PIOs can’t buy agricultural land in India

Possibility of seeking a specific approval from the Reserve Bank of India to purchase agricultural land for charity, may be explored


Pradeep Gaur/Mint
Pradeep Gaur/Mint

I am a person of Indian origin (PIO) in the US. Can I buy agriculture land for a charity based in India? What will be the tax implications?

—Davis Zaccharias

There is no income tax implication on purchase of immovable property. However, under Indian Exchange Control rules (Foreign Exchange Management Act), while a PIO such as your self is permitted to purchase immovable property in India, purchase of agricultural land, farmhouse and plantation is not permitted. But possibility of seeking a specific approval from the Reserve Bank of India to purchase agricultural land for charity, may be explored.

I own a few physical shares that I purchased a few years ago and would like to sell them. How will this be taxed?

—D. Bhaduri

Capital gain from sale of shares of an Indian company are taxable in India. Capital gain on sale of equity shares listed on a recognised stock exchange in India will be classified as long term if held for more than 12 months. Long-term capital gains (LTCG) from sale of listed equity shares are tax exempt provided securities transaction tax is paid. Short-term capital gains on sale of listed shares are taxed at 15% plus applicable surcharge and education cess, provided securities transaction tax is paid. This means an effective rate of 17.304%. Capital gain on sale of shares not listed on a recognised stock exchange in India will be classified as long term if held for over 36 months. LTCG from unlisted shares is taxed at 20% plus surcharge and education cess.

I am a non-resident Indian (NRI) based in San Francisco. I have a rupee fixed deposit (FD) in India and its interest is credited in my savings account there. Do I have to file a tax return for this despite a tax deducted at source (TDS) being applicable on this. Also, will it have some Foreign Account Tax Compliance Act (FATCA) implications?

—Roger Patel

Interest earned or received from FDs in India are taxable in India. But interest earned from non-resident external accounts (savings or fixed) by an NRI is exempt from tax in India. If your total taxable income in India does not exceed the maximum non-taxable amount (Rs.2.5 lakh), you are not liable to pay tax on it and you are also not liable to file a tax return. However, you may file a tax return to claim refund of the taxes deducted on such interest income. As for FATCA, your bank in India will report the bank account to the relevant US authorities.

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