I have been living in Australia for 7 years. Last year, some ancestral land was sold in India, in which my share amounted to about Rs15 lakh, pre-tax. Please tell me how I can pay taxes on this. I want to use this amount to clear some of my debts in Australia.
Sale of property in India will be taxable in the year of sale of property. Any immovable property held for a period of more than 36 months is classified as long-term capital asset. For inherited property, the holding period would be calculated from the date of acquisition by the original owner.
In case of a long-term capital asset, taxable capital gain will be net sale proceeds less indexed cost of acquisition (i.e. adjusted as per cost of inflation index (CII)) less cost of improvement. For computing long-term capital gain, the base for calculating the indexed cost of acquisition of assets acquired prior to 1 April 1981 will be revised to 1 April 2001. Long term capital gain is taxable at 20% (excluding surcharge and education cess).
The long-term capital gain can be claimed exempt from tax to the extent it is re-invested in India in specified bonds or a residential house (to be either purchased within 2 years or constructed within 3 years of transfer of the land). There are certain restrictions however, on the sale of new house bought and amount of investment made in bonds.
If the capital gain remains un-invested till the due date of filing of India tax return (i.e., 31 July), you may put the amount of capital gain in a capital gain account scheme with a bank (not later than the due date of filing your India tax return) and subsequently withdraw this amount for re-investment. If the entire amount is not reinvested or not deposited in the capital gain account scheme, the remaining portion of the gain will be taxable.
Tax on long-term capital gain can be either paid by way of advance tax in four instalments (15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March) or before filing of a tax return by way of self-assessment tax along with interest by 31 July.
NRIs are allowed to remit up to $1 million from the sale proceeds of property in India from their NRO account on production of an undertaking by the remitter together with a certificate issued by a Chartered Accountant as prescribed to the authorised dealer (bank).
I was living in the US as a non-resident Indian (NRI) for the last 12 years. However, I returned to India this year to take care of my parents. Based on my performance, the company I was working for asked me to continue working for it from its office in Mumbai. However, my salary will continue to be processed in the US and deposited in my overseas bank account, so I continue receiving the same salary I was getting there. Otherwise, my salary will be readjusted to the Indian pay structure, which is lower. Now I plan to transfer my salary every month to my resident account here. Is it illegal to do so? What will be the tax implications?
Taxability in India depends on the following factors:
—source of income,
Typically, source of income lies where the services are performed, or where the asset— from which the income arises—is located. Salary earned in relation to services rendered by you in India is an India-sourced income. Based on this, it is taxable in India, irrespective of the place of its receipt and residential status. Thus, your India-sourced salary would be taxable in your hands in India, even if you receive it in your US bank account. However, in case your income is subject to double taxation, both in India and the US, then provisions of the India-US Double Taxation Avoidance Agreement (DTAA) may be analysed to claim any available benefit, subject to the provisions of the treaty.
Further, under the exchange control law, you may transfer your salary received in your US bank account to your Indian bank account.
I will become an NRI from the next year. I already have a Public Provident Fund (PPF) account as I am a resident Indian. If I want to continue contributing to the PPF account, how much can I do every year? Is it Rs70,000 or can I continue with Rs1.5 lakh per year?
NRIs are not eligible to open a PPF account. However, an NRI who has opened a PPF account when he was a resident in India and subsequently has become an NRI, is permitted to continue to deposit funds into the existing PPF account till its maturity on a non-repatriation basis.
There is no difference in the limit of deposits that may be made during one financial year for a resident or an NRI. Therefore, you may continue to contribute to Rs1.5 lakh per year.
Sonu Iyer is tax partner and people advisory services leader, EY India
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