|
|
| Home > FAQs > Taxation |
FAQs - Taxation |
|
1. How is the 'Residential Status' of a person determined?
Resident in India
Under the provisions of the Income-tax Act, an individual is regarded as resident in India in any previous year if any one of the following conditions is satisfied:
- The individual was present in India for 182 days or more during that year.
- The individual was present in India for 60 days or more during that year and has been in India for a period or periods totaling at least 365 days in India during the 4 preceding years.
These conditions are modified in two cases:
- When an Indian citizen leaves India for employment abroad or as a crew member of an Indian ship.
- When an Indian citizen or a person of Indian origin, who, being outside India, comes to India on a visit.
In the above cases, the 60 days period in India stipulated in the second condition is extended to 182 days.
Non Resident
An individual is regarded as non-resident in India if he is not a resident as discussed above.
Ordinary Resident
An individual who is a resident will be regarded as ordinary resident in India in any previous year if both the following conditions are satisfied:
- The individual has been resident in India for 2 out of 10 previous years preceding the current year.AND
- The individual has been present in India for a period or periods totaling 730 days or more, during the previous 7 years preceding the current year.
Note: If any one or both of these conditions remain unsatisfied, the individual will be regarded as not ordinarily resident. |
2. What are the incomes "Deemed to accrue or arise in India"?
The following incomes are deemed to arise in India:
- Salaries earned in India for services rendered in India.
- Salaries payable by the Government of India to an India citizen for service outside India.
- Dividend paid by an Indian company outside India.
- Interest.
- Royalty.
- Fees for technical services.
|
3. What are the types of non taxable incomes for NRIs?
The following are some items of income of NRIs that are exempt from tax under the provisions of the Income Tax Act.
- Interest on Non Resident External Account (NRE) in a Bank.
- Interest on RBI approved foreign currency deposits-FCNR (B) deposits.
- Interest on notified Relief Bonds.
- Other notified Bonds and Certificates.
- Dividends on shares of domestic companies.
- Income from specified Mutual Funds.
- Long Term Capital Gains of sales of shares of Indian Co/Equity Oriented Mutual Funds on a recognized stock exchange.
- Other items specified in Section 10 of the Income Tax Act.
|
4. How is capital gain computed?
Capital Gain is calculated as described below:
| Sale value of the asset |
xxxx.xx |
| Less: Expenses incurred on sale (brokerage, commission) |
xx.xx |
| Net consideration |
xxxx.xx |
| Less: Cost / Indexed cost of acquisition |
xxxx.xx |
| Capital Gain |
xxxx.xx |
|
Indexed cost of acquisition refers to the cost of purchasing the asset, as adjusted by the cost inflation index, provided by the Income Tax department. The benefit of indexation is not available in respect of bonds and debentures, other than capital indexed bonds issued by the Government.
|
Computation of capital gains
5. What are the exemptions available from Capital Gains?
It should be noted that exemption are available only in respect of "Long-Term Capital Gains". There are no exemptions for "Short Term Capital Gains".
In respect of long-term capital gains, NRIs can claim exemption by investing the capital gains within the time limit in specified bonds of:
- SIDBI (Small Industries Development Bank of India)
- NABARD (National Bank for Agriculture and Rural Development)
- NHAI (National Highways Authority of India)
- RECL (Rural Electrification Corporation Ltd)
- NHB (National Housing Bank)
Exemption is also claimed by investing the net consideration in a residential house.
In case of long-term capital gains arising from transfer of listed securities or unit, exemption can be claimed by investing the capital gains in acquiring equity shares forming part of an eligible issue of capital.
Capital Gains Accounts Scheme- If an NRI wants to avail the benefits of long term capital gains exemption by investing in a residential house, the same has to be invested within the stipulated time period as mentioned in that particular section. In case, the return of income is filed before the time limit specified for such investment, then the said amount can be deposited in the 'Capital Gain Deposit Account Scheme' with a nationalized bank. |
| Top |
6. What are the different rates of tax applicable for NRIs?
Depending upon the kind of income, the tax rate will vary as under:
- Long Term Capital Gains: On assets other than specified assets @ 20% (with indexation benefits).In case the gains arise from transfer of listed securities or unit or zero coupon bond, there is an option to be taxed @ 10% without indexation benefits.
Long term Capital Gains arising on sale of listed equity shares and units of an equity oriented fund are exempt from tax with effect from1.10.2004
- Short Term Capital Gains: Such gains are taxable as per the normal rates of Income Tax applicable to the total income of the NRI. However, short term Capital Gains arising on sale of listed equity shares and units of an equity oriented fund is liable to tax @ 10%.
- Dividends (other than dividends from domestic companies) and Interest income: 20% of gross amount.
- Dividends on GDRs and Interest on Foreign Currency Convertible Bonds: 10% of gross amount.
- Long Term capital gains from the transfer of GDR or FCCBs: 10%
When the income of an individual exceed Rs.10,00,000/-, surcharge @ 10% will be levied on the above tax rate. Education cess @ 2% is levied on the total tax, plus surcharge.
Note: Where rates prescribed under the relevant Double Tax Avoidance Agreement are lower, the same would apply. |
7. What is the special tax regime available to a NRI?
A special tax regime is available for NRIs in respect of income arising from investment in specified assets purchased with convertible foreign exchange. The specified assets are as under:
- Shares in an Indian company.
- Debentures issued by a public limited Indian company.
- Deposits with a public limited Indian company.
- Securities of the Central Government.
- Any other notified assets.
Income from the aforesaid specified assets shall be taxable as under:
- Investment income: 20% of gross amount (without any deduction or allowance against such investment income)
- Long-term capital gains: 10% (without indexation)
Exemption from long-term capital gains tax is available by investing the net consideration in any specified asset within a period of 6 months from the date of transfer of the capital asset. |
8. Is it compulsory for a NRI to file tax returns?
An NRI is required to furnish his return of income if his total taxable income exceeds the maximum amount which is not taxable (Rs. 1,00,000).
A non-resident Indian is not required to furnish return of income, if -
- Total income consists only of investment income from foreign exchange assets or long-term capital gains under special tax regime or both.
- Tax has been deducted at source on such income.
- NRI has opted to be governed by the special tax regime.
|
9. What are the wealth tax provisions applicable to a NRI
Wealth tax, in India, is levied under the Wealth-tax Act, 1957. NRIs are taxed for their wealth in India alone.
Wealth tax is payable on the aggregate value of chargeable assets as reduced by the value of debts owed on valuation date. The valuation date is uniformly fixed as 31st March.
Taxable Assets
- Any building or land appurtenant thereto used for residential or commercial purposes, but not including:
- Houses forming part of stock-in-trade.
- Houses occupied for business or profession.
- Residential property let out for a minimum of 300 days in the previous year.
- Commercial establishments and complexes.
One house or part of a house or a plot of land not exceeding 500 square meters, belonging to an individual or an HUF is also exempt from wealth tax.
- Motor cars other than those used in the business of running them on hire or held as stock-in-trade.
- Jewellery, bullion, furniture, utensils or any other article made wholly or partly of precious metals other than those used as stock-in-trade.
- Yachts, boats and aircrafts other than those used for commercial purposes.
- Urban land subjected to certain exceptions.
- Cash in hand in excess of Rs.50,000 of individuals and HUF's and in other cases, amounts not recorded in the books of accounts.
|
| Top |
|
