as there are limits on repatriation. You may submit the application through the authorised dealer and they will do the needful.

Yes this fund will be used to develop the township project for which we received it.

You need to form a company in India. Then, invest in shares in that company under Foreign Direct Investment route complying with Press Note # 2 of 2005. For legal and regulatory compliance you need to get in touch with your adviser's in India.

Basically the fund we received is an advance from customer against proposed real estate project.

Pl. tell us the fund raised is to invest in India.

I am planning to invest in Equity linked mutual funds. Please give me an approx idea of the annual returns I can expect from a top-notch MF based on past performance.

Last one year the return was not superior but most of the prominent funds as a potential to deliver annualised return of 20-25 per cent on a long-term basis.

I would like to clarify that I would like to repatriate the amount paid into the NRO account every month. So I want to transfer the funds back in US dollars every month.

Will I be charged Indian income tax for the amount I want to repatriate?

Any amount that arises or accrued by way of interest in India is subject to tax.

I am thinking of lending some money to a friend in India. What's the best way he can repay money back?
Can he send normal bank cheques drawn on Indian bank, like I do from USA?
Can he send traveller's cheques, which I can encash here?
Do I have to create NRO account?
What are the tax implications in India / USA?

Open an NRO account and get it deposited into it. There are no tax implications.

My friend is of Indian origin but has German nationality. He also has the OCI card. He wants to now work and settle down in India:
a. Will his earnings and income in India be taxed at the same rates as an Indian citizen? If not, then what are tax rates applicable to him?
b. He holds shares in a private limited company in India long before becoming a German national. Can he still hold the shares? Or does he to inform any authority now that he is German citizen?

In India tax rates are applicable irrespective of nationality. If any one stays in India for employment and earns it will be taxed at the same rate of resident individual.
Regarding shares it's advisable to inform the company of your change in residential status.

Hello, if I transfer money from my NRE a/c to NRO a/c to pay my monthly instalments of Car and Loan, will this money be taxed in India and how much is the limit set for the transfer. I have heard that if my transaction goes above Rs.1 lakh then I'll be taxed in India. If it is true then how will I pay my loans.

No tax on transfer from NRE to NRO account.

If I have PAN No.do I have to file tax returns every year. I am a non-resident Indian working in Saudi Arabia.

Holding a PAN Card does not warrant file of return. If you earn any income in India then you ought to file your returns mandatorily subject to the limit.

In case a person is working as consultant for US company in India and is paid in USD, what sort of taxes will he be liable to and is there any issue with FERA on this.

He will have to pay taxes in India and there are no FEMA issues.

1. On what amount FBT is levied for the shares purchased under ESPP?

It is levied on the difference between the offer price and the market price, subject to Rules yet to be framed.

2. On what amount capital gains are applicable if FBT is paid (either by employer or by employee)?

On the diff between the FBT base and the selling price.

3. What is the rate for short-term (less than 12 months) and long-term (more than 12 months) capital gain tax treatment? Is indexation applicable on long-term capital gain?

Depends on whether STT is applicable or not. Indexation is applicable as an option. Please refer to section111A and 112 of the Income tax Act for full details.

4. What is the tax treatment of ESOPs and the FBT on ESOPs?

The question seems a repetition of the above.

Is the gift in the form of cash (by cheque payment) given by mother-in law in the name of HUF of which son-in-law is karta taxable? If it is tax-free, then till what amount (limit)?

1. HUF is created by the existence of family/ancestral property thrown into the common hotchpot.

2. Comes under the definition of "relative" and hence exempt from income tax - even if received by HUF.

What is the Notification Number and date of "Income tax returns can be filed up to 31st March 2008, without penalty of Rs. 5,000?"

No penalty of Rs 5,000/- if return of income is filed before 31st March, 2008 as per section 271F of the Income Tax Act.

I am a person of Indian Origin and registered as an OCI. I am now an Australian Citizen and live in Sydney. I am planning to invest in Mutual Funds (0pen ended, Growth) in India. I have a NRE account and investment payment will be made from that account.

I will be obliged, if you could advise me on the following two questions:

1. If I do not redeem the funds at least for 12 months, will I still have to pay any CGT when the funds are redeemed?
2. When I redeem, will I be allowed to repatriate the proceeds?

NRIs are allowed to invest in mutual fund. Stock or mutual fund if it was held for 12 months or more they are exempted from any tax. If the investments are made from NRE account repatriation is allowed.

What is the Notification Number and date of "Income tax returns can be filed up to 31st March 2008, without penalty of Rs. 5,000?"

No penalty of Rs 5,000/- if return of income is filed before 31st March, 2008 as per section 271F of the Income Tax Act.

I wanna to save tax. I am a working professional having PF of about 1380 pm and LIC's of 35000. My HRA comes to 5745 pm, whereas I am paying 4800 pm as rent. I want to know, some more investment or tax exemption options to save tax. Is there any plan like investing in March and withdrawing the same amount in April.

If you are looking for short-term then Equity Linked Saving Scheme (Mutual Fund) may be a better option. In India there is no scheme as such available where you can invest for tax purpose in March and to withdraw in April.

What legalities, route & taxation issues will have to be covered for selling a company to an NRI with some real estate holdings in its name?

This is quite open ended and the real estate industry involves significant restriction in foreign holding/operations. Suitable expert guidance be availed.

If a non-resident on becoming a resident, holds funds in an RFC account, will he have to pay Income tax and when?

It is taxable and advance tax in 3 instalments should be paid after considering the TDS effected by the bank.

For example if I receive 1000000.00 pounds as a online lottery, what will be the gift tax to be payable by me to the government.

Winning of lottery attracts tax at the rate of 30.66 per cent.

I had a PAN card recently. I would like to know that should I have to file nil return though I am not an assessee. Also I would like to invest 70,000 in shares. I get only 5,000 per month as a private teacher. Please guide me what I have to do.

If your income is less than one lakh rupees it is not mandatory to file the return.

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