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Tax Queries
Can you tell me about tax returns in India for NRI, do we have to file returns in India?
Query By - Siddana | 26/01/2012
A : If your total Indian taxable income is over the basic tax threshold of Rs. 1,80,000, you are required to file tax returns in India. Note that in arriving at the above limit, only taxable income has to be considered. This means, incomes such as interest on NRE and FCNR deposits as also long-term capital gains from equity and equity MFs, if any, will not be taken into consideration in order to arrive at the total taxable income. Similarly, any tax saving investments such as contributions to or deposits under some specified avenues such as insurance premium, interest on long-term infrastructure bonds, PPF etc. have to be deducted. If the net result is above Rs. 180,000, then tax return has to be filed.
If TDS (withholding tax) has been applied to any of your income (especially bank interest) the same has to be reduced from the net tax payable. If the TDS amount is more, then you can claim a refund.
The last date for filing returns for any Financial Year (April – March) is 31st July of the immediately succeeding Financial Year (FY). For example, for income earned in FY 2011-12, the tax return has to be filed by July 31st, 2012 (FY 12-13).
Do I have to pay tax either in India or the US on the amount gifted to me by my father? What is the documentation required so that I do not have to pay gift tax?
Query By - Ranajit | USA | 10/02/12
As per the provisions of Sec. 56 of the Indian Income Tax Act (ITA), gifts given by a close relative do not attract any tax in India. Your father would qualify as a ‘close relative’ of yours as per the ITA. Hence any gift given by him to you would be tax-free for both parties so far as India tax incidence is concerned. As far as the paperwork is concerned, all that is required is an offer by the donor and acceptance thereof by the donee in black and white. The donee should request the donor for a gift and then the donor should remit the amount to the donee. Alternatively, the donor can offer the gift. In either case, it is necessary for the donee to accept the gift in writing (maybe through a thank you note). Only then it would be considered as a gift in India. It is preferable to mention the relationship between the donor and the done.
Do I need to open an NRO account so that my father can deposit the Indian rupees in the account? Or can he deposit in directly in my NRE account? If I need to open an NRO account for this purpose, can the NRO account be a joint account with my father?
Query By - Ranajit | USA | 10/02/12
Yes, you will need to open an NRO account for this purpose. The gift from your father cannot be credited to your NRE account. Also, he can be the second holder in this NRO account.
Will TDS be deducted from the interest on the NRO account? Are there any limits at which TDS deduction starts?
TDS will be deducted on the interest earned from NRO account @30% plus applicable cess and surcharge. The TDS rate is 31.2% on interest upto Rs 5 million. The entire NRO interest is subject to TDS without any exempted threshold. For more details on the withholding tax percentage, click here.
If I end up paying TDS and have no other income in India, how do I claim tax refund from the Indian government? I have not filed a tax return in India for more than 12 years now and prefer not to file an Indian tax return, unless I have to
Ranajit | USA | 10/02/12
The only way of claiming the refund of TDS is by filing your tax return.
If I have to file tax returns in India, do I need to provide details of my income in the US? Or will my tax returns in India only be related to my income in India such as interest earned on NRO account?
Query By - Ranajit | USA | 10/02/12
Only your Indian income needs to be mentioned in your tax return. The foreign income of an NRI or a PIO is not taxed in India.
At a later stage, can I repatriate money out of the NRO account and deposit in either in my US bank account or in my NRE account? If yes, what is the process and what are the annual limits?
Query By - Ranajit | USA | 10/02/12
The corpus lying in NRO account is normally not repatriable. However, RBI Master Circular 3 /2010-11 dt 1.07.10 makes it possible for NRIs / PIOs to remit up to US$ 1 million per financial year out of the balances held in NRO accounts on production of an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes.
What are the tax implications in the US of opening and maintaining an NRO account?
Query By - Ranajit | USA | 10/02/12
Legally we can comment only on Indian tax laws and rules. As regards taxability in USA of gifts given by Indian Residents and interest on NRO account etc., you are requested to kindly get this information from a tax consultant licensed to practice in your host country.
Does the amount credited by my friend come under any special tax bracket? Or can I add that to my bank interest as my source of income? Query By - Rahul | Sweden | 26/03/12
Query By - Rahul | Sweden | 26/03/12
The basic threshold income limit below which no tax becomes leviable is Rs. 1,80,000 for FY 11-12. Therefore, there is no legal requirement on your part to file a tax return. In other words, you do not need to file a tax return only to inform the income tax department about the TDS etc. However, if you file a return, you can claim a refund of the TDS deducted since as explained above, your final tax liability is nil.
What % is deducted at source by the bank and how do I go about filing the tax return to include the TDS form? Whom do I approach?
The bank deducts 31.2% tax on NRO interest upto Rs 5 million.
Also, my brother (has income in India and a PAN number) transferred money to me, since I sold my car to him. Will that be taxed separately? There was no name change in the ownership of the car since it was in his name originally (though I purchased it). c
Query By - Rahul | Sweden | 26/03/12
Cars, motor-cycles etc. owned and used by the assessee are personal effects. The sale of personal effects do not attract any tax. Since the car did not belong to you the amount paid to you by your brother may be shown as a gift from him to you.
Since my wife also has her own income abroad, how can we file tax for the both of us using a single account? Is it possible or should I open another account in her name as primary?
Query By - Rahul | Sweden | 26/03/12
For Indian income tax, your wife and you are two separate tax entities. If you have a single joint account, you should be able to segregate her income and your income. In the long run it is much more efficient and convenient to have two separate joint accounts, one with you the primary holder with her as the second one and vice versa. It appears that you simultaneously have Resident and Non-Resident bank accounts in India. Please note that --- As required by FEMA --- when you go out of India or stay outside India, in either case a) for or on taking up employment outside India, or b) for carrying on outside India a business or vocation outside India, or c) for any other purpose with intention to stay outside India for an uncertain period; you are required to inform all the banks and depository participants with whom you have an account or MFs where you are unitholder about the change in your status within a reasonable time. The banks will redesignate your accounts as NRO. You can use this account the same way as you used it before becoming an NRI. It is illegal for an NRI to continue to hold his normal Resident bank account. You will do well by getting all the existing Resident accounts of yourself and your wife redesignated as NRO accounts.
Is it possible that I fill out and scan all the pages that require and send it to my dad in India, who will then submit it in the designated ICICI branch in Kakinada ? I assume the charted accountant statement need to be obtained from India and doesn't r
Query By - Ajit | 12/12/2012
Form 15CA has to be filled online and then the signed print out of the system generated acknowledgement has to be submitted along with the CA certificate (Form 15CB). So there is no requirement as such of sending any scanned pages to India. Form 15CB (CA certificate) does not need to be signed by the remitter. Yes, remittance of the sale / maturity proceeds of financial assets is a bonafide purpose.
I want to remit money abroad which is from the sale of property in India. The purpose to remit is to buy a house for us in abroad. The paper work needed also include a certificate from the CA where he has to certify that all the Taxes due have been paid
Query By - Khursheed | 12/12/2012
There have been conflicting court judgments on whether this new house that is to be purchased to save capital gains tax could be situated outside India. If exemption is sought on Indian long-term capital gains tax based on the fact that the long-term capital gains has been reinvested in property situated abroad, the Indian tax department could disallow this claim. Hence any action in this regard should be taken only after consulting your personal tax attorney/advisor.” the CA certificate is necessary – the CA certificate is necessary even if you have actually paid the taxes.
When I would be permanently returning to India do I have to close my NRE Savings Bank accounts immediately or there is some breathing time?
Query By - Prabir | 12/12/2012
As per the FEMR (Deposit), Schedule-1 Item-7, after returning to India permanently, you are expected to inform all the banks, wherever you have accounts, that you have returned permanently. On receipt of this information, the bank will redesignate the NRE/NRO accounts as a ‘Resident’ accounts’. Though the law does not mention any time limit as such, the account holder is expected to discharge this obligation at his / her earliest.
Do I have to open a new Savings Bank Account or these NRE accounts can be converted to NRO / Savings Bank Accounts? If such conversion takes place then the money, lying in such accounts, is still fully repatriable?
Query By - Prabir | 12/12/2012
Both NRE and NRO are NRI related accounts. Residents cannot have either an NRE or an NRO account. In other words, upon informing the bank, both NRE as well as the NRO account(s) of the account holder would be converted to Resident bank accounts. Resident bank accounts do not have the facility of repatriability that an NRE account has.
I have got a couple of fixed deposits in State Bank of India in NRE account. In case I return to India before maturity dates of these do I have to pay income tax on these? If so, then how it will be calculated?
Query By - Prabir | 12/12/2012
Once the NRE account is redesignated as a Resident account, the interest will be taxable.
If after being a NRI for twelve years or so when I return to India then should I pay income tax from that financial year itself like any normal Indian tax payer or there is any relaxation? I have to pay tax only on interests being accrued on foreign money
Query By - Prabir | 12/12/2012
There is a transitional status of RNOR between being an NRI and becoming a full-fledged Resident after returning to India permanently. Resident but not Ordinarily Resident (RNOR) is a person who satisfies one of the following conditions ---
a) He has been a non-resident in India in nine out of the ten previous years preceding that year, or
b) Has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less.
Note that the above two conditions are alternative and not cumulative i.e. to get RNOR status, one has to satisfy any one condition. You may apply the above provisions to your personal situation to arrive at your RNOR status. You will find most NRIs will qualify to be RNOR for two financial years. An RNOR (just like an NRI) is not required pay tax in India on his foreign income. Indian income will be taxable the same way as it is taxable for a Resident.
If some balance settlement / payment with my overseas employer is due then how can this be repatriated after I return to India if there does not exist any NRE account in my name?
Query By - Prabir | 12/12/2012
This payment can be credited to your Resident account. The funds may be wired to your account through normal banking channels.
During the period on my being a NRI can a domestic account be opened? In case it’s done what is the outcome? Any penalty?
Query By - Prabir | 12/12/2012
By domestic if you mean Indian Resident then note that as an NRI, you cannot open a Resident account. The same should be closed down as soon as the account holder learns of the discrepancy. A person contravening the provisions of the law may be liable for a penalty of up to thrice the sum involved. However, normally such penalties are usually applied for major offences.
Can NRIs open MIS account in Post Offices?
Query By - Prabir | 12/12/2012
All Post Office schemes are not available to NRIs w.e.f. 25.7.03. Old accounts are allowed to be run up to their maturity but cannot be renewed.
Before being a NRI my wife had a joint MIS account in a Post Office on a five – year term. After it has matured can she, as a NRI, extend it or she has to withdraw the money completely and invest it somewhere else or re-invest in MIS again?
Query By - Prabir | 12/12/2012
All Post Office schemes are not available to NRIs w.e.f. 25.7.03. Old accounts are allowed to be run up to their maturity but cannot be renewed.
I have two domestic joint Savings Bank accounts with State Bank of India. One of these has been converted to a NRO account. The other could not be done yet – in spite of several reminders etc. to Bank. I have got the records to show that I did my best to
Query By - Prabir | 12/12/2012
As long as you have written documentation of your requests to get the account redesignated, you cannot be said to have contravened the provisions of the law.
If my wife is made a nominee against Public Provident Fund and NRE fixed deposits made with State Bank of India then in the event of my death how she will prove herself to be the nominee and will amounts lying in such accounts will automatically flow to h
Query By - Prabir | 12/12/2012
She will have to provide to the PPF accounts office, to its satisfaction, proof of her identity. You may check with the bank its policy in this regard. Different banks / organizations have differing policies in this regard. However essentially an identity proof needs to be submitted. As per current tax laws, India does not impose any inheritance tax nor is wealth tax applicable on financial assets such as PPF and bank deposits.
Will there be any tax implication on the money that was transferred to my India NRE account on 23-10-2012?
Rafiq | Dubai | 12/12/2012
After you have opened your bank account in Dubai, you will do well to request your company to deposit the entire amount to your Dubai account and thereafter you can get it transferred to your NRE account. Note that the total income of any previous year of a person who is a non-resident includes all the income from whatever source derived which —
a) is received or is deemed to be received in India in such year by or on behalf of such person ; or
b) accrues or arises or is deemed to accrue or arise to him in India during such year.
Therefore, the receipt of income refers to the first occasion when the recipient gets the money under his control. Once an amount is received as income abroad, any remittance or transmission of the amount to another place does not result in receipt income at any other place. For instance, an assessee after receiving an income outside India cannot be said to have received the same again when he brings or remits it to India. The position will remain the same if income is received outside India by an agent of the assessee who later on remits it to India.
Note again that the above provision is applicable to an NRI and your Residential status may be that of a Resident in India for the purpose of Indian taxes. We are not aware of the number of days you were in China during the current Financial Year and also the term of your current assignment in Dubai. To enable you to know whether you are a Resident or not, we reproduce hereunder the related definition ---
A Resident is one who during a Financial Year (FY) which is from April to March, satisfies any one of the following 2 basic conditions :
He is in India for at least
a) 182 days in the FY OR
b) 365 days out of the preceding 4 FYs AND 60 days in the FY.
The stay in India need not be continuous.
Most persons going abroad for an employment for the first time will have the status of Resident since they will be aught by the ‘b’ clause above. Therefore, if an Indian citizen leaves India in any year for the purpose of employment, or as a member of the crew of an Indian ship, the 60 days in the clause ‘b’ above is to be replaced by 182 days.
In other words, they will be treated as Residents only if they are in India for 182 days or more in the current FY.
In short, you will be treated as an NRI for the financial year, if your total stay abroad during the year is more than 183 days To sum, if you are an NRI, you should not ask your company to directly credit even a part of your salary to your NRE account.
I left India on 29-09-2012 and arrived in Dubai on 29-09-2012. Now, if we consider my first day outside of India as 30-09-2012, by 31-03-2013, I’d have completed 183 continuous days outside of India. Does that make me an NRE for the year 2012-2013?
Rafiq | Dubai | 12/12/2012
Counting only the period from 30.9.12 to 31.3.13, since you were in India for 181 full days and a part of one day, yours would have been a borderline case. Thankfully, the stay in India (or abroad) need not be continuous and also need not be related with only one country outside India. So, since you will not be in India for 182 days (need not be continuous) in all during 2012-13, you would be an NRI. Consequently, the money earned in Dubai by you and transferred to India will not be taxable in India.
I left India on 29-09-2012 and arrived in Dubai on 29-09-2012. Now, if we consider my first day outside of India as 30-09-2012, by 31-03-2013, I’d have completed 183 continuous days outside of India. Does that make me an NRE for the year 2012-2013?
Rafiq | Dubai | 12/12/2012
The interest earned in NRE account is not taxable in India. You can refer the following link for further details on the features of the NRE account :
https://www.icicibank.com/nri-banking/bankAccounts/nre_saving_accounts
When is the tax assessed at what rate is tax deducted?
Under the Income Tax Act, it is mandatory for the banks to apply TDS (= Withholding Tax) on NRO interest. There is no income threshold under which TDS is not chargeable. The TDS rate is 31.2% on interest upto Rs 5 million. If the interest exceeds Rs. 5 million during the financial year then an additional surcharge of 10% would also be applicable. For more details on the withholding tax percentage, click here.
The TDS is not the same as your tax liability. This liability will be computed on the basis of the income tax rates which again depend upon your income and the exemptions, deductions and rebates you can claim. The TDS can be set off against your actual tax payable and only the difference if any is payable. If your tax liability is less than the TDS, the only practical way to get the refund is to file the tax returns.
What if my dad is gifting me the money. In that case, am I still taxed?
Query By - Pankaj | Dubai | 12/12/2012
Gift by close relatives is free from any tax, both for the donor and the donee. The income arising from the gifted property will be taxed in your hands.
below, are you stating that the *interest* needs to be greater than Rs. 10,00, 000 for the rules to apply? You don't mean principal, do you?
Query By - Pankaj | Dubai | 12/12/2012
As said earlier, the applicability of TDS has no threshold. In other words, TDS is required to be applied by the bank on any interest amount, without any basic exempt minimum.
Is there any tax I have to pay on the sale proceeds, considering my purchase price was 11 lakhs and the current selling price could be 60 lakhs.If there is any tax that needs to be paid, can the same be avoided by way of investments?
Query By - Sanjeev | Dubai | 12/12/2012
Without knowing the exact date of purchase and sale, it is not possible to accurately compute the long term capital gain. However, based on the data provided, your approximate long term capital gains would be around Rs. 16 lakh on which the tax @20% would be around Rs. 3.2 lakh. You can save this tax by investing the amount of capital gain (Rs. 16 lakh) in ---
i) purchasing another residential property; Or
ii) purchase capital gains related Bonds of REC or NHAI.
Can I repatriate this money to Canada through my NRE account?
Query By - Sanjeev | Dubai | 12/12/2012
The sale proceeds will have to be credited to your NRO account before you get them remitted to Canada.
Where do I deposit the sale proceeds? Nre or NRO account?
Query By - Sanjeev | Dubai | 12/12/2012
The sale proceeds will have to be credited to your NRO account before you get them remitted to Canada.
Is there any other procedure/permission that needs to be followed/taken before selling my property in India
Query By - Sanjeev | Dubai | 12/12/2012
The procedure for the remittance process has been modified from 1st July 2009 as follows. First, you would need to provide the bank with a certificate from an Indian Chartered Accountant. This certificate is to be provided in prescribed Form 15CB. You would also need to fill out Form 15CA. This Form 15CA also known as the ‘undertaking’ requires the remitter to furnish certain specified details (like name of the bank to which the money is to be credited etc.) regarding the proposed remittance. The information to be furnished in Form 15CA is to be filled using the information contained in Form 15CB (certificate). Form 15CA has to be then uploaded on www.tin-nsdl.com. The remitter will then take a print out of this filled up Form 15CA (which will bear an acknowledgement number generated by the system) and sign it.
The duly signed Form 15CA (undertaking) and Form 15CB (certificate), has to be submitted to the bank who will in turn forward a copy the certificate and undertaking to the Assessing Officer concerned.
Once this is done, the funds may be remitted abroad. Please note that though the procedure seems complicated at first glance, it basically amounts to filling out of two forms, one of which will be done by the chartered accountant concerned. The other one has to be filled online and then printed out with the system generated acknowledgement number. Submission of both these documents is all that is needed to effect the remittance.
My dad, who lives in India would like to gift me a certain amount in Rupees. If I deposit that money via a bank transfer from his bank to my ICICI NRO account, will that money also be taxed as other money, or, because it is a gift, for which he can provid
Query By - Pankaj | Dubai | 12/12/2012
Gift received from a close relative (your father qualifies as a close relative of the son) does not attract any tax as per Indian tax laws. Hence, your father can deposit the money directly into your NRO bank account or remit it to your US bank account. AP (DIR 2011-12) Circular 90 dt 6.3.12 allows under Liberalised Remittance Scheme (LRS) Resident individuals to remit up to the limit of US$ 2,00,000 per FY (Apr-Mar) for any permitted capital and/or current account transactions or a combination of both. This includes gift.
We confirm that there will be no tax on such a gift in India. Legally we can only comment on Indian tax laws. For taxability in the US, you are requested to get the information from a US based tax attorney licensed to practice US tax laws.
Can you tell me about tax returns in India for NRI, do we have to file returns in India?
Query By - Siddana | 26/01/2012
A : If your total Indian taxable income is over the basic tax threshold of Rs. 1,80,000, you are required to file tax returns in India. Note that in arriving at the above limit, only taxable income has to be considered. This means, incomes such as interest on NRE and FCNR deposits as also long-term capital gains from equity and equity MFs, if any, will not be taken into consideration in order to arrive at the total taxable income. Similarly, any tax saving investments such as contributions to or deposits under some specified avenues such as insurance premium, interest on long-term infrastructure bonds, PPF etc. have to be deducted. If the net result is above Rs. 180,000, then tax return has to be filed.
If TDS (withholding tax) has been applied to any of your income (especially bank interest) the same has to be reduced from the net tax payable. If the TDS amount is more, then you can claim a refund.
The last date for filing returns for any Financial Year (April – March) is 31st July of the immediately succeeding Financial Year (FY). For example, for income earned in FY 2011-12, the tax return has to be filed by July 31st, 2012 (FY 12-13).
Do I have to pay tax either in India or the US on the amount gifted to me by my father? What is the documentation required so that I do not have to pay gift tax?
Query By - Ranajit | USA | 10/02/12
As per the provisions of Sec. 56 of the Indian Income Tax Act (ITA), gifts given by a close relative do not attract any tax in India. Your father would qualify as a ‘close relative’ of yours as per the ITA. Hence any gift given by him to you would be tax-free for both parties so far as India tax incidence is concerned. As far as the paperwork is concerned, all that is required is an offer by the donor and acceptance thereof by the donee in black and white. The donee should request the donor for a gift and then the donor should remit the amount to the donee. Alternatively, the donor can offer the gift. In either case, it is necessary for the donee to accept the gift in writing (maybe through a thank you note). Only then it would be considered as a gift in India. It is preferable to mention the relationship between the donor and the done.
