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Photo: iStock

You can gift up to $250,000 to close relatives staying abroad

Remittances outside India in the nature of gifts or for maintenance of close relatives abroad are permitted transactions under the Liberalised Remittance Scheme

Can I gift or donate and remit $65,000 to my married daughter who is a US resident (green card holder) and lives in the US? This money is out of my accumulated wealth.

—Manish Ahluwalia

Under the Liberalised Remittance Scheme (LRS), all resident individuals are allowed to freely remit up to $250,000 per financial year (April-March) for permissible transactions as specified under the LRS. The remittances can be made in any freely convertible foreign currency.

Remittances outside India in the nature of gifts or for maintenance of close relatives abroad are permitted transactions under the LRS. Hence, you may remit up to $250,000 under LRS as gift, which is a permitted transaction under LRS, to your daughter who is living outside India.

Under the income-tax law, income tax is payable on any sum of money, movable property or immovable property received by an individual without consideration (that is, without a quid pro quo), except gifts received from specified relatives or on specified occasions such as marriage and inheritance. 

Therefore, a gift of money to your daughter (who is your lineal descendant) will not be subject to tax in your hands or in the hands of your daughter in India. 

From April 2017 to September 2017, I was working in India. I have come to Germany on deputation for 6 months. I will be working here from 1 October 2017 to 31 March 2018. What will be the income tax implication on earnings for the complete year (from April 2017 to March 2018)?

—Mahesh Ganti

Taxability in India depends on the following factors: 

(a) Source of income

(b) Residential status as per income tax law

Typically, source of income lies where the services are performed, or where the asset, from which the income arises, is located. Any income, the source of which is located in India, is taxable in India (irrespective of residential status).

Residential status under the income-tax law is determined based on your physical presence in India in the current financial year (FY) (1 April 2017 to 31 March 2018) and preceding 10 FYs.

Depending on the number of days of presence in India, there can be following types of residential status in India:

(a) Resident and ordinarily resident

(b) Resident but not ordinarily resident 

(c) Non-resident 

On the basis of above facts, you will most likely qualify as a resident in India if you have spent 182 days or more in India during the FY 2017-18. 

As resident, you will be taxable in India on the below mentioned during the FY 2017-18:

(a) Salary income earned in India during the period April 2017 to September 2017;

(b) Salary income earned in Germany during the period October 2017 to March 2018;

(c) Any other personal income earned or received in or outside India.

To avoid double taxation of salary income, you may consider the following:

(a) Claim foreign tax credit for taxes paid in Germany against India income-tax payable on doubly taxed salary income as per Article 23 of the Double Taxation Avoidance Agreement between India and Germany;

(b) Maintain proof of taxes paid in Germany (return, challan or any other documentary evidence);

(c) Prepare and file Form 67 along with India income-tax return (‘return’).

Form 67 is a new requirement effective FY 2016-17. Under the Income-tax Rules, 1962, foreign tax credit claimed in the return will be allowed only upon furnishing Form 67 by the individual. This is in addition to the return to be filed by the individual.

Queries and views at mintmoney@livemint.com.

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

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