India’s efforts to track down tax evaders could soon see officials monitoring the funding flows of nationals living in Gulf countries.
“Some of the leading Gulf cities such as Dubai, Abu Dhabi, Bahrain [Manama] and Doha are major financial centres that are increasingly attracting Indian money that is leaving Swiss banks”
“In many cases these funds reach Gulf cities in the form of seemingly-legitimate investments.”
Indian government has drawn up a plan to track the suspicious financial dealings of non-resident Indians in close cooperation with respective foreign governments.
The government has already posted eight senior IRS officers in newly-created income tax overseas units in countries like the US, the UK and the UAE as part of efforts to trace illegal funds hidden away by Indians abroad.
These tax officials will function from the Indian missions in Washington, London, Berlin, Paris, The Hague, Abu Dhabi, Cyprus and Japan.
“The expansion of information exchange network at the international level will help in curbing cross-border flow of illicit wealth”
“It’s a long enough time for most to cover their tracks and move money to safer destinations.”
Although there are no official figures on the illicit funds, estimates by various sources say the total amount could be in the range of $1.5 to $2 trillion (Dh5.5 to Dh7.4 trillion). A significant portion of this money is believed to be in Switzerland.
Despite the new tax treaty India signed with Switzerland, analysts say it is unlikely that the Swiss banks will give away any details of the coded accounts that existed prior to January 1, 2012 when the treaty came into effect.
Analysts say India’s war on black money is likely to be a damp squib as many of the cross border fund movements are within the existing regulations.
A typical transaction to move money from Switzerland involves buying a shell company in a tax haven. Under the liberalised remittance schemes Indians can make investments up to $200,000 a year per person. This allows the Indian resident to hold shares of a paper company while having an account with a bank abroad.
Then the illicit money in coded accounts can be transferred to these companies in the form of trading income or earnings from consultancy services. The money can eventually flow back to India in the form of a legitimate foreign direct investment or portfolio investment.
With hundreds of thousands of NRI-owned businesses in the Gulf and Far East, tax evaders could use these businesses as conduits to escape the prying eyes of the taxman.
News and Events
India sets up Gulf unit to track NRI tax evaders
How NRI's can manage Assets/liabilities in India without being present
Indians planning to immigrate from India are normally worried as to how there affairs in India would be handled in their absence from India. They may appoint someone to act for and on their behalf, during their absence from India and ensure the smooth running of the day-to-day affairs in connection with their assets and liabilities in India. The obvious question, which comes to mind, is as to the meaning and implications of a ‘power of attorney’ and the modalities for its execution.
1) What is a power of Attorney?
A power of attorney is an instrument in writing empowering a specified person to act for and in the name of a person executing it. In other words, a power of attorney (POA) is an authorisation to act on someone else’s behalf in a legal or business matter. The person authorising the other to act is the grantor/principal of the power and the one authorised to act is the attorney/agent. It is a unilateral document signed and executed only by the grantor or principal. A power of attorney may be revoked at the instance of the grantor or due to his death or incapacity. A power of attorney is usually construed very strictly.
A power of attorney conferring on the agent the authority to act in a single transaction in the name of the principal is a Special Power of Attorney. If the power of attorney authorises the agent to act generally or in more than one transaction in the name of a principal, it is a General Power of Attorney.
A single act or transaction is meant to imply either a single act or acts so related to each other as to form one judicial transaction for example power of attorney for sale of a particular property.
2) How to execute a power of attorney, if you are within India/outside India?
• The name of the person executing the power of attorney should reveal his identity. In case he is an individual, the father’s name and address should be given. In the case of a corporation, the power of attorney should mention the place of incorporation and the address of the principal place of business/registered office of the company.
• The date and place of execution of the power of attorney is to be mentioned.
• The power of attorney should be duly signed by the person executing the same. Where the same is being executed by a company, it should bear the signature of the authorised signatory and the common seal of the company
• The power of attorney may be accepted by the person in whose favour it is drawn. Where the same is being accepted by a firm, the Partners/individuals so authorised on behalf of the firm should sign individually.
• The power of attorney should be duly attested by two witnesses.
• In case the power of attorney is drawn in favour of the firm it should mention the constitution of the firm i.e. partners/specific individuals authorised on behalf of the firm.
• The power of attorney should be duly executed on a non-judicial stamp paper per prescribed stamp duty, if executed within India. The power of attorney is chargeable to stamp duty at the time of its execution in India as per the Indian Stamp Act, 1899. A power of attorney executed outside India, but which relates to any property situated in India or to any matter or thing to be done in India or received in India is chargeable to stamp duty under the Indian Stamp Act, 1899. The power of attorney is executed outside India on a plain paper without any stamp. The same is required to be stamped within three months after it is received in India by the Collector of Stamps.
• The power of attorney should be duly executed before and authenticated by a Notary Public, or any court, Judge, Magistrate, Indian Consul or Vice Consul or representative of the Central government in case executed within India. `Authentication’ implies that the above-mentioned persons ie Notary Public, court, Judge, Magistrate, Indian consul or Vice Consul or representative of the Central government assure themselves of the identity of the person who has signed the attorney as well as the fact of its execution. The act of authentication creates a presumption under the Indian Evidence Act, 1872 that the document purporting to be an attorney was so executed and is valid.
• A power of attorney executed outside India has to be executed before and authenticated by a Notary Public and also consularised/apostilled by the Indian Consulate present in the country of execution. In international law, consularisation is the act of authenticating any legal document by the consul office of the country in which it is to be used, by the consul signing and affixing a red ribbon to the document for it to be acceptable in the country of use. Foreign countries, who are party to the Hague Convention, require the bearer of a document to obtain an apostille from authorities of the country in which the document was issued. An apostille involves the addition of a certificate, either stamped on the document itself or attached to the document. It certifies the country of origin of the document, the identity and capacity in which a document has been signed and the name of any authority which has affixed a seal or stamp to the document. The apostille enables the presenter to bypass further certification and immediately send or take the documents to the country of intended use. Only certain countries will accept the apostille. Such a power of attorney so authenticated is recognised as valid under the Indian Evidence Act, 1872. The same will also be valid/recognisable under the Registration Act, 1908 for purpose of registration of a document by an agent of a person, or a representative or an assign (where the person executing the document cannot be present for registration).
• A power of attorney to be used for the specific purpose of registration of a document in respect of an immoveable property of value more than R. 100 by an agent of a person, or a representative or an assign (where the person executing the document cannot be present for registration) has to be executed before or authenticated by the Registrar or Sub-Registrar within whose district or sub-district the principal resides. This is as per the requirements of the Registration Act, 1908. This being an exception, no other power of attorney, either special or general requires registration under the Registration Act, 1908.
3) Other noteworthy points
Sometimes the process of notarization and consularisation may be cumbersome in case of attorneys executed outside India, but it is important to note that only a “valid power of attorney” can validate the act performed by the agent/attorney on behalf of the principal/grantor. The governments may think in terms of easing the process of consularisation as many a time, an Indian consulate may be thousands of miles away from the place of execution of a power of attorney thus causing unnecessary delays and costs for the grantor.
As cross border business and legal transactions increase, the delays caused by such cumbersome requirements need to be addressed and reduced. Perhaps the governments would take some much needed steps and define a simpler procedure for execution of documents outside India
NRIs should take advantage of lower TDS while selling property in India
Being an NRI at this point in time must a great spot to be in. And especially for NRIs who wish to make investments in India as well as for those who want to sell investments made some time ago.
According to property consultants, Indian metro cities are seeing a good 20 to 30% year-on-year increase in property sales from NRIs in the past 4 to 6 months. This is on the back of a constant rise in property prices in the metro cities.
According to data from Residex, the residential index of National Housing Bank, prices in Mumbai and Delhi have shot up by 17 and 20% between March 2012 and March 2013. While many NRIs are still mulling and some even selling their properties, it’s important they know how they will be taxed on such a transaction.
If a resident Indian or a Non-Resident Indian (NRI) sells a property in India after holding it for a period of more than three years, then long term capital gains tax of 22.66% will be applicable.
While the taxation is same for both the parties, there is a difference in the way Tax-Deducted at Source (TDS) is calculated.
Ajay Vaswani says, “An NRI selling property in India has the right to apply to the assessing officer for certificate of non-deduction or lower tax deduction. That is for deducting his TDS only on the capital gains.”
He can make this application because if the 20.66% is applied on the sale price, then the NRI may end up getting less than what he had invested.
In other words, the TDS including surcharge of 22.66% will be calculated only on the capital gains and not on the sale price which will not erode his profits, if any. If this gets approved by the Income Tax office, then the buyer of the NRI’s property can make payment to him in full (ie: sale price), whereas a certificate of (TDS on capital gains) will be issued separately to the NRI.
This procedure takes about 2 to 4 weeks, and will require the NRI to submit some key documents like his sale-agreement, PAN, income tax returns, bank statements and so on. Hence, hiring a chartered accountant or a property lawyer in India would work in his benefit to ensure a smoother transaction.
First, deduct the expenses incurred by NRI from the sale price, which will give you the net selling price of the property. Expenses incurred can include legal fees, transfer fees, traveling fees etc. Then, the difference between this and the indexed cost of purchase will be your capital gains.
However, as an NRI you can save this TDS as well.
One way of getting this waiver is if the NRI re-invests these capital gains made from the sale of property in another property (within two years) or in tax-free bonds (within six months). In such cases, the NRI will be exempt from tax in India, and no TDS will be deducted either. For this, they will have to apply for a tax-exemption certificate under Section 195 of income tax act.
Whereas, if the NRI decides to sell that property within three years, then he will have to pay short-term capital gains tax according to the tax-bracket he falls under along with a fixed rate of TDS respectively.
As an NRI, he can ask his CA to file form 15 CA & CB electronically which will state that the NRI has no tax-liability and can remit this money back to his country now. If he doesn’t wish to repatriate the money, he can keep it in his Indian bank’s NRO account. However, according to RBI guidelines repatriation of such funds per financial year should not exceed $1 million.
NRI Bank Accounts Explained in Simple Language
NRIs and foreign nationals of Indian origin (PIO), residing overseas can open bank accounts in India without seeking any permission from the Indian government authorities. Basically, there are two types of bank accounts that NRI/PIO can maintain in India. These are:
1. Non Resident External, commonly referred to as a NRE account
2. Ordinary Non-Resident account, referred to as NRO account
Difference between NRE and NRO account:
NRE Account:
• Money in NRE accounts can be repatriated abroad by the account holder. When you make a deposit in NRE accounts, the money is converted to Indian rupees and held in your NRE account. When you with draw money from this account and want to have it sent abroad, the Rupee amount withdrawn is then converted to the foreign currency.
• No income tax is payable on the income earned by way of interest on NRE accounts. Hence no TDS is deducted from NRE accounts. While NRE account earnings are not taxable in India, they may be taxable in the foreign country you reside in.
• NRE accounts cannot be held jointly with Indian residents. They can be held jointly with NRIs only.
NRO Account:
• Repatriation from NRO accounts is generally not freely allowed.
• Interest earned on NRO accounts is taxable in India and may also be taxable in the foreign country you reside in. TDS is deducted by banks from NRO accounts.
• NRO accounts can be held jointly with Indian residents.
Points to Note - Buying House Property in India
How would the rent received from the property be treated?
Rent received is taxable in India and NRI has to file a tax return in India in case the rent received along with other income exceeds the threshold limit.
The rent may be additionally taxed in the NRI’s country of tax residence. There may be some tax relief available under the Double Tax Avoidance Agreement (DTAA) for NRIs who are tax residents in certain countries. This may allow one to get credit for Indian taxes paid.
What are the deductions one can get against the property?
It is the same as for residents. Municipal taxes paid during the year and housing loan interest payment are deductible. Standard deduction of 30 per cent of the net rent (gross rent less municipal taxes) can be obtained for repair and maintenance, irrespective of actual expenditure.
Housing loan principal repayment, stamp duty and registration charges are allowed as deduction from one’s gross income under the overall limit of Rs 1 lakh per year, under Section 80C.
How does one handle a vacant property?
Again, treatment here is similar to a resident. A property which is not rented out is treated as a self-occupied property and the taxable value is NIL. The only deduction available against such property is interest on housing loan up to Rs 1.5 lakh per year. When there are more than one property that is not rented, then the owner can choose one property as self-occupied and all the other un-rented properties shall be deemed to be let out, even if not actually let out. For these, the rent that the property would likely fetch is considered as gross rent and all other deductions as applicable for a rented property will be allowed.
Deduction for principal repayment on housing loan can be obtained on all property, whether it is rented, self-occupied or deemed to be let out.
How is wealth tax applicable for NRIs?
An NRI is exempt from wealth tax on a property that has been rented for more than 300 days. Also, one vacant house property can be declared as self-occupied property and is exempt from wealth tax. The value (net of outstanding loans) of second and subsequent vacant properties would be subject to wealth tax, at the rate of 1 per cent on the value in excess of Rs 30 lakh.
What are the tax payments to consider during a sale?
NRIs are subject to capital gains tax in India, similar to what is applied to residents. They can get long-term capital gains rate for property held for over 36 months and can claim exemption by investing in another house property or specified bonds. Capital gains may also be taxable in the NRI’s country of residence. Relief may be available in the form of credit for Indian taxes paid, in case the NRI is a tax resident of a country with which India has a DTAA.
Are there any limits on the amount that can be repatriated?
Limits and conditions for repatriation are different based on the funds used for buying property. If the property was acquired as per the foreign exchange laws, the amount of repatriation is restricted to the extent of the initial purchase cost of the property. For example, assume the purchase price was $100,000 (Rs 40 lakh, with an exchange rate of Rs 40) and the sale price was Rs 75 lakh. Assuming the prevailing exchange rate at the time of sale is Rs 60, one can repatriate Rs 60 lakh ($100,000).
Gains made on foreign source funded properties (Rs 15 lakh in the example above) as well as all proceeds from property purchased with rupee sources can be repatriated under the general limit of Rs 10 lakh per financial year.
Tax implications for NRI's returning to India
It is a well know fact, that most of the Indians are returning to their homeland to explore new avenues, but coming back is not the only thing on their minds, they need solutions for their taxes as well. Basically, most of them want to know what implications will their Non Resident Indian (NRI) status would have on their tax liability in India.
Under Indian tax provisions, the residential status in India is based on the physical presence of the person in India during the tax year and if the person is not physically present in India for more than 60 days then he is considered to be Non-Resident of India (NRI). The tax year is calculated from April 1 to March 31. However, when a citizen of India or a person of Indian origin who is outside India visits India in any year, he would be regarded as Non-Resident if his total stay is less than 182 days in the relevant tax year.
The individual can also file is his existence as Not Ordinarily Resident (NOR) which will be based on his stay in India in the past years. But the glitch in NOR is he/she should be a non-resident in India in nine out of the ten years preceding the previous years. Taxability is completely dependent on whether an individual qualifies as a Resident, NOR or Non-Resident. A NOR or Non-resident is taxed on the income he earns in India.
An NRI can reap his tax benefits until he claims that he is a Non-Resident, but once he/she pronounces his residential status he will avail no benefits and will be considered as a full time resident of India and will have to follow the regular tax format. There are some special provisions under Indian tax laws wherein NRIs can opt for special tax rates for specific investment incomes or capital gains from foreign exchange assets (eg: Shares in Indian company purchased in convertible foreign exchange).
Of course NRI's do not come empty handed, they will be carrying some wealth tag behind them. But they don't have to panic, as assets located outside India owned by NRI's shall not come under wealth tax bracket. NRI's are also allowed to file exemption for the assets brought by them to India or assets acquired by such money. Up to seven years from the day of they return to India, they are exempted for their assets.
NRI remittances spike on festive demand UAE Exchange
NRI remittances spike on festive demand: UAE Exchange
Source: Economic Times
MUMBAI: Global remittance flows have witnessed a sharp surge in September this year and the ongoing festive season is expected to boost flows even further, setting a new record for the year 2013, says UAE Exchange, a global remittance and foreign exchange brand.
"Remittances by non-resident Indians have seen a sharp spike of 27% between January and September 2013, as compared to 7% growth during the same period last year, reaching a new high of over $6.5 billion, the highest quantum since 2008," says UAE Exchange.
"The RBI's special window to attract NRI dollar deposit flows into India, valid till November 30, 2013 has also driven high volume foreign currency remittance transactions," it adds.
The strengthening of the US dollar against most other currencies, particularly the Indian rupee has also been another key driver for increased remittance flows.
Most NRIs also choose to remit money into the country for gifting purposes during the festive season, apart from purchase of gold and other investment options including fixed deposits and real estate.
Average transaction volumes have risen by about 27% this year and average transaction size has risen by 7% to $830 as compared to $775 in 2012.
FAQ’s By NON RESIDENTS ON INCOME TAX FOR AY 2014-15
Q) Who is NRI as per Income Tax Act?
A) Residential status of an individual or HUF or a company is of great importance in Indian Income Tax Act as the liability to pay tax in India does not depend on the nationality or domicile of the Tax payer but on his residential status. Residential Status is determined on the basis of physical presence i.e. the number of days of stay in India in any year.
An individual is resident if any of the following conditions are satisfied: (i) he stayed in India for 182 days or more during the previous year, or (ii) he stayed in India for 365 days or more during the four preceding years and stays in India for at least 60 days. 182 days in case of an Indian citizen or a person of Indian Origin coming on a visit to India or 182 days in case of an Indian citizen going abroad for an employment during the previous year. Otherwise he is Non Resident.
Hindu Undivided Family (HUF) or firm or other Association of persons is resident of India except in cases where the control and management of its affairs is wholly situated outside India in the previous year
A company is resident in India if-it is an Indian company, or during the previous year, the control and management is situated wholly in India.
Q) I am NRI, do I need to file my Income Tax Return for AY 2014-15?
A) NRI need to file your return provided your taxable income in India during the Assessment Year 2014-2015 was above the basic exemption limit of Rs 2 lakh OR you have earned short-term or long-term capital gains from sale of certain investments and assets, even if the gains are less than the basic exemption limit. For NRIs, certain short term or long term capital gains from sale of investments or assets are taxed even if the total income is below the basic exemption limit. There is an exception: If your taxable income consisted only of investment income (interest) and/or capital gains income and if tax has been deducted at source from such income, you do not have to file your tax returns.
Q) Is Income Tax Return need to file compulsory Online for NRI for AY 2014-15?
A) Central Board of Direct Taxes (CBDT) in India issued a notification which has made it mandatory for individuals who have annual gross total income in excess of Rs 5 lakh to file their returns online from Assessment Year 2014-2015. This applies to all individuals including non resident Indians. So as an NRI with gross total income exceeding Rs 5 lakh in Assessment Year 2014-2015, you must file your returns electronically.
In case your taxable income exceeds Rs.5 lakh in the previous year, you would be required to file the return of income electronically either using the digital signature or through submission of the verification Form ITR-V after electronically filing the return of income. In case your income does not exceed the above limit, you would also have an option to file the return of income in paper form.
Q) Are NRI were liable to pay advance tax for Assessment Year 2014-2015?
A) As per the Income Tax Act, Individual must pay advance tax in three instalments during the year in case the tax payable is likely to be Rs 10,000 or more after considering TDS deduction. In case of default interest is generally 1 percent per month for the default amount and extends till the date of payment. Therefore, NRIs should evaluate if they were liable to pay advance tax and whether the same was paid in time.
Q) What is last date to file your Income Tax Return? What if NRI do not have any tax payable?
A) The last date to file returns for the financial year Assessment Year 2014-2015 is July 31st 2014. However, If you do not have any tax payable (that is all your tax has been deducted at source), you can still file your tax return by 31st March 2015 without any penalties.
Q) What if NRI do not file return till 31 March 2015?
A) If you do not file your tax returns even by the 31st of March 2015, you may be charged a penalty of Rs 5,000 for every year of delay or sometimes may not be able to file your returns at all after 2016.
Q) My NRO account TDS has been deducted at source @30%. My interest income is 1 Lakhs Rs? Do I Need to File Return?
A) As your total income is less than 2 Lakh Rs, you are not liable to file return. However you can claim refund of Rs 30,000/- of your TDS deducted for which you should file return. If you are expecting a refund, make sure that you put accurate bank details such as account number and IFSC code of the branch as refunds are processed electronically.
Q) Can NRI get Refund of TDS by Filing IT return for Last year 2013 March Ending?
A) Yes you can file your return for Financial Year ended 2013 and get refund.
Q) What all income is exempt for NRI?
A) Dividends from equity shares and equity mutual funds is tax free in India. Interest received on the NRE account and FCNR account is tax free. Long term capital gains on equity shares and equity mutual funds (provided you pay securities transaction tax at time of sale). Further, If you have given a property on rent, you can claim an ad hoc deduction of 30% of net annual value as repairs and maintenance expenses in addition to claiming a deduction on mortgage interest.
Health insurance premium in India for yourself or your dependents, you can claim a deduction under section 80D. If the health insurance is taken for your spouse and dependent children, you can claim a deduction of Rs 15,000 per annum. An additional Rs 15,000 is available as deduction on insurance premium paid on behalf of your parents. If either of your parents is over the age of 65, the additional deduction will be Rs 20,000 instead of Rs 15,000.
Contributions to an approved charity, you can claim a deduction under section 80G. Investments such as PPF, life insurance premiums, etc. can be claimed as deduction under section 80C up to a total of Rs 1 lakh.
Q) I am NRI has deposited Rs. 1 crore in a non-resident ordinary (NRO) account in the form of fixed deposit. I want to transfer the amount from NRO to a non-residential external (NRE) account. Is it compulsory to give Form 15CB and 15CA to banks? Who has to file these forms? The bank has deducted tax at source when it credited the interest amount. What is the ceiling for transfer from NRO to NRE during a year?
A) An NRI can transfer / remit out of the NRO account subject to production of documentary evidence in support of acquisition by the remitter and an undertaking by the remitter along with a certificate by a chartered accountant in Form 15CA and 15CB
As per regulations, NRI are permitted to transfer a maximum of $1 million per financial year to your NRE account. The transfer will be subject to payment of applicable taxes. So far the amount being transferred to the NRE account represents balances for which tax has already paid or exempt there shouldn’t be additional tax.
Q) I am a non-resident Indian (NRI) and have a piece of agricultural land and an apartment in India. I earn agriculture income and rental income from these two. Do I need to file income tax return? Also, can an NRI buy agricultural or farmland in India?
A) NRI would be subject to taxes in India on any income accruing or arising from an asset located in India. The agricultural income earned by you would be exempt, whereas the rental income from the house property would be subject to tax. You would be under an obligation to file an income tax return in India on or before 31 July 2014 for financial year 2013-14 if your taxable income exceeds Rs.2 lakh in the previous year. However, you may note that the income tax law prescribes a specific method of computing taxable income where the taxpayer has earned agricultural income. While this type of income is exempt from tax, it is nonetheless included in the total income for rate purposes.
Q) Is NRI allowed to buy Agriculture property or Farm house in India?
A) NRIs and Persons of Indian Origin are not allowed to buy agricultural property, plantation or a farm house.
Q) What are the tax implications for an NRI looking at selling his property in India?
A) If the property is more than 3 years old, long term capital gains tax will be incurred on the sale of the property. On long term capital gains, tax is payable @ 20%. However, tax can be minimised by making alternative investments in India.
Q) I am a NRI living in US. Can you please advise me if long term capital gains tax are payable on sales of shares purchased by paying STT, and if it is exempt is there a limit?
A) LTCG is fully exempted on sale of listed company shares, purchased by paying STT, provided the transaction is long-term. i.e that share are hold for period of more than 12 months
Q) I an NRI, bought a property in 2005 and sold it in 2014 at a difference of Rs 40 Lakhs for Rs 80 Lakhs. If I repatriate this amount to the US, am I liable for any tax? What is the procedure to repatriate money to the US?
A) You have earned a long term capital gain on your property. You have to pay taxes in India on this income and then obtain a certificate from a chartered accountant. After this certificate only, you would be able to repatriate the money abroad.
Q) During Year Ended 2014, I, NRI leased out my building to a bank which is paying rent monthly but is deducting TDS. Can you please let me know what kind of documentation is required from the bank to submit my taxes in India? Is form 16 sufficient?
A) Form 16 is enough to determine your income on rent and TDS deducted by the bank.
Q) Is the money received from sale of inherited property in India taxable for an NRI? Earlier it was mandatory to put it in an NRO account but now with the RBI go ahead can we transfer it to NRE account provided the tax is paid?
A) Yes, the money received from NRI is taxable in India. Sale proceeds will first be credited to NRO account. Then you have to obtain a certificate from the chartered accountant relating to payment of taxes after which the money would be transferred from NRO account to NRE account.
Q) I hold NRI status for this year 2014. I have FD and RD accounts in ICICI Bank and they are deducting taxes. Do I need to pay the tax for the interest I get from FD and RD?
A) If the FD and RD were opened under NRE status as (NRE-FD or NRE-RD) then the interest earned on the same will not be taxable. However, in case the FD/RD was opened when you were resident Indian then the said FD will be converted to NRO- FD (upon your status being changed to NRI) and the interest earned on the same will be subject to TDS. However, depending on your cumulative tax liability in India, you may claim refund while filing tax return in India.
Q) If I have 8 year NRE FRD and if in second year I become resident, how NRE FDR will be treated after third year and will interest thereon be taxable?
A) For returning Indians, funds held in fixed deposits in NRE accounts, interest will be payable at the rate originally fixed, provided the deposit is held for the full term even after conversion into resident account. However, the interest earned after the status was updated to resident will be taxable.
Q) If I buy a property out of NRE funds and later on sell the property and credit the proceeds to my NRO account, what are the tax implications?
A) Profits earned by selling property in India will be liable to Capital gain is the difference between the sale value of the property and its cost of purchase. Capital gains can be classified as short term (up to 36 months) or long term (more than 36 months), depending on the period for which the property is held. Short-term capital gain will be taxed at normal slab rates and long-term gain will be taxed at 20%.
If a residential property is sold after being held for more than three years and the proceeds are reinvested for purchase of a new residential property, then the capital gains will be exempt to the extent of the amount reinvested. The exemption is subject to the new property being purchased within a year before or two years from the date of sale, or if new property is being constructed within three years from the date of sale.
Q) Can NRIs can also claim exemption by investing the amount of capital gains in bonds issued by the National Highways Authority of India (NHAI) or Rural Electrification Corporation (REC) in case of Profit from sale of property which is long term?
A) Yes Investment in the specified bonds is to be made within six months of such sale and there is a lock-in period of three years for such bonds.
Q) I am an Indian resident taking up employment abroad. I want to know whether I am eligible to claim exemption of income under NRI category. If the employment is in Dubai, where there is no tax on income, will it make any difference?
A) Your employment in Dubai will not make any difference. As per taxation laws in India, your overseas income getting credited to your NR account in India will not be taxed. It is indifferent to overseas country tax regulations.
Q) I have an account in Qatar and want to send money to my resident (saving) account in SBI Bank, Will it be taxable? What is the ceiling for wire transfer? Can I open an NRO/NRE account before completing first six months out of India.
A) Yes, you can send money to your resident account and the said amount will not be taxable because it will be from your overseas earnings. There is no upper cap on the amount you can wire transfer to a bank account in India. Yes, based on a valid work visa and company offer letter, you can convert your existing resident account into NRO and open a NRE account as well.
Q) Can an NRI returning back to India, continue to hold his foreign earnings overseas, and gradually bring the money back to India as and when required?
A) You can bring your earnings as you wish. You should take care of income tax of your earnings. After you are return to India, your income earned outside India will not be taxable in India provided it is received in India for two years. After the two years, your worldwide income would be taxable in India.
India sets up Gulf unit to track NRI tax evaders
How NRI's can manage Assets/liabilities in India without being present
Indians planning to immigrate from India are normally worried as to how there affairs in India would be handled in their absence from India. They may appoint someone to act for and on their behalf, during their absence from India and ensure the smooth running of the day-to-day affairs in connection with their assets and liabilities in India. The obvious question, which comes to mind, is as to the meaning and implications of a ‘power of attorney’ and the modalities for its execution.
1) What is a power of Attorney?
A power of attorney is an instrument in writing empowering a specified person to act for and in the name of a person executing it. In other words, a power of attorney (POA) is an authorisation to act on someone else’s behalf in a legal or business matter. The person authorising the other to act is the grantor/principal of the power and the one authorised to act is the attorney/agent. It is a unilateral document signed and executed only by the grantor or principal. A power of attorney may be revoked at the instance of the grantor or due to his death or incapacity. A power of attorney is usually construed very strictly.
A power of attorney conferring on the agent the authority to act in a single transaction in the name of the principal is a Special Power of Attorney. If the power of attorney authorises the agent to act generally or in more than one transaction in the name of a principal, it is a General Power of Attorney.
A single act or transaction is meant to imply either a single act or acts so related to each other as to form one judicial transaction for example power of attorney for sale of a particular property.
2) How to execute a power of attorney, if you are within India/outside India?
• The name of the person executing the power of attorney should reveal his identity. In case he is an individual, the father’s name and address should be given. In the case of a corporation, the power of attorney should mention the place of incorporation and the address of the principal place of business/registered office of the company.
• The date and place of execution of the power of attorney is to be mentioned.
• The power of attorney should be duly signed by the person executing the same. Where the same is being executed by a company, it should bear the signature of the authorised signatory and the common seal of the company
• The power of attorney may be accepted by the person in whose favour it is drawn. Where the same is being accepted by a firm, the Partners/individuals so authorised on behalf of the firm should sign individually.
• The power of attorney should be duly attested by two witnesses.
• In case the power of attorney is drawn in favour of the firm it should mention the constitution of the firm i.e. partners/specific individuals authorised on behalf of the firm.
• The power of attorney should be duly executed on a non-judicial stamp paper per prescribed stamp duty, if executed within India. The power of attorney is chargeable to stamp duty at the time of its execution in India as per the Indian Stamp Act, 1899. A power of attorney executed outside India, but which relates to any property situated in India or to any matter or thing to be done in India or received in India is chargeable to stamp duty under the Indian Stamp Act, 1899. The power of attorney is executed outside India on a plain paper without any stamp. The same is required to be stamped within three months after it is received in India by the Collector of Stamps.
• The power of attorney should be duly executed before and authenticated by a Notary Public, or any court, Judge, Magistrate, Indian Consul or Vice Consul or representative of the Central government in case executed within India. `Authentication’ implies that the above-mentioned persons ie Notary Public, court, Judge, Magistrate, Indian consul or Vice Consul or representative of the Central government assure themselves of the identity of the person who has signed the attorney as well as the fact of its execution. The act of authentication creates a presumption under the Indian Evidence Act, 1872 that the document purporting to be an attorney was so executed and is valid.
• A power of attorney executed outside India has to be executed before and authenticated by a Notary Public and also consularised/apostilled by the Indian Consulate present in the country of execution. In international law, consularisation is the act of authenticating any legal document by the consul office of the country in which it is to be used, by the consul signing and affixing a red ribbon to the document for it to be acceptable in the country of use. Foreign countries, who are party to the Hague Convention, require the bearer of a document to obtain an apostille from authorities of the country in which the document was issued. An apostille involves the addition of a certificate, either stamped on the document itself or attached to the document. It certifies the country of origin of the document, the identity and capacity in which a document has been signed and the name of any authority which has affixed a seal or stamp to the document. The apostille enables the presenter to bypass further certification and immediately send or take the documents to the country of intended use. Only certain countries will accept the apostille. Such a power of attorney so authenticated is recognised as valid under the Indian Evidence Act, 1872. The same will also be valid/recognisable under the Registration Act, 1908 for purpose of registration of a document by an agent of a person, or a representative or an assign (where the person executing the document cannot be present for registration).
• A power of attorney to be used for the specific purpose of registration of a document in respect of an immoveable property of value more than R. 100 by an agent of a person, or a representative or an assign (where the person executing the document cannot be present for registration) has to be executed before or authenticated by the Registrar or Sub-Registrar within whose district or sub-district the principal resides. This is as per the requirements of the Registration Act, 1908. This being an exception, no other power of attorney, either special or general requires registration under the Registration Act, 1908.
3) Other noteworthy points
Sometimes the process of notarization and consularisation may be cumbersome in case of attorneys executed outside India, but it is important to note that only a “valid power of attorney” can validate the act performed by the agent/attorney on behalf of the principal/grantor. The governments may think in terms of easing the process of consularisation as many a time, an Indian consulate may be thousands of miles away from the place of execution of a power of attorney thus causing unnecessary delays and costs for the grantor.
As cross border business and legal transactions increase, the delays caused by such cumbersome requirements need to be addressed and reduced. Perhaps the governments would take some much needed steps and define a simpler procedure for execution of documents outside India
NRIs should take advantage of lower TDS while selling property in India
Being an NRI at this point in time must a great spot to be in. And especially for NRIs who wish to make investments in India as well as for those who want to sell investments made some time ago.
According to property consultants, Indian metro cities are seeing a good 20 to 30% year-on-year increase in property sales from NRIs in the past 4 to 6 months. This is on the back of a constant rise in property prices in the metro cities.
According to data from Residex, the residential index of National Housing Bank, prices in Mumbai and Delhi have shot up by 17 and 20% between March 2012 and March 2013. While many NRIs are still mulling and some even selling their properties, it’s important they know how they will be taxed on such a transaction.
If a resident Indian or a Non-Resident Indian (NRI) sells a property in India after holding it for a period of more than three years, then long term capital gains tax of 22.66% will be applicable.
While the taxation is same for both the parties, there is a difference in the way Tax-Deducted at Source (TDS) is calculated.
Ajay Vaswani says, “An NRI selling property in India has the right to apply to the assessing officer for certificate of non-deduction or lower tax deduction. That is for deducting his TDS only on the capital gains.”
He can make this application because if the 20.66% is applied on the sale price, then the NRI may end up getting less than what he had invested.
In other words, the TDS including surcharge of 22.66% will be calculated only on the capital gains and not on the sale price which will not erode his profits, if any. If this gets approved by the Income Tax office, then the buyer of the NRI’s property can make payment to him in full (ie: sale price), whereas a certificate of (TDS on capital gains) will be issued separately to the NRI.
This procedure takes about 2 to 4 weeks, and will require the NRI to submit some key documents like his sale-agreement, PAN, income tax returns, bank statements and so on. Hence, hiring a chartered accountant or a property lawyer in India would work in his benefit to ensure a smoother transaction.
First, deduct the expenses incurred by NRI from the sale price, which will give you the net selling price of the property. Expenses incurred can include legal fees, transfer fees, traveling fees etc. Then, the difference between this and the indexed cost of purchase will be your capital gains.
However, as an NRI you can save this TDS as well.
One way of getting this waiver is if the NRI re-invests these capital gains made from the sale of property in another property (within two years) or in tax-free bonds (within six months). In such cases, the NRI will be exempt from tax in India, and no TDS will be deducted either. For this, they will have to apply for a tax-exemption certificate under Section 195 of income tax act.
Whereas, if the NRI decides to sell that property within three years, then he will have to pay short-term capital gains tax according to the tax-bracket he falls under along with a fixed rate of TDS respectively.
As an NRI, he can ask his CA to file form 15 CA & CB electronically which will state that the NRI has no tax-liability and can remit this money back to his country now. If he doesn’t wish to repatriate the money, he can keep it in his Indian bank’s NRO account. However, according to RBI guidelines repatriation of such funds per financial year should not exceed $1 million.
NRI Bank Accounts Explained in Simple Language
NRIs and foreign nationals of Indian origin (PIO), residing overseas can open bank accounts in India without seeking any permission from the Indian government authorities. Basically, there are two types of bank accounts that NRI/PIO can maintain in India. These are:
1. Non Resident External, commonly referred to as a NRE account
2. Ordinary Non-Resident account, referred to as NRO account
Difference between NRE and NRO account:
NRE Account:
• Money in NRE accounts can be repatriated abroad by the account holder. When you make a deposit in NRE accounts, the money is converted to Indian rupees and held in your NRE account. When you with draw money from this account and want to have it sent abroad, the Rupee amount withdrawn is then converted to the foreign currency.
• No income tax is payable on the income earned by way of interest on NRE accounts. Hence no TDS is deducted from NRE accounts. While NRE account earnings are not taxable in India, they may be taxable in the foreign country you reside in.
• NRE accounts cannot be held jointly with Indian residents. They can be held jointly with NRIs only.
NRO Account:
• Repatriation from NRO accounts is generally not freely allowed.
• Interest earned on NRO accounts is taxable in India and may also be taxable in the foreign country you reside in. TDS is deducted by banks from NRO accounts.
• NRO accounts can be held jointly with Indian residents.
Points to Note - Buying House Property in India
How would the rent received from the property be treated?
Rent received is taxable in India and NRI has to file a tax return in India in case the rent received along with other income exceeds the threshold limit.
The rent may be additionally taxed in the NRI’s country of tax residence. There may be some tax relief available under the Double Tax Avoidance Agreement (DTAA) for NRIs who are tax residents in certain countries. This may allow one to get credit for Indian taxes paid.
What are the deductions one can get against the property?
It is the same as for residents. Municipal taxes paid during the year and housing loan interest payment are deductible. Standard deduction of 30 per cent of the net rent (gross rent less municipal taxes) can be obtained for repair and maintenance, irrespective of actual expenditure.
Housing loan principal repayment, stamp duty and registration charges are allowed as deduction from one’s gross income under the overall limit of Rs 1 lakh per year, under Section 80C.
How does one handle a vacant property?
Again, treatment here is similar to a resident. A property which is not rented out is treated as a self-occupied property and the taxable value is NIL. The only deduction available against such property is interest on housing loan up to Rs 1.5 lakh per year. When there are more than one property that is not rented, then the owner can choose one property as self-occupied and all the other un-rented properties shall be deemed to be let out, even if not actually let out. For these, the rent that the property would likely fetch is considered as gross rent and all other deductions as applicable for a rented property will be allowed.
Deduction for principal repayment on housing loan can be obtained on all property, whether it is rented, self-occupied or deemed to be let out.
How is wealth tax applicable for NRIs?
An NRI is exempt from wealth tax on a property that has been rented for more than 300 days. Also, one vacant house property can be declared as self-occupied property and is exempt from wealth tax. The value (net of outstanding loans) of second and subsequent vacant properties would be subject to wealth tax, at the rate of 1 per cent on the value in excess of Rs 30 lakh.
What are the tax payments to consider during a sale?
NRIs are subject to capital gains tax in India, similar to what is applied to residents. They can get long-term capital gains rate for property held for over 36 months and can claim exemption by investing in another house property or specified bonds. Capital gains may also be taxable in the NRI’s country of residence. Relief may be available in the form of credit for Indian taxes paid, in case the NRI is a tax resident of a country with which India has a DTAA.
Are there any limits on the amount that can be repatriated?
Limits and conditions for repatriation are different based on the funds used for buying property. If the property was acquired as per the foreign exchange laws, the amount of repatriation is restricted to the extent of the initial purchase cost of the property. For example, assume the purchase price was $100,000 (Rs 40 lakh, with an exchange rate of Rs 40) and the sale price was Rs 75 lakh. Assuming the prevailing exchange rate at the time of sale is Rs 60, one can repatriate Rs 60 lakh ($100,000).
Gains made on foreign source funded properties (Rs 15 lakh in the example above) as well as all proceeds from property purchased with rupee sources can be repatriated under the general limit of Rs 10 lakh per financial year.
Tax implications for NRI's returning to India
It is a well know fact, that most of the Indians are returning to their homeland to explore new avenues, but coming back is not the only thing on their minds, they need solutions for their taxes as well. Basically, most of them want to know what implications will their Non Resident Indian (NRI) status would have on their tax liability in India.
Under Indian tax provisions, the residential status in India is based on the physical presence of the person in India during the tax year and if the person is not physically present in India for more than 60 days then he is considered to be Non-Resident of India (NRI). The tax year is calculated from April 1 to March 31. However, when a citizen of India or a person of Indian origin who is outside India visits India in any year, he would be regarded as Non-Resident if his total stay is less than 182 days in the relevant tax year.
The individual can also file is his existence as Not Ordinarily Resident (NOR) which will be based on his stay in India in the past years. But the glitch in NOR is he/she should be a non-resident in India in nine out of the ten years preceding the previous years. Taxability is completely dependent on whether an individual qualifies as a Resident, NOR or Non-Resident. A NOR or Non-resident is taxed on the income he earns in India.
An NRI can reap his tax benefits until he claims that he is a Non-Resident, but once he/she pronounces his residential status he will avail no benefits and will be considered as a full time resident of India and will have to follow the regular tax format. There are some special provisions under Indian tax laws wherein NRIs can opt for special tax rates for specific investment incomes or capital gains from foreign exchange assets (eg: Shares in Indian company purchased in convertible foreign exchange).
Of course NRI's do not come empty handed, they will be carrying some wealth tag behind them. But they don't have to panic, as assets located outside India owned by NRI's shall not come under wealth tax bracket. NRI's are also allowed to file exemption for the assets brought by them to India or assets acquired by such money. Up to seven years from the day of they return to India, they are exempted for their assets.
NRI remittances spike on festive demand UAE Exchange
NRI remittances spike on festive demand: UAE Exchange
Source: Economic Times
MUMBAI: Global remittance flows have witnessed a sharp surge in September this year and the ongoing festive season is expected to boost flows even further, setting a new record for the year 2013, says UAE Exchange, a global remittance and foreign exchange brand.
"Remittances by non-resident Indians have seen a sharp spike of 27% between January and September 2013, as compared to 7% growth during the same period last year, reaching a new high of over $6.5 billion, the highest quantum since 2008," says UAE Exchange.
"The RBI's special window to attract NRI dollar deposit flows into India, valid till November 30, 2013 has also driven high volume foreign currency remittance transactions," it adds.
The strengthening of the US dollar against most other currencies, particularly the Indian rupee has also been another key driver for increased remittance flows.
Most NRIs also choose to remit money into the country for gifting purposes during the festive season, apart from purchase of gold and other investment options including fixed deposits and real estate.
Average transaction volumes have risen by about 27% this year and average transaction size has risen by 7% to $830 as compared to $775 in 2012.
FAQ’s By NON RESIDENTS ON INCOME TAX FOR AY 2014-15
Q) Who is NRI as per Income Tax Act?
A) Residential status of an individual or HUF or a company is of great importance in Indian Income Tax Act as the liability to pay tax in India does not depend on the nationality or domicile of the Tax payer but on his residential status. Residential Status is determined on the basis of physical presence i.e. the number of days of stay in India in any year.
An individual is resident if any of the following conditions are satisfied: (i) he stayed in India for 182 days or more during the previous year, or (ii) he stayed in India for 365 days or more during the four preceding years and stays in India for at least 60 days. 182 days in case of an Indian citizen or a person of Indian Origin coming on a visit to India or 182 days in case of an Indian citizen going abroad for an employment during the previous year. Otherwise he is Non Resident.
Hindu Undivided Family (HUF) or firm or other Association of persons is resident of India except in cases where the control and management of its affairs is wholly situated outside India in the previous year
A company is resident in India if-it is an Indian company, or during the previous year, the control and management is situated wholly in India.
Q) I am NRI, do I need to file my Income Tax Return for AY 2014-15?
A) NRI need to file your return provided your taxable income in India during the Assessment Year 2014-2015 was above the basic exemption limit of Rs 2 lakh OR you have earned short-term or long-term capital gains from sale of certain investments and assets, even if the gains are less than the basic exemption limit. For NRIs, certain short term or long term capital gains from sale of investments or assets are taxed even if the total income is below the basic exemption limit. There is an exception: If your taxable income consisted only of investment income (interest) and/or capital gains income and if tax has been deducted at source from such income, you do not have to file your tax returns.
Q) Is Income Tax Return need to file compulsory Online for NRI for AY 2014-15?
A) Central Board of Direct Taxes (CBDT) in India issued a notification which has made it mandatory for individuals who have annual gross total income in excess of Rs 5 lakh to file their returns online from Assessment Year 2014-2015. This applies to all individuals including non resident Indians. So as an NRI with gross total income exceeding Rs 5 lakh in Assessment Year 2014-2015, you must file your returns electronically.
In case your taxable income exceeds Rs.5 lakh in the previous year, you would be required to file the return of income electronically either using the digital signature or through submission of the verification Form ITR-V after electronically filing the return of income. In case your income does not exceed the above limit, you would also have an option to file the return of income in paper form.
Q) Are NRI were liable to pay advance tax for Assessment Year 2014-2015?
A) As per the Income Tax Act, Individual must pay advance tax in three instalments during the year in case the tax payable is likely to be Rs 10,000 or more after considering TDS deduction. In case of default interest is generally 1 percent per month for the default amount and extends till the date of payment. Therefore, NRIs should evaluate if they were liable to pay advance tax and whether the same was paid in time.
Q) What is last date to file your Income Tax Return? What if NRI do not have any tax payable?
A) The last date to file returns for the financial year Assessment Year 2014-2015 is July 31st 2014. However, If you do not have any tax payable (that is all your tax has been deducted at source), you can still file your tax return by 31st March 2015 without any penalties.
Q) What if NRI do not file return till 31 March 2015?
A) If you do not file your tax returns even by the 31st of March 2015, you may be charged a penalty of Rs 5,000 for every year of delay or sometimes may not be able to file your returns at all after 2016.
Q) My NRO account TDS has been deducted at source @30%. My interest income is 1 Lakhs Rs? Do I Need to File Return?
A) As your total income is less than 2 Lakh Rs, you are not liable to file return. However you can claim refund of Rs 30,000/- of your TDS deducted for which you should file return. If you are expecting a refund, make sure that you put accurate bank details such as account number and IFSC code of the branch as refunds are processed electronically.
Q) Can NRI get Refund of TDS by Filing IT return for Last year 2013 March Ending?
A) Yes you can file your return for Financial Year ended 2013 and get refund.
Q) What all income is exempt for NRI?
A) Dividends from equity shares and equity mutual funds is tax free in India. Interest received on the NRE account and FCNR account is tax free. Long term capital gains on equity shares and equity mutual funds (provided you pay securities transaction tax at time of sale). Further, If you have given a property on rent, you can claim an ad hoc deduction of 30% of net annual value as repairs and maintenance expenses in addition to claiming a deduction on mortgage interest.
Health insurance premium in India for yourself or your dependents, you can claim a deduction under section 80D. If the health insurance is taken for your spouse and dependent children, you can claim a deduction of Rs 15,000 per annum. An additional Rs 15,000 is available as deduction on insurance premium paid on behalf of your parents. If either of your parents is over the age of 65, the additional deduction will be Rs 20,000 instead of Rs 15,000.
Contributions to an approved charity, you can claim a deduction under section 80G. Investments such as PPF, life insurance premiums, etc. can be claimed as deduction under section 80C up to a total of Rs 1 lakh.
Q) I am NRI has deposited Rs. 1 crore in a non-resident ordinary (NRO) account in the form of fixed deposit. I want to transfer the amount from NRO to a non-residential external (NRE) account. Is it compulsory to give Form 15CB and 15CA to banks? Who has to file these forms? The bank has deducted tax at source when it credited the interest amount. What is the ceiling for transfer from NRO to NRE during a year?
A) An NRI can transfer / remit out of the NRO account subject to production of documentary evidence in support of acquisition by the remitter and an undertaking by the remitter along with a certificate by a chartered accountant in Form 15CA and 15CB
As per regulations, NRI are permitted to transfer a maximum of $1 million per financial year to your NRE account. The transfer will be subject to payment of applicable taxes. So far the amount being transferred to the NRE account represents balances for which tax has already paid or exempt there shouldn’t be additional tax.
Q) I am a non-resident Indian (NRI) and have a piece of agricultural land and an apartment in India. I earn agriculture income and rental income from these two. Do I need to file income tax return? Also, can an NRI buy agricultural or farmland in India?
A) NRI would be subject to taxes in India on any income accruing or arising from an asset located in India. The agricultural income earned by you would be exempt, whereas the rental income from the house property would be subject to tax. You would be under an obligation to file an income tax return in India on or before 31 July 2014 for financial year 2013-14 if your taxable income exceeds Rs.2 lakh in the previous year. However, you may note that the income tax law prescribes a specific method of computing taxable income where the taxpayer has earned agricultural income. While this type of income is exempt from tax, it is nonetheless included in the total income for rate purposes.
Q) Is NRI allowed to buy Agriculture property or Farm house in India?
A) NRIs and Persons of Indian Origin are not allowed to buy agricultural property, plantation or a farm house.
Q) What are the tax implications for an NRI looking at selling his property in India?
A) If the property is more than 3 years old, long term capital gains tax will be incurred on the sale of the property. On long term capital gains, tax is payable @ 20%. However, tax can be minimised by making alternative investments in India.
Q) I am a NRI living in US. Can you please advise me if long term capital gains tax are payable on sales of shares purchased by paying STT, and if it is exempt is there a limit?
A) LTCG is fully exempted on sale of listed company shares, purchased by paying STT, provided the transaction is long-term. i.e that share are hold for period of more than 12 months
Q) I an NRI, bought a property in 2005 and sold it in 2014 at a difference of Rs 40 Lakhs for Rs 80 Lakhs. If I repatriate this amount to the US, am I liable for any tax? What is the procedure to repatriate money to the US?
A) You have earned a long term capital gain on your property. You have to pay taxes in India on this income and then obtain a certificate from a chartered accountant. After this certificate only, you would be able to repatriate the money abroad.
Q) During Year Ended 2014, I, NRI leased out my building to a bank which is paying rent monthly but is deducting TDS. Can you please let me know what kind of documentation is required from the bank to submit my taxes in India? Is form 16 sufficient?
A) Form 16 is enough to determine your income on rent and TDS deducted by the bank.
Q) Is the money received from sale of inherited property in India taxable for an NRI? Earlier it was mandatory to put it in an NRO account but now with the RBI go ahead can we transfer it to NRE account provided the tax is paid?
A) Yes, the money received from NRI is taxable in India. Sale proceeds will first be credited to NRO account. Then you have to obtain a certificate from the chartered accountant relating to payment of taxes after which the money would be transferred from NRO account to NRE account.
Q) I hold NRI status for this year 2014. I have FD and RD accounts in ICICI Bank and they are deducting taxes. Do I need to pay the tax for the interest I get from FD and RD?
A) If the FD and RD were opened under NRE status as (NRE-FD or NRE-RD) then the interest earned on the same will not be taxable. However, in case the FD/RD was opened when you were resident Indian then the said FD will be converted to NRO- FD (upon your status being changed to NRI) and the interest earned on the same will be subject to TDS. However, depending on your cumulative tax liability in India, you may claim refund while filing tax return in India.
Q) If I have 8 year NRE FRD and if in second year I become resident, how NRE FDR will be treated after third year and will interest thereon be taxable?
A) For returning Indians, funds held in fixed deposits in NRE accounts, interest will be payable at the rate originally fixed, provided the deposit is held for the full term even after conversion into resident account. However, the interest earned after the status was updated to resident will be taxable.
Q) If I buy a property out of NRE funds and later on sell the property and credit the proceeds to my NRO account, what are the tax implications?
A) Profits earned by selling property in India will be liable to Capital gain is the difference between the sale value of the property and its cost of purchase. Capital gains can be classified as short term (up to 36 months) or long term (more than 36 months), depending on the period for which the property is held. Short-term capital gain will be taxed at normal slab rates and long-term gain will be taxed at 20%.
If a residential property is sold after being held for more than three years and the proceeds are reinvested for purchase of a new residential property, then the capital gains will be exempt to the extent of the amount reinvested. The exemption is subject to the new property being purchased within a year before or two years from the date of sale, or if new property is being constructed within three years from the date of sale.
Q) Can NRIs can also claim exemption by investing the amount of capital gains in bonds issued by the National Highways Authority of India (NHAI) or Rural Electrification Corporation (REC) in case of Profit from sale of property which is long term?
A) Yes Investment in the specified bonds is to be made within six months of such sale and there is a lock-in period of three years for such bonds.
Q) I am an Indian resident taking up employment abroad. I want to know whether I am eligible to claim exemption of income under NRI category. If the employment is in Dubai, where there is no tax on income, will it make any difference?
A) Your employment in Dubai will not make any difference. As per taxation laws in India, your overseas income getting credited to your NR account in India will not be taxed. It is indifferent to overseas country tax regulations.
Q) I have an account in Qatar and want to send money to my resident (saving) account in SBI Bank, Will it be taxable? What is the ceiling for wire transfer? Can I open an NRO/NRE account before completing first six months out of India.
A) Yes, you can send money to your resident account and the said amount will not be taxable because it will be from your overseas earnings. There is no upper cap on the amount you can wire transfer to a bank account in India. Yes, based on a valid work visa and company offer letter, you can convert your existing resident account into NRO and open a NRE account as well.
Q) Can an NRI returning back to India, continue to hold his foreign earnings overseas, and gradually bring the money back to India as and when required?
A) You can bring your earnings as you wish. You should take care of income tax of your earnings. After you are return to India, your income earned outside India will not be taxable in India provided it is received in India for two years. After the two years, your worldwide income would be taxable in India.