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I am an Indian national working in Singapore. I have invested in insurance policies that are invested into unit trusts in Singapore. Now I plan to return to India for good. In this context, do I need to pay capital gain tax on the profits I earn from the said investments?

—Name withheld on request

 

Taxability in India depends on residential status, source of income and place of receipt of income. Residential status is determined on the basis of physical presence of an individual in India during a financial year (FY) and the preceding 10 FYs. Residential status needs fresh determination for each year.

An individual qualifying as resident and ordinarily resident (ROR) is taxable on his/her worldwide income in India and is required to report all foreign assets in the India income tax return (ITR).

Also, the income earned from such foreign assets during the relevant year, along with the nature of income and head of income under which such income has been offered to tax in the India ITR, needs to be reported in relation to each foreign asset.

In your case, if you qualify as ROR of India in the year the units are sold, matured or transferred, the capital gains on sale of units of Singapore investment policy will be taxable in India. There is an exemption available under the Indian tax law for maturity proceeds of insurance policy if certain conditions are fulfilled (example, insurance policy is issued on or after 1 April 2012 but before 1 February 2021 and the premium payable on the policy does not exceed 10% of the capital sum assured).

Such exemption can be explored after examining the terms of the insurance product in your case. If you qualify as NR or RNOR, capital gains on sale of units of Singapore will not be taxable in India unless the receipts are directly received in India.

Benefit under the Double Taxation Avoidance Agreement (DTAA) between India and Singapore may be explored depending upon your residential status in India, residential status in Singapore and residential status under the DTAA.

Accordingly, it is important in your case to determine your residential status in India, residential status in Singapore and residential status under the DTAA to analyze taxability of the capital gains income earned in Singapore.

 

I am a non-resident Indian with an Overseas Citizen of India card. I do not live in India and have no income in India. However, I hold both permanent account number (PAN) and Aadhaar cards. Is it mandatory that I link my PAN card with Aadhaar card?

—Name withheld on request

 

As per Section 139AA of the Income Tax Act, 1961, every person who has been allotted PAN and who is eligible to obtain Aadhaar number is required to intimate his/her Aadhaar number to the income tax authorities. Failure to do so will make the PAN inoperative till the date Aadhaar number is intimated/linked.

However, as per the notification number S.O.(E) 1513 dated 11 May 2017, the government has exempted the following classes of people from provisions of Section 139AA:

Individuals residing in Assam, Jammu and Kashmir and Meghalaya; non-residents under the income tax law; senior citizens of the age 80 years or more and foreign citizens.

The primary condition for exemption is that the individual do not possess the Aadhaar number or Aadhaar enrolment ID.

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

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