Photo: iStock
Photo: iStock

While filing tax in India, NRIs do not have to state overseas income

Non resident Indians (NRIs) do not have to include income earned abroad in their tax returns filed in India

I am moving to Cambodia for a long-term assignment. I am told that India does not have a Double Taxation Avoidance Agreement (DTAA) with that country. Please let me know how that will impact my tax outgo. I have interest income in India and will continue to file tax return on that. Will I have to include my income in Cambodia in the India tax return as well, and pay tax on it again in India?

—Rajiv Unial 

Since you are moving to Cambodia for a long term, you may no longer be resident of India for tax purposes. Please check the conditions that apply to see whether you will be a tax resident in India for the said financial year. Do note that income earned in India will continue to be taxed in India even when you are a non-resident in India. Therefore, you will have to file a tax return in India. Non resident Indians (NRIs) do not have to include income earned abroad in their tax returns filed in India. It is likely that your total income will be taxable in Cambodia according to local laws. If there is no DTAA between two countries, the taxpayers may claim benefit of section 91 relief.

I am an NRI and I had purchased some land in a rural area of Thiruvananthapuram, Kerala, in October 2014. I am now planning to sell it to buy a new plot in an urban part of the city. We had bought this property for Rs15 lakh and will be selling it for Rs35 lakh. Please tell me my tax liability on this, considering that I am an NRI.

—Santhosh Venjaramoodu

Agricultural land in specified rural areas in India is not considered a capital asset. Therefore, any gains from its sale are not taxable. The income-tax Act defines what is an agricultural land in rural area and you must evaluate whether your land meets this definition.

If we assume this land is non-agricultural in nature, here is how it will be taxed. Non-residents have to pay capital gains tax similar to resident Indians. 

As mentioned by you, this land was purchased in October 2014 and you are planning to sell it now. Starting 1 April 2017, for a property to qualify as a long-term capital asset, it must have been held for at least 2 years. Since you meet this criterion, your gains will be considered long-term capital gains. 

You can index the cost of acquisition, which is Rs15 lakh. This is how it can be calculated: by multiplying it with the cost inflation index (CII) of year of sale (CII of FY2017-18 is 272) and dividing it by the CII of year of purchase (for FY2014-15, CII is 240). Your indexed cost by this calculation will be Rs17 lakh. Reduce this cost of acquisition from the sale price of Rs35 lakh. Your resulting capital gains will be Rs18 lakh. You are also eligible to deduct expenses, which are incidental to the sale. You will have to file a tax return in India and report these gains and any other income you have earned. In case you do not want to pay taxes on the gains, you can invest to claim exemption under section 54F or 54EC of the income tax Act. 

I am an NRI, and I want to buy a car in India, without taking any loan. I will be using funds from my non-resident external (NRE) account. Can you explain the tax implication if the car is in my name or somebody else?

—Rama Krishna

There are no tax implications for you when you use these funds to buy a car in your name or in any other person’s name. If this is a gift—purchased in someone else’s name—do make sure it is properly documented. Gifts may be exempt from tax, in the hands of the receiver, when made to a ‘specified’ relative.

Archit Gupta is founder and chief executive officer of ClearTax.

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