I used to be awarded worker inventory by a world firm that I had left four-and-a-half years in the past. The inventory is being held in a constancy account within the US. My brother is a US citizen and I need to reward this inventory to him as a substitute of promoting it. Please advise how I can do that? Also, what will probably be my tax legal responsibility on this transaction?
—Name withheld on request
We have assumed that your brother relies within the US and qualifies as a tax non-resident of India. The transaction of reward is not going to result in any revenue tax implications in your palms or your brother’s as he qualifies as a specified relative. We advise you to document any such reward in a authorized doc, particularly a present deed and put it aside apart. The onus of proving that the switch of such shares between you and your brother is a present or an irrevocable switch will probably be on you and your brother, so there ought to be documentation to assist the declare.
You could have to individually confirm the change management implications, if any, and permissibility of such reward underneath the Foreign Exchange Management Act, 1999. Also, the US tax implication, if any, in relation to this switch must also be verified.
I made my final deposit in my workers’ provident fund account in November 2015. I’ve not withdrawn my corpus. Every 12 months I get curiosity as per the prevailing charges. Currently, the curiosity accrued is reported as tax-free in my revenue tax return, however I used to be instructed that once I money it out, I might want to pay tax on the curiosity I earned after the account turned dormant. Is this true and the way a lot tax will I’ve to pay?
—Rakesh
It is assumed that you’ve got rendered steady service for a interval of 5 years or extra, as much as November 2015.
As per tax guidelines, the collected PF steadiness due and payable to the worker, i.e. steadiness to his credit score on the date of cessation of his employment, is exempt from tax, if he has rendered steady service for 5 years or extra. If the interval of employment is greater than 5 years, the collected steadiness to the extent payable to the worker, on the time of ceasing employment, shall be absolutely exempt from tax.
However, any accretion to such PF steadiness thereafter, i.e. from the date of ceasing employment until the date of withdrawal, will probably be taxable within the worker’s palms. So, the curiosity earned put up completion of your employment will probably be taxable in your palms.
For the taxable curiosity on employer contribution put up completion of your employment, it might be contended that the identical ought to be supplied to tax on a year-on-year foundation and never simply on withdrawal. For the taxable curiosity on worker contribution, the identical could also be supplied to tax based mostly on the strategy of accounting adopted by the taxpayer, i.e. money or mercantile. The disclosures within the tax returns would must be made accordingly. Further, upon withdrawal of provident fund steadiness, curiosity supplied to tax on accrual foundation wouldn’t be topic to tax in your palms.
Parizad Sirwalla is companion and head, world mobility providers, tax, KPMG in India.
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