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Tag: NRI Taxation

  • Is redemption of inherited funds taxed?

    My deceased mom was a non-resident Indian (NRI) and through her work overseas, she invested $20000 in a fund falling within the Isles of Man in 2002. This was invested from the funds earned overseas from her overseas checking account. She then retired in 2016 and didn’t redeem her funds and he or she turned a resident Indian. Now the fund has appreciated to $50000. If I, being a resident Indian, should redeem this and convey it to India, what shall be my taxation? I’m a tax payer and fall within the 30% bracket.

    —Name withheld on request

    Inheritance of overseas property below a will will not be a taxable occasion whereas the sale of such property by the authorized inheritor would appeal to capital positive aspects tax within the palms of the authorized inheritor.

    The funding within the Isle of Man fund could be thought of as a long-term capital asset and whereas computing the overall holding interval of the capital asset, the interval of holding by your deceased mom can be to be included. Similarly, the price of acquisition paid by your deceased mom could be handled as price of acquisition in your palms too. Capital positive aspects arising from the sale of this funding could be computed by deducting the listed price of acquisition from the total worth of consideration that might be obtained.

    As per judicial precedents, indexation ought to be out there from the 12 months 2002 (assuming fiscal 12 months 2002-03) until the fiscal 12 months 2023-24 i.e. interval beginning with the date when the asset was acquired by your deceased mom until the date of sale. The listed price of acquisition involves $66,286 ($20,000 / 105 * 348). Since the listed price of acquisition is increased than the sale worth, it will lead to a capital lack of $16,286, which you’ll convert into Indian rupees on the SBI shopping for TT (Telegraphic Transfer) price prevalent on the final of earlier month of sale. TT price is the speed at which a financial institution will convert overseas foreign money despatched to India, into Indian rupee.

    The capital loss may be set-off towards some other long-term capital positive aspects arising throughout FY2023-24 and pending set-off, it may be carried ahead for subsequent 8 years to be set-off towards any future long-term capital positive aspects.

    Harshal Bhuta is companion at P.R. Bhuta & Co. Chartered Accountants

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    Updated: 09 Oct 2023, 09:10 PM IST

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  • Can I exploit LRS to remit cash outdoors India for F&O buying and selling?

    As per the Liberalized Remittance Scheme (LRS), an Indian citizen can ship $250,000 per 12 months. Can this quantity be used for investments in futures & choices (F&O) buying and selling on worldwide listed derivatives. For instance, can a buying and selling account be opened with a global dealer in overseas geography to commerce alternate merchandise comparable to S&P 500 futures, crude oil choices, gold, Comex (F&O marketplace for commodities), and so on. What is the taxation if the account is opened in Dubai, UAE or Singapore; jurisdictions which have double taxation avoidance settlement (DTAA) with India?

    —Name withheld on request

    Remittances below LRS are allowed solely in respect of permissible capital or present account transactions or a mix of each. However, funding in abroad derivatives just isn’t a permitted capital account transaction since it’s prohibited below the abroad portfolio funding guidelines. Further, transactions within the nature of remittance for margins or margin calls to abroad exchanges/abroad counterparty are additionally not allowed below LRS. Therefore, you wouldn’t be permitted to remit funds below LRS for F&O buying and selling outdoors India.

    As to the query of whether or not a buying and selling account may be opened with a global dealer in overseas geography to commerce alternate merchandise, such transaction just isn’t permissible below FEMA (Foreign Exchange Mangement Act) within the first place. However, the actual fact of illegality is immaterial for the aim of taxation below the Indian tax regulation. The tax division just isn’t involved with the taint of illegality of the earnings or its supply. Thus, a taxpayer could also be prosecuted for an offence and concurrently be additionally taxed on the earnings arising from the unlawful transaction.

    Being an Indian tax resident, your worldwide earnings turns into chargeable to tax in India. The distributive guidelines below a DTAA assign to every respective nation, the suitable to tax particular class incomes that come up within the supply state. Such rights could also be unique taxing rights or shared taxing rights between each nations. However, a DTAA can not take away the suitable of the resident nation to tax its personal residents besides below restricted circumstances. Granting overseas tax credit score by the resident nation is one such circumstance whereby below DTAA obligations, it must grant overseas tax credit score to its personal taxpayer.

    Thus, whereas your worldwide earnings together with the earnings earned in UAE or Singapore from F&O buying and selling can be liable to taxation in India, you could take the advantage of the respective DTAA to avail overseas tax credit score in India towards the earnings tax chargeable on such earnings below the Indian tax regulation.

    When it involves the taxation below the Indian tax regulation, the earnings earned from F&O buying and selling exercise (in shares, shares and commodity) that’s carried out outdoors India can be characterised as enterprise earnings and particularly from a ‘speculation business’, since it will be carried out on a inventory alternate positioned outdoors India which don’t qualify as ‘recognized stock exchanges’.

    However, if the F&O buying and selling exercise leads to a loss, then there are restrictions on set-off and carry ahead of losses from the hypothesis enterprise. Loss in a speculative enterprise may be set-off solely towards earnings from speculative enterprise and pending full set-off, it may be carried ahead just for 4 consecutive evaluation years.

    Harshal Bhuta is associate at P.R. Bhuta & Co. Chartered Accountants.

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    Updated: 14 Sep 2023, 10:34 PM IST

  • Should an NRI file I-T returns if there isn’t a revenue in India?

    Is it obligatory for a non-resident Indian (NRI) to file revenue tax return (ITR) yearly in India regardless of not having any revenue in India?

    —Dolly Moga

    According to Indian tax legal guidelines, any individual whose revenue exceeds the utmost quantity not chargeable to tax (i.e. ₹2.5 lakh underneath the outdated tax regime; ₹3 lakh underneath the brand new tax regime) through the monetary yr, is required to file an ITR in India. Therefore, you aren’t obliged to file returns should you shouldn’t have any revenue in India.

    Though there isn’t a requirement to file the ITR, sure high-value transactions are required to be captured and reported by a reporting entity though these transactions could not have any reference to revenue. Certain examples are: investing a sum of greater than ₹10 lakh in non-residential exterior (NRE), non-resident bizarre (NRO ) or FCNR (overseas present non-resident account) mounted deposits (FDs) or subscribing to shares of an Indian firm or mutual funds for greater than that sum; buying an immovable property in India for greater than ₹30 lakh. In such circumstances, the tax division could search to verify the transactions and a response must be filed diligently with out which it could finally lead to issuance of a reassessment discover.

    I used to be working within the US since 2012. About a month again, I give up my job and got here again to India on account of well being points. After my remedy right here is over, I’ll return and seek for one other job within the US. I earn NRO saving financial institution curiosity and NRE mounted deposit curiosity from banks in India. What is the utmost interval of keep allowed in India to maintain the FD curiosity tax free?

    —Name withheld on request

    NRE FD curiosity stays exempt from tax until such time that the individual qualifies to be an individual resident outdoors India (i.e. a non-resident) underneath Foreign Exchange Management Act (Fema). If one is on a short lived go to and doesn’t intend to remain again for good, then the individual continues to stay an individual resident outdoors India underneath FEMA.

    In your case, your India go to overlaying this era of keep might be handled as a short lived go to and you may proceed to assert exemption for NRE FD curiosity earned by you.

    Harshal Bhuta is companion at P.R. Bhuta & Co. Chartered Accountants

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    Updated: 06 Sep 2023, 10:56 PM IST

  • Does an NRI should pay inheritance tax?

    I’m an NRI (non-resident Indian) dwelling within the US for greater than a decade. My mom died just lately and I’ll inherit one of many immovable properties from her property. Can I obtain and maintain immovable property in India, and if that’s the case, what are the tax implications on this?

    —Name withheld on request

    Under Fema (Foreign Exchange Management Act) laws, an NRI can inherit immovable property located in India from an Indian resident with out the permission of the Reserve Bank of India. Further, the inheritance of such property just isn’t topic to any earnings tax in India. India doesn’t levy any inheritance taxes too.

    I’m an Indian passport holder dwelling within the UAE since 2015. I just lately got here to know that there are some adjustments within the tax legislation which may deal with NRIs as Indian residents. Please clarify this transformation in tax legislation?

    —Name withheld on request

    With impact from FY2020-21, the tax legislation has been amended to offer that any Indian citizen who just isn’t ‘liable to tax’ in some other nation shall be deemed to be a tax resident in India. This change was launched to deal with the scenario of some Indian residents who travelled the world over however nonetheless remained stateless by way of tax residency throughout the specific FY and accordingly didn’t pay taxes wherever the world over. However, as an hostile fallout of this modification, all NRIs residing in UAE got here to be routinely coated beneath this new provision and had been handled as tax residents of India although solely a small a part of overseas earnings earned by them may develop into taxable in India. This was the scenario in the event that they weren’t eligible to take advantages of the DTAA (double tax avoidance Agreement) between India and the UAE

    Interestingly, UAE has just lately launched its new tax legislation which applies to people too, the place they’re exempt on incomes earned aside from from enterprise actions. Thus, NRIs residing in UAE could now declare to be ‘liable to tax’ in UAE and accordingly, stay outdoors the scope of the amended provisions of the tax legislation of India.

    Harshal Bhuta is companion, P.R. Bhuta & Co. Chartered Accountants.

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    Updated: 07 Aug 2023, 10:50 PM IST

  • Is TCS relevant if NRIs switch the proceeds of property sale?

    Can non-resident Indians (NRIs) switch the proceeds of a property sale to their nation of residence? In such a case, will banks accumulate tax at supply even in any case tax dues on such sale has been cleared?

    —Name withheld on request

    NRIs are allowed to remit upto $1 million in a monetary yr from the stability held of their NRO (non-resident peculiar) account or from the sale proceeds of a property held in India. These gross sales proceeds should first be credited to their NRO account in India. Any tax due on such sale ought to have been duly paid by the NRI in India. In case of an NRI, TCS just isn’t relevant for cash remitted to international accounts from an NRO account.

    My US-based father-in-law desires to present me a home. What would be the tax implications for me as an Indian resident?

    —Name withheld on request

    There isn’t any tax implication upon receiving a present from specified family members. Certain taxpayers have been included within the record of specified family members beneath the revenue tax act, the place any present acquired from them is tax free.

    I work as a service provider navy officer. I used to be crusing between 1 August 2021 and 31 January 2022 within the final monetary yr (FY22). In this monetary yr (FY23), I’ve been crusing between 1 July 2022 and 30 November 2022. Can you inform me what can be the tax therapy of my revenue this yr?

    —Name withheld on request

    A seafarer serving on Indian ships exterior India for a interval of 182 days or extra in a yr is taken into account to be a non-resident. However, the time spent by a ship in Indian territorial waters is taken into account a interval of service in India, based on tax guidelines framed in 1990. The variety of days exterior India of Indian crew engaged on such Indian ships will get counted solely from the date when the Indian ship crosses the coastal boundaries of India.

    Based on the data supplied by you, it appears you may have spent 153 days in India within the FY 2022-23, in such a case it’s possible you’ll be a resident or not ordinarily resident in India for tax functions.

    Archit Gupta is founder and chief government officer, Clear.in

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    Updated: 19 Jul 2023, 10:44 PM IST

  • How NRIs are taxed on property sale constructive features

    I’m an NRI having a flat in Pune, which I want to advertise. My father has the ultimate vitality of lawyer. What is the method I should adjust to? What about income tax on capital purchase? In which account the cheque should be deposited–NRI/NRO/monetary financial savings account?

    — Name withheld on request

    Gains on the sale of a flat shall be taxable in your fingers and you need to file an income tax return in India to report them. The sale proceeds paid to you shall be subject to TDS. 20% TDS is likely to be deducted if the property has been held for larger than 2 years; in another case the pace of TDS is 30%. You can declare this TDS by submitting an income tax return. In case you plan to reinvest the constructive features, you could possibly obtain a low/nil TDS certificates and supplies it to the shopper so that TDS is deducted as required.

    Taxation for capital constructive features for NRIs and residents is nearly an equivalent aside from the TDS as talked about above. You can deposit the sale proceeds in your NRO account.

    In case of the proprietor being an NRI, it’s the tenant’s accountability to deduct TDS on lease and deposit it with the income tax division. Otherwise, there’s provision for penalty. But what if the proprietor/house proprietor’s NRI standing is hidden from the tenant and subsequently tenant has not deducted any TDS on lease, nonetheless landlord himself has deposited TDS as advance tax; what shall be the punishment for tenant along with NRI landlord?

    — Dolly Moga

    The onus of deducting and depositing the TDS shall rest on the tenant. The tenant might obtain a certificates that specifies the residential standing of the proprietor. The tax need to be deducted from the lease payable on the cost of 31.2%. This tax cost is related besides the NRI landlord has a certificates stating that his entire income from India is below the exemption limit. If you fail to deduct tax from the lease paid to an NRI landlord, you could possibly enchantment to a penalty equal to the tax not deducted as per Section 271C of the Income Tax Act. There are excessive penalties for not depositing the TDS deducted. Even though the NRI might have deposited advance tax, the tenant ought to deduct TDS from the lease paid.

    Archit Gupta is founder and CEO at Clear.in.

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    Updated: 29 May 2023, 10:58 PM IST

  • Can NRIs avail of any tax deductions?

    I dwell within the US. Can you please let me know which tax deductions are usually not allowed for non-resident Indians (NRIs)?

    —Name withheld on request

    The following deductions are usually not allowed for NRIs beneath the revenue tax Act:

    Investments beneath part 80C: Investment in public provident fund, or PPF, is just not allowed. (NRIs are usually not allowed to open new PPF accounts. However, PPF accounts which can be opened whereas they had been residents are allowed to be maintained.)

    The identical rule applies for Investments in nationwide financial savings certificates scheme and the submit workplace five-year deposit scheme, senior citizen financial savings scheme.

    Deduction for the differently-abled beneath part 80DD , which is for upkeep, together with medical remedy, of an individual with a incapacity as outlined on this part, can be not obtainable to NRIs.

    Deduction for the differently-abled beneath part 80DDB in the direction of medical remedy of a dependent who’s disabled (as licensed by a prescribed specialist) is on the market solely to residents.

    Deduction for the differently-abled beneath Section 80U, the place the taxpayer himself has a incapacity as outlined within the part, is allowed just for resident Indians.

    My revenue in India is lower than ₹2.5 lakh from rental revenue. Do I must file an revenue tax return (ITR)? If so, which ITR kind is relevant?

    —Name withheld on request

    Assuming you haven’t any different revenue, your whole taxable revenue is prone to be under the taxable restrict of ₹2.5 lakh. You could select to not file your revenue tax return.

    However, there are various advantages to submitting an revenue tax return—it’s a document of your revenue earned. In case any tax has been deducted at supply (TDS) from the revenue earned by you and your whole revenue is under taxable restrict, then you possibly can declare a refund by submitting an revenue tax return.

    Archit Gupta is founder and chief govt officer, Clear.in.

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  • How is overseas retirement fund taxed in India?

    I’ve been residing in Canada since 2001. I’ll retire subsequent yr and plan to return to India quickly after. I’ll get my retirement corpus and different advantages later subsequent yr. How will this cash be taxed in India, if I’m a resident in India?

    -Name withheld on request

    How your earnings shall be taxed relies upon upon your residential standing and the supply of such earnings. If an earnings has been earned in India, it’s possible that it shall be taxed in India. How a lot of your earnings shall be taxable in India additionally is dependent upon your residential standing in India. Your residential standing have to be decided as per the Income Tax Act for every monetary yr.

    There can also be a rule of deemed residency. An particular person who’s a citizen of India who is just not liable to tax in every other nation or territory has whole earnings, aside from from overseas sources, exceeding ₹15 lakh in the course of the mentioned FY, shall be a deemed resident of India.

    In case you might be decided to be a non-resident or resident however not ordinarily resident in India, you’ll have to pay tax on earnings that accrues or arises in India or incomes which might be acquired or deemed to be acquired in India. However, in the event you qualify as a resident taxpayer, you shall need to pay tax in India in your world earnings together with any incomes from exterior India.

    The ITR kind additionally requires residents to report any earnings earned by them from overseas property of their ITR filed in India and pay tax on it.

    Therefore, in case you’re a non-resident or resident however not ordinarily resident in India, any retirement cash acquired by you in Canada, shall not be taxed in India. However, in case you qualify as a resident the scenario could also be totally different. In order to keep away from paying tax on the identical earnings twice, you’ll have to confer with the DTAA (Double Taxation Avoidance Agreements) between the 2 international locations.

    The authorities has just lately launched a provision that permits returning NRIs to defer taxation of retirement funds to the yr of withdrawal to keep away from mismatch of taxation of earnings in India versus taxation of earnings exterior India as a consequence of mismatch within the interval associated to tax submitting. It is advisable to seek the advice of an professional to completely perceive how your corpus shall be taxed.

    Archit Gupta is founder and chief govt officer, Clear.in.

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  • How to file ITR as an OCI on Indian earnings?

    My son is predicated in London for the previous 12 years . He was an NRI and has earnings in India from NRE deposits and mutual funds. He has been often submitting IT returns which have been assessed updated. He has now obtained British citizenship and has utilized for OCI standing.

    Will he get the indexation advantages as per Indian tax legal guidelines on his MF earnings? How does the Double Taxation Avoidance Treaty with UK apply?

    He is working in UK and TDS is being deducted from his wage. What is the shape and the process to be adopted for submitting tax returns as an OCI for Indian earnings tax?

    Does he should declare his monetary property to the UK tax authorities? Will his PAN and Aadhar numbers nonetheless be legitimate as an OCI?

    – Name withheld on request

    As your son is predicated exterior India, he would qualify as “Non Resident” of India beneath the next circumstances:

    a. His bodily presence in India is lower than 60 days throughout the related monetary 12 months;

    b. His bodily presence in India is lower than 120 days throughout the related monetary 12 months if India sourced earnings doesn’t exceed ₹1,500,000; or

    c. His bodily presence in India is lower than 182 days throughout the related monetary years if India sourced earnings lower than ₹1,500,000.

    On the sale of mutual funds in India, he can be eligible for indexation profit in case of long-term capital positive aspects in case of mutual funds apart from equity-oriented mutual funds.

    Double Taxation Avoidance Treaty: Benefit could also be claimed beneath the Double Taxation Avoidance Agreement (DTAA) between India and the UK if there’s double taxation of any earnings in India and within the UK. The profit might be both of the next :

    (a) Exemption of earnings

    (b) Lower fee of tax or

    (c) Credit for taxes paid within the different nation.

    There isn’t any separate process to be adopted for submitting tax returns in India as an Overseas Citizen of India card (OCI) holder. He can proceed submitting returns in India as a non-resident. Further, his PAN and Aadhaar are legitimate as an OCI.

    Sonu Iyer is tax accomplice and other people advisory companies chief, EY India.

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