Who
is a Non-Resident Indian?
Difference between Resident definition under Income Tax and FEMA
An Indian abroad is
popularly known as Non-Resident Indian (NRI). NRI is legally defined under the
Income Tax Act, 1961 and the Foreign Exchange Management Act, 1999 (FEMA) for
applicability of respective laws.
Difference between Resident definition under Income Tax and FEMA
- "Financial Year" is
not defined under FEMA, but by convention it is assumed to refer to 1st
April to 31st March
- Income-tax Act requires
physical presence of 182 days or more, whereas, FEMA requires 183 days or
more
- Income-tax Act considers the
physical presence of a person in the Current Financial Year, whereas FEMA
considers physical presence of a person in the Preceding Financial
Year
NRI
as per Income Tax Act
Income Tax Act has not
directly defined NRI. Section 6 contains detailed criteria of who is considered
as Resident in India and provides that anyone who doesn’t meet these
criteria is Non-Resident.
The status of a person
as a resident or non-resident depends on his period of stay inIndia. The period
of stay is counted in number of days for each financial year beginning from 1st
April to 31st March (known as previous year under the Income-tax Act).
Resident
An individual will be
treated as a Resident in India in any previous year if he/she is in India for:
- At-least 182 days in that year, OR
- Atl-east 365 days during 4
years preceding that year AND atleast 60 days in that
year.
An individual who does
not satisfy both the conditions as mentioned above will be treated as
"non-resident" in that previous year.
Definition of Resident
is relaxed by dropping Condition 2 given above (i.e. only Condition 1 is
applicable), for the following cases:
- An Indian citizen who leaves
India in any year for the purpose of employment outside India or as a crew
member of an Indian ship,
- An Indian citizen or a person
of Indian origin who resides outside India and who comes on a visit to
India. Note that a person shall be deemed to be of Indian origin if he, or
either of his parents or any of his grand-parents, was born in undivided
India.
Following examples
will make the rules more clear:
- Ajay leaves India for the first
time on 1st August, 2006 and remains out of India in the remaining part of
the financial year. His period of stay in India in the previous year
2006-07, being less than 182 days, he is not a resident for that
year.
- Divya leaves India in December
2006 and continues to remain abroad in the remaining part of the financial
year. Her period of stay in India being more than 182 days, she will be a
'resident' in the previous year 2006-07.
- Rohit leaves India in 2003. In
the financial year 2003-04 to 2006-07 he visited India several times and
the total period of stay during these 4 years was 400 days. During the
financial year 2007-08, he came to India for total period of 180 days.
Although his stay in India in the financial year 2007-08 is less than 182
days, he becomes a ‘resident’ by virtue of the fact that his stay in the
preceding 4 years was more than 365 days and he was in India for more than
60 days in the year under consideration.
- In the above examples, if Rohit
was a member of the crew of an Indian ship or a citizen of India or a
person of Indian origin, he would not have become a 'resident' for the
year 2007-08 since his period of stay in India in that year was less than
182 days.
“Resident
and Ordinarily Resident” & “Resident but not Ordinarily Resident”
A person Resident in India is
further classified as “Resident and Ordinarily Resident”if BOTH the
following conditions are satisfied:
- Resident in India for
9 out of 10 years preceding that year, AND
- In India for atleast
730 days during 7 years preceding that year
If any one of
the above conditions is not satisfied, the person is
classified as“Resident but not Ordinarily Resident”
Points to Note
- A Hindu Undivided Family (HUF),
firm or other association of persons is Non-Resident if control and
management of its affairs is situated wholly outside India
- A company is said to be
resident in India in any previous year, if it is an Indian company; or the
control and management of its affairs is situated wholly in India
- Every other person is said to
be Non-resident in India if control and management of his affairs is
situated wholly outside India
- If a person is resident in
India in respect of any source of income, he shall be deemed to be
resident in India in respect of each of his other sources of income
Residency
and Taxable Income
Based on the
residential status of a tax payer and the place where the income is earned, the
income that is included in the total income is as under:-
|
Residential status
|
Nature of Income taxable
|
|
Resident and Ordinarily Resident
|
All Income whether earned in India
or outside India
All incomes :-
|
|
Resident but not Ordinarily
Resident
|
All income earned in India and
all income earned outside India if the same is derived from a
business which is controlled in India or from a profession which is
set up in India
|
|
Non Resident
|
All income earned in India.
Income outside india is not liable to tax
|
A person who is
non-resident is liable to tax on that income only which is earned by him in
India. Income is earned in India if -
- It is directly or indirectly
received in India; or
- It accrues in India or the law
construes it as having accrued in India.
The following are some
of the instances when the law construes the income to have accrued in India:-
- income from business arising
through any business connection in India;
- income from property if such
property is situated in India;
- income from any asset or source
if such asset or source is in India;
- income from salaries if the
services are rendered in India. In such cases salary for rest period or
leave period will be regarded as earned in India if it forms part of
service contract,.
- income from salaries payable by
the Government to a citizen of India even though the services are rendered
outside India;
- income from dividend paid by an
Indian company even if the same is paid outside India;
- income by way of interest
payable by Government or by any other person in certain
circumstances;
- income by way of Royalty if
payable by the Government or by any other person in certain
circumstances;
- income by way of fees for
technical services if such fees is payable by the Government or by any
other person in certain circumstances.
The following income
even though appearing to be arising in India are construed as not arising in
India:-
- If a non-resident running a
news agency or publishing newspapers, magazines etc. earns income from
activities confined to the collection of news and views in India for
transmission outside India, such income is not considered to have arisen
in India.
- In the case of a non-resident,
no income shall be considered to have arisen in India if it arises from
operations which are confined to the shooting of any cinematography film.
This applies to the following types of non-residents:-
- individual who is not a citizen
of India; or
- firm which does not have any
partner who is a citizen of India or who is resident in India; or
- company which does not have any
shareholder who is resident in India.
In
the Income tax act, following sections are relevant in respect of computation
of taxable income of a NRI.
A brief summary of the
applicability of the above sections is given below.
1.
INVESTMENT
INCOME OF A NON-RESIDENT
Interest income received by a non-resident from Government or from
any other person in India is taxable in India.
A. Exempt Investment Income
Following types of interest incomes are exempted:
0.
Interest
on NRE/FCNR account paid or credited to individual non-residents Indians who
are permitted by Reserve Bank to maintain such accounts. Sec. 10(4)(ii)
1.
Interest
on notified saving certificates (like NSC VI & VII) subscribed in foreign
exchange before 1-6-2002, by a NR who is an Indian citizen or a person of
Indian origin. Sec. 10(4B)
2.
Interest,
premium on redemption or any other payment on NRNR deposit and other
securities, bonds, savings certificates, notified under section 10(15)(i). NRNR
deposit interest is exempt in the hands of non-resident while he remains
non-resident as per Income-tax Act.
3.
Interest
on "NRI Bonds 1988" and "NRI Bonds (Second series)" issued
by SBI purchased in foreign exchange, exemption continues even after person
becomes resident.
(S. 10(15)(iid). However, no exemption will be available in the year of premature encashment.
(S. 10(15)(iid). However, no exemption will be available in the year of premature encashment.
4.
Interest
paid up to 31st March, 2005 by a scheduled bank on RBI approved foreign
currency deposits, FCNR & RFC A/c, to a NR or NOR [S. 10(15)(iv)(fa)]. [Exemption
withdrawn for interest payable on or after 1st April, 2005 by the Finance (No.
2) Act, 2004]
5.
Interest
payable by Government or local authorities on moneys borrowed from sources
outside India prior to 1-6-2001. [Sec. 10(15)(iv)(a)].
6.
Interest
on moneys borrowed by industrial undertaking prior to 1-6-2001 in a foreign
country in respect of purchase of raw materials, components or plant and
machinery and approved by Central Government prior to 1-6-2001 [Sec.
10(15)(iv)(c)].
7.
Lease
income from leasing of aircraft or aircraft engine received from an Indian
company under an agreement is exempt from tax. However incomes under an
agreement entered into between 1st April, 1997 and 31st March, 1999, and
agreements entered into after 31st March, 2005, are not entitled to exemption.
8.
Any
income by way of dividends referred to in S. 115O received by a non-resident is
exempt u/s 10(34). Any income received in respect of units of a Mutual Fund
specified u/s 10(23D), or the specified company or an Administrator of the
specified undertaking as defined in Sec. 10(35) is exempt u/s 10(35).
9.
Any
income arising from the transfer of a long-term capital asset, being an
eligible equity share in a company purchased on or after 1st day of March, 2003
and before 1st March, 2004 and held for a period of twelve months or more is
exempt u/s 10(36). Eligible equity share means: –
( )
Any
equity share in a company which is a constituent of BSE 500 Index of the Stock
Exchange, Mumbai as on the 1st day of March, 2003 and the transaction of
purchase and sale of such equity share are entered into on a recognised stock
exchange in India;
(i)
Any
equity share in a company allotted through a public issue on or after the 1st
day of March, 2003 and listed in a recognised stock exchange in India before
1st March, 2004. There is a change in the taxation of Capital Gains from sale
of listed securities. See the relevant Income Tax Section for details.
B. Special Tax Rate and Surcharge applicable
on Investment Income of Non-resident
Tax Rates
Sections 115A to 115AD prescribes tax rates for various types of
investment income of different non-resident entities. However, if the
non-resident is covered by a particular DTAA, then the rates prescribed under
that DTAA would be applicable without any surcharge.
Surcharge
If a non-resident recipient of income is either an individual, HUF, AOP or BOI and his income (from all sources) is exceeding or likely to exceed Rs. 10,00,000/- in a Financial Year then a surcharge and education cess of 10 per cent is applicable.
If a non-resident recipient of income is either an individual, HUF, AOP or BOI and his income (from all sources) is exceeding or likely to exceed Rs. 10,00,000/- in a Financial Year then a surcharge and education cess of 10 per cent is applicable.
In case of other non-resident entities, a surcharge of 2.5% and
education cess is applicable.
.
Income
of non-residents in respect of interest received from Government or any Indian
concern for money borrowed in foreign currency is taxed @ 20% subject to
applicable surcharge and education cess. [Sec. 115A]
i.
Tax
on overseas financial organisation (approved by SEBI) in respect of income by
way of long-term capital gain arising on sale/repurchase of units of Mutual
Funds/UTI purchased in foreign currency is 10% subject to applicable surcharge
and education cess. [Sec. 115AB]
ii.
Tax
on non-resident in respect of interest on bonds of Indian companies issued as
per Government notification, on bonds of PSU sold by Government and purchased
in foreign currency, and on LTCG on sale of such bonds/GDRs/ADRs is 10% subject
to applicable surcharge and education cess. [Sec. 115AC].
iii.
Tax
on approved Foreign Institutional Investor (FII) is as follows:
.
Income
by way of interest on securities – 20%
i.
Short-term
capital gains on sale of such securities – 30%
ii.
Long-term
capital gain on sale of such securities – 10% [Sec. 115AD]
C. Special Tax Rates for income of a
non-resident sportsmen or Sports Associations
Income of non-resident sportsmen or sport association by way of i)
participation in India in any game or sport or ii) advertisement or iii)
contribution of article in newspapers, magazines etc. is chargeable at 10%
subject to applicable surcharge and education cess (without allowing any
deductions) [Sec. 115BBA]
2.
BUSINESS
INCOME OF NON-RESIDENTS
A. Income from business of operation of ships
is taxable at 7.5% of the gross receipts from such business. [Section 44B]
B. Income from business of providing services
or facilities in connection with plant and machinery on hire used or to be used
in prospecting for or extraction or production of mineral petroleum &
natural gas is taxable at 10% of gross receipts from such business, unless the
assessee claims lower profits and gains by fulfilling the required conditions.
If the non-resident claims that he has earned lower profits than that
prescribed, he can keep proper accounts, get the same audited and file the
audit report with the income tax return. The Income Tax Officer will then
conduct a scrutiny assessment. [Sec. 44BB]
C. Income from business of operation of
aircraft is chargeable at 5% of gross receipts from such business. [Sec. 44BBA]
D. Income of foreign companies from business
of civil construction or the business of erection of plant or machinery or testing
or commissioning thereof, in respect of turnkey power project approved by the
Central Government and financed under any international aid programme is
chargeable at 10% of gross receipts from such business, unless the assessee
claims lower profits and gains by fulfilling the required conditions. If the
foreign company claims that it has earned lower profits than that prescribed,
it can keep proper accounts, get the same audited and file the audit report
with the income tax return. The Income Tax Officer will then conduct a scrutiny
assessment. [Sec. 44BBB]
E. In any other case, for computing the
business income of non-resident, expenditure in nature of head office
expenditure is allowable up to 5% of the adjusted income as specified. [Sec.
44C]
F. For any other business, the present rate
of tax for foreign companies is 40% plus a surcharge of 2.5% and education cess
of 2% thereon. (i.e., 41.82%)
3.
TAXATION
OF ROYALTIES & FEES FOR TECHNICAL SERVICES RECEIVED BY NON-RESIDENTS
A. Royalties and Fees for technical services
received by non-residents from an Indian concern or the Government are taxed as
under:
.
*Agreements
entered into after 31st March, 1976 and before 1st June, 1977 – [Section
115A(1)(b)]
.
Foreign
Companies:
a. If agreement approved by Central
Government, or is under Industrial Policy, Tax = 30% on Gross income
b. For other agreements, Tax = 40% on Gross
income
A.
Persons
other than foreign companies – Tax is at applicable rates on Gross income.
i.
Agreements
entered into after 31st May, 1997 and before 1st April, 2003 – [Section
115A(1)(b)]
.
Foreign
Companies:
a. If agreement is approved by Central
Government, or is under Industrial Policy, Tax = 20% on Gross income.
b. For other agreements, Tax = 40% on Gross
income.
A.
Persons
other than foreign companies – Tax is at applicable rates on Gross income.
ii.
Agreements
entered into after 31st March, 2003 – [Sections 44DA & 115A(1)(b)]
For all non-residents; i.e., Foreign companies and other
persons:
.
If
the non-resident does not have a Permanent Establishment in India –
a. (a) If the agreement is approved by the
Central Government or is under Industrial Policy, Tax = 20% on Gross income.
b. (b) If the agreement is not approved as
mentioned in clause (a), Tax is at applicable rate on Net income.
A.
If
the non-resident has a PE, Tax is at applicable rates on Net income.
iii.
Agreements
entered into on or after 1st June, 2005 – [Section 115A(1)(b)]
.
Foreign
companies
a. If the agreement is approved by Central
Government, or is under Industrial Policy, Tax = 10% on gross income.
b. For other agreement, Tax – 40% as Gross
Income.
A.
Persons
other than foreign companies. Tax is at applicable rates on Gross Income.
B. Any income by way of royalty or fees for
technical services arising to any foreign company (as may be notified by the
Central Government from time to time) under an agreement entered into with the
Central Government for provision of services in connection with security of
India is exempt. (Section 10(6C))
4.
TDS
BORNE BY THE PAYER
TDS borne by the payer in case of all payments to non-residents
would be taxable in hands of the non-residents except in following cases:
A. royalty or technical service fees payment
in respect of agreements with foreign company after 1-4-1976 and before
1-6-2002.
B. payment other than salary, royalty or
technical services in respect of agreement made before 1-6-2002 between Central
Government and international organisation or foreign government.
C. tax on perquisites borne by the employer
u/s 192(1A).
D. payment of lease rent for aircraft or
aircraft engine under an agreement entered into after 31st March, 1997 but
before 1st April, 1999, or entered into after 31st March, 2005.
5.
ACTUAL
COST OF AN ASSET BROUGHT INTO INDIA BY A NON-RESIDENT
A. For the purpose of computation of business
income, ’Actual Cost’ of any asset brought into India by a non-resident would
be computed as Actual cost of acquisition to the non-resident as reduced by
notional depreciation as provided in the Income-tax Act, 1961, from the date of
acquisition as if the asset had been used in India. (Sec. 43 Expl. 11)
B. Where an imported capital asset is
acquired on deferred payment terms or out of the foreign loan the actual cost
would be after taking into account the fluctuation in exchange rate. For this
purpose, actual payment will be considered. (Sec. 43A).
FAQ – FREQUENTLY ASKED QUESTION.
) Who is NRI as per
Income Tax Act?
A) Residential status
of an individual or HUF or a company is of great importance in Indian
Income Tax Act as the liability to pay tax in India does not depend on the
nationality or domicile of the Tax payer but on his residential
status. Residential Status is determined on the basis of physical presence
i.e. the number of days of stay in India in any year.
An individual is
resident if any of the following conditions are satisfied: (i) he stayed in
India for 182 days or more during the previous year, or (ii) he stayed in India
for 365 days or more during the four preceding years and stays in India for at
least 60 days. 182 days in case of an Indian citizen or a person of Indian
Origin coming on a visit to India or 182 days in case of an Indian citizen
going abroad for an employment during the previous year. Otherwise he is Non
Resident.
Hindu Undivided Family
(HUF) or firm or other Association of persons is resident of India except in
cases where the control and management of its affairs is wholly situated outside
India in the previous year
A company is resident
in India if-it is an Indian company, or during the previous year, the control
and management is situated wholly in India.
Q) I am NRI, do I need
to file my Income Tax Return for A Y 2014-15?
A) NRI need to file
your return provided your taxable income in India during the
Assessment Year 2014-2015 was above the basic exemption limit of Rs 2 lakh OR
you have earned short-term or long-term capital gains from sale of certain
investments and assets, even if the gains are less than the basic exemption
limit. For NRIs, certain short term or long term capital gains from sale of
investments or assets are taxed even if the total income is below the basic
exemption limit. There is an exception: If your taxable income consisted
only of investment income (interest) and/or capital gains income and
if tax has been deducted at source from such income, you do not have to file
your tax returns.
Q) Is Income Tax
Return need to file compulsory Online for NRI for AY 2014-15?
A) Central Board
of Direct Taxes (CBDT) in India issued a notification which has made
it mandatory for individuals who have annual gross total income in excess of Rs
5 lakh to file their returns online from Assessment Year 2014-2015. This applies
to all individuals including non resident Indians. So as an NRI with gross
total income exceeding Rs 5 lakh in Assessment Year 2014-2015, you must file
your returns electronically.
In case your taxable
income exceeds Rs.5 lakh in the previous year, you would be required to file
the return of income electronically either using the digital signature or
through submission of the verification Form ITR-V after electronically filing
the return of income. In case your income does not exceed the above limit, you
would also have an option to file the return of income in paper form.
Q) Are NRI were liable
to pay advance tax for Assessment Year 2014-2015?
A) As per the Income
Tax Act, Individual must pay advance tax in three installments during the year
in case the tax payable is likely to be Rs 10,000 or more after considering TDS
deduction. In case of default interest is generally 1 percent per month for the
default amount and extends till the date of payment. Therefore, NRIs should
evaluate if they were liable to pay advance tax and whether the same was paid
in time.
Q) What is last date
to file your Income Tax Return? What if NRI do not have any tax payable?
A) The last date to file
returns for the financial year Assessment Year 2014-2015 is July 31st
2014. However, If you do not have any tax payable (that is all your tax has
been deducted at source), you can still file your tax return by 31st March 2015
without any penalties.
Q) What if NRI do
not file return till 31 March 2015?
A) If you do not file
your tax returns even by the 31st of March 2015, you may be charged a penalty
of Rs 5,000 for every year of delay or sometimes may not be able to file your
returns at all after 2016.
Q) My NRO account TDS
has been deducted at source @30%. My interest income is 1 Lakhs Rs? Do I Need
to File Return?
A) As your total
income is less than 2 Lakh Rs, you are not liable to file return. However you
can cliam refund of Rs 30,000/- of your TDS deducted for which you should file
return. If you are expecting a refund, make sure that you put accurate bank
details such as account number and IFIC code of the branch as refunds are
processed electronically.
Q) Can NRI get Refund
of TDS by Filing IT return for Last year 2013 March Ending.
A) Yes you can file
your return for Financial Year ended 2013 and get refund.
Q) What all income is
exempt for NRI?
A) Dividends from
equity shares and equity mutual funds is tax free in India. Interest
received on the NRE account and FCNR account is tax free.
Long term capital gains on equity shares and equity mutual funds (provided you
pay securities transaction tax at time of sale). Further, If you have given a
property on rent, you can claim an ad hoc deduction of 30% of net annual value
as repairs and maintenance expenses in addition to claiming a deduction on
mortgage interest.
Health insurance
premium in India for yourself or your dependents, you can claim a deduction
under section 80D. If the health insurance is taken for your spouse and
dependent children, you can claim a deduction of Rs 15,000 per annum. An
additional Rs 15,000 is available as deduction on insurance premium paid on
behalf of your parents. If either of your parents is over the age of 65, the
additional deduction will be Rs 20,000 instead of Rs 15,000.
Contributions to an
approved charity, you can claim a deduction under section 80G. Investments such
as PPF, life insurance premiums, etc. can be claimed as deduction under section
80C up to a total of Rs 1 lakh.
Q) I am NRI has
deposited Rs. 1 crore in a non-resident ordinary (NRO) account in the form of
fixed deposit. I want to transfer the amount from NRO to a non-residential
external (NRE) account. Is it compulsory to give Form 15CB and 15CA to banks?
Who has to file these forms? The bank has deducted tax at source when it
credited the interest amount. What is the ceiling for transfer from NRO to NRE
during a year?
A) An NRI can transfer
/ remit out of the NRO account subject to production of documentary evidence in
support of acquisition by the remitter and an undertaking by the remitter along
with a certificate by a chartered accountant in Form 15CA and 15CB
As per regulations,
NRI are permitted to transfer a maximum of $1 million per financial year to
your NRE account. The transfer will be subject to payment of applicable taxes.
So far the amount being transferred to the NRE account represents balances for
which tax has already paid or exempt there shouldn’t be additional tax.
Q) I am a non-resident
Indian (NRI) and have a piece of agricultural land and an apartment in India. I
earn agriculture income and rental income from these two. Do I need
to file income tax return? Also, can an NRI buy agricultural or farmland
in India?
A) NRI would be
subject to taxes in India on any income accruing or arising from an asset
located in India. The agricultural income earned by you would be exempt,
whereas the rental income from the house property would be subject to
tax. You would be under an obligation to file an income tax return in India on
or before 31 July 2014 for financial year 2013-14 if your taxable income
exceeds Rs.2 lakh in the previous year. However, you may note that the income
tax law prescribes a specific method of computing taxable income where the
taxpayer has earned agricultural income. While this type of income is exempt
from tax, it is nonetheless included in the total income for rate purposes.
Q) Is NRI allowed to
buy Agriculture property or Farm house in India?
A) NRIs and Persons of
Indian Origin are not allowed to buy agricultural property, plantation or
a farm house.
Q) What are the tax
implications for an NRI looking at selling his property in India?
A) If the property is
more than 3 years old, long term capital gains tax will be incurred on the sale
of the property. On long term capital gains, tax is payable @ 20%. However, tax
can be minimised by making alternative investments in India.
Q) I am a NRI living
in US. Can you please advise me if long term capital gains tax are payable on
sales of shares purchased by paying STT, and if it is exempt is there a limit?
A) LTCG is fully
exempted on sale of listed company shares, purchased by paying STT, provided
the transaction is long-term. i.e that share are hold for period of more than
12 months
Q) I an NRI, bought a
property in 2005 and sold it in 2014 at a difference of Rs 40 lakhs for Rs 80
lakhs. If I repatriate this amount to the US, am I liable for any tax? What is
the procedure to repatriate money to the US?
A) You have earned a
long term capital gain on your property. You have to pay taxes in India on this
income and then obtain a certificate from a chartered accountant. After this
certificate only, you would be able to repatriate the money abroad.
Q) During Year Ended
2014, I, NRI leased out my building to a bank which is paying rent monthly but
is deducting TDS. Can you please let me know what kind of documentation is
required from the bank to submit my taxes in India? Is form 16 sufficient?
A) Form 16 is enough
to determine your income on rent and TDS deducted by the bank.
Q) Is the money
received from sale of inherited property in India taxable for an NRI? Earlier
it was mandatory to put it in an NRO account but now with the RBI go ahead can
we transfer it to NRE account provided the tax is paid?
A) Yes, the money
received from NRI is taxable in India. Sale proceeds will first be credited
to NRO account. Then you have to obtain a certificate from the chartered
accountant relating to payment of taxes after which the money would be
transferred from NRO account to NRE account.
Q) I hold NRI status
for this year 2014. I have FD and RD accounts in ICICI Bank and they are
deducting taxes. Do I need to pay the tax for the interest I get from FD and
RD?
A) If the FD and RD
were opened under NRE status as (NRE-FD or NRE-RD) then the interest earned on
the same will not be taxable. However, in case the FD/RD was opened when you
were resident Indian then the said FD will be converted to NRO- FD (upon your
status being changed to NRI) and the interest earned on the same will be
subject to TDS. However, depending on your cumulative tax liability in India,
you may claim refund while filing tax return in India.
Q) If I have 8 year
NRE FRD and if in second year I become resident, how NRE FDR will be treated
after third year and will interest thereon be taxable?
A) For returning
Indians, funds held in fixed deposits in NRE accounts, interest will be payable
at the rate originally fixed, provided the deposit is held for the full term
even after conversion into resident account. However, the interest earned after
the status was updated to resident will be taxable.
Q) If I buy a property
out of NRE funds and later on sell the property and credit the proceeds to my
NRO account, what are the tax implications?
A) Profits earned by
selling property in India will be liable to Capital gain is the difference
between the sale value of the property and its cost of purchase. Capital gains
can be classified as short term (up to 36 months) or long term (more than 36
months), depending on the period for which the property is held. Short-term
capital gain will be taxed at normal slab rates and long-term gain will be
taxed at 20%.
If a residential
property is sold after being held for more than three years and the proceeds
are reinvested for purchase of a new residential property, then the capital
gains will be exempt to the extent of the amount reinvested. The exemption is
subject to the new property being purchased within a year before or two years
from the date of sale, or if new property is being constructed within three
years from the date of sale.
Q) Can NRIs can also
claim exemption by investing the amount of capital gains in bonds issued by the
National Highways Authority of India (NHAI) or Rural Electrification
Corporation (REC) in case of Profit from sale of property which is long term?
A) Yes Investment in the
specified bonds is to be made within six months of such sale and there is a
lock-in period of three years for such bonds.
Q) I am an Indian
resident taking up employment abroad. I want to know whether I am eligible to
claim exemption of income under NRI category. If the employment is in Dubai,
where there is no tax on income, will it make any difference?
A) Your employment in
Dubai will not make any difference. As per taxation laws in India, your
overseas income getting credited to your NR account in India will not be taxed.
It is indifferent to overseas country tax regulations.
Q) I have an account
in Qatar and want to send money to my resident (saving) account in SBI Bank,
Will it be taxable? What is the ceiling for wire transfer? Can I open an
NRO/NRE account before completing first six months out of India.
A) Yes, you can send
money to your resident account and the said amount will not be taxable because
it will be from your overseas earnings. There is no upper cap on the amount you
can wire transfer to a bank account in India. Yes, based on a valid work visa
and company offer letter, you can convert your existing resident account into
NRO and open a NRE account as well.
Q) Can an NRI
returning back to India, continue to hold his foreign earnings overseas, and
gradually bring the money back to India as and when required?
A) You can bring your
earnings as you wish. You should take care of income tax of your earnings.
After you are return to India, your income earned outside India will not be
taxable in India provided it is received in India for two years. After the two
years, your worldwide income would be taxable in India.
1 comment:
Very informative one! To save the taxes it is good to invest in mutual funds!
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