As per the prevailing exchange control laws, NRIs and PIOs cannot buy agricultural land in India

There is no income tax implication on purchase of immovable property


Photo: Mint
Photo: Mint

I live in Germany and I want to buy agricultural land in Madhya Pradesh. Can I do this in my name, and if that is not possible can I buy it in my younger sister’s name who lives there?

—R.K. Siddhu

There is no income tax implication on purchase of immovable property. Under the exchange control law, a person of Indian origin (PIO) or a non-resident Indian (NRI) is permitted to purchase immovable property in India except: agricultural land or plantation property or farm house. Your younger sister, who stays in India and is a resident in India, may buy the agricultural land in her name from funds transferred by you.

I am an Indian citizen employed in the US. My company is sending me to its India office for a 1-year assignment and has agreed to keep paying me in my US account. What are the tax implications for this?

—K. Ravi

Taxability in India depends on the following factors:

► a) Source of income

► b) Residential status

Typically, source of income lies where the services are performed, or where the asset, from which the income arises, is located.

Residential status is dynamic and is required to be determined for each financial year (FY) (1 April to 31 March). The same is determined on the basis of physical presence of an individual in India during the relevant FYs and the last 10 FYs. If the individual satisfies any of the basic conditions that are mentioned below, then he would qualify as a resident; otherwise he would qualify as a non-resident.

Basic Conditions:

i) Stay in India during the FY is 182 days or more, or;

ii) Stay in India during the FY is 60 days or more and in the four years immediately preceding the FY is 365 days or more.

A resident may either qualify as resident and ordinarily resident (ROR), or resident but not ordinarily resident (RNOR).

If both the additional conditions mentioned below are met, then the individual would qualify as ROR, otherwise the individual would qualify as RNOR in India.

Additional
conditions:

i) Resident in India for at least 2 FYs out of 10 FYs immediately preceding the relevant FY, and;

ii) Stay in India is for 730 days or more during the 7 years preceding the relevant FY.

An individual qualifying as ROR is taxable on the global income and is required to report global assets in the India tax return.

However, an individual qualifying as non-resident or as RNOR is taxable only on the income earned or received in India. Thus, salary income received in the US bank account will be taxable in India as the services are rendered in India.

However, taxability of any other income earned or received by you outside India will be dependent upon your residential status in India.

To avoid double taxation of salary received in the US, applicable benefit may be explored under the Double Taxation Avoidance Agreement (DTAA) between India and the US.

I’m an NRI living in Sydney, Australia and have inherited a piece of non-agricultural land in India. I am going to sell it soon. Can I repatriate the sale proceeds?

—Hetal Shah

Yes, general permission is available to an NRI to repatriate the sale proceeds of a non-agricultural, immovable property inherited from a person resident in India.

The NRl may repatriate an amount not exceeding $1 million per financial year, on production of documentary evidence in support of the inheritance of assets, an undertaking by the remitter and certificate by a chartered accountant in the prescribed format.

The general permission for repatriation of sale proceeds of immovable property is not available to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran. They have to seek specific approval from the Reserve Bank of India (RBI).

Sonu Iyer is tax partner & people advisory services leader, EY India.

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