NRI Queries Related to Tax Rules

Q1) What kind of tax rules have been advised for NRIs?

Ans: Tax rules for NRIs related to property transactions can be enlisted as follows:

• Purchase of Property- No taxes are needed while purchasing a property.
• Sale of Property - Certain taxes are payable while selling a property.
• Renting Property - PAN card is necessary at the time of letting a property on rent.
  

Q2) Under what circumstances an NRI is liable to pay taxes in India?

Ans: NRI is liable to pay taxes under the following circumstances:

• Income received in India, irrespective of whether income is accrued in or outside India.
• Income deemed to be received in India, irrespective of whether income is accrued in or outside India.
• Income accruing in India, irrespective of whether received in or outside India.
• Income deemed to accrue in India, irrespective of whether received in or outside India.
  

Q3) Which categories of NRI income are taxable in India?

Ans: The following categories of NRI income fall under the taxable regime:

1. Double taxation
2. Fees for technical services and royalties
3. Income from property in India.
4. Income arising as a result of profits of businesses in India.
   

Q4) What is estate duty for NRIs?
Ans: NRIs are not liable to pay estate duty in India.

Q5) Is NRI obliged to pay for gift tax in India for gift to spouse?
Ans: No.

Q6) To save on taxes, how much do I need to invest? Can I avoid tax completely?

A) You can invest upto Rs.100, 000 annually in various government schemes such as PPF, NSC, pension plan and insurance and medical premiums. You cannot evade tax completely, you can only minimize it.

Q7) The Form 16 issued by my ex-employer before I left for employment overseas erroneously carries my wrong PAN number. Even if the company issues a new Form 16 to me, the wrong PAN number quoted by the company on the TDS could create problems for me?

A) Once you have informed your ex-employer of the error, the onus for revising the returns lies on them.

Q8) Is there a time limit for getting an IT refund?
A) Generally, refunds are issued within a year. You can inform your Income tax officer in case of a delay beyond 12 months.

Q9) How do I file my income tax returns from overseas?
A) From 2007 onwards, online payment of taxes is possible for all categories of taxpayers, including NRI taxpayers.

Q10) What is the process for filing online returns?

A) Firstly, prepare the income tax return in the electronic format (XML) which is accepted by the Income Tax Department. You can download the service from www.incometaxindiaefiling.gov.in or use online software which calculates your tax and creates an XML format. After the XML format is ready, upload your return on the above mentioned site again.

Q11) While filling up the ITR Form, does one need to fill up all the credit entries – there is hardly enough space.

A) Yes, it is mandatory to fill up all credit entries – you can add an annexure based on the same format with all the data included.

Q12) If I have paid up my housing loan by March 2007, how do I minimize my tax?

A) Invest in NSC, ELSS schemes, pension plans and other tax-free schemes which
promise returns, upto a maximum of Rs.100,000

Q) Which form is used for declaring short term capital gains?

A) Form ITR 2. The same form is used by NRIs for filing returns on rentals received on property in India

More Queries

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Q:-I am an US citizen originally an Indian. I have all my investments abroad. I plan to spend a major part of my time (more than six months) in India with my children. In such a case, will my status change to that of a Resident? I will not be in India for business or employment but only for leisure. Also, I have no income arising from India. Even so, will I have to declare my global income to Indian tax authorities?

A : The Residential status is decided by the person’s number of days stay in India and not by your status (PIO etc.) or the extent of investments abroad or whether you are in India for employment or otherwise. As per law, the global income of a Resident becomes taxable in India. So, yes, you will as per law, have to disclose and pay tax on your global income. However, in case you are being taxed in the US also, you can definitely take shelter under the Double Tax Avoidance Agreement between US and India.

Q:-I’m an NRI/OCI in Australia and planning to take a loan in Australia to buy a property in India. I would like to know if I can get a tax concession in India on the rental income from that property against the interest I’ll be paying towards the loan in Australia?

A : No. The loan will have to be taken from a housing finance company in India for purchase of house in India.

Q : 1. Being an NRI can I link a Demat account to a NRO account for trading in stocks?
2. If my earnings through trading in stocks is more than Rs. 1 lakh, do I have to file tax return in India?
3. I am also given to understand that tax will be deducted at source for the interest earned in NRO accounts, does it mean that I need file tax returns in India?
4. Is there a way I can file tax returns on-line?
5. Due to my NRI status (with no Indian income) I will not be filing tax returns. If say after a year I earn rent income or profit from stock trades and if I have to file tax returns, does it matter that there is a gap in tax filing?

--- Kumar

A : 1 Yes, you can link your NRO account to the demat account for the purpose of trading in stocks.
2. Yes, if your earning is more than Rs. 1.10 lakh, you have to file tax return.
3. If your Indian income is more than Rs. 1.10 lakh you have to mandatorily file a tax return, regardless of the amount of tax deducted at source. You get credit for the tax deducted from your final tax liability. If your Indian income is less than Rs. 1.10 lakh, you need not file a tax return unless you wish to claim refund of any extra TDS.
4. At this particular juncture, on-line filing is not possible but it should see day light within a couple of years.
5. If the income chargeable to tax is less than the tax threshold, there is no need to file the returns. The gap would not matter as legally a person with income below the tax threshold of Rs. 1.10 lakh isn’t liable to file a tax return.

Q: Can a NRI invest in KVP, POMIS or other postal investments on non-repatriable basis. How do the post office track whether the investment made is from NRI money or otherwise (since most of the transaction is done on cash. Even if cheque is required it is quite easily possible from a local account to issue a cheque). Although national savings website shows NRI are not allowed to invest in P.O small savings, some agents are encouraging NRIs to deposit cash or cheque from local accounts for postal investments? Could you please guide us with a correct detail of this investment?

--- Surindar

A : This is on account of systemic inefficiencies. As per law, NRIs are not allowed to invest in postal schemes. However, if one invests cash, it is difficult to find out. Secondly NRIs aren’t allowed to have local accounts. They should convert the same to NRO accounts. However, several NRIs do not do this and continue to operate local accounts. The long and the short of the matter is that if being an NRI you do invest in Postal instruments, you are breaking the law. If it comes to the notice of the authorities, not only will the money be given back to you without any interest, you will also be liable to prosecution.

Q: I will like to know better of the following two options.. Liquid/Debt fund VS NRE Fixed deposits. NRE FD - current interest rates is around 5.7%, interest is non-taxable. Lock-in period of minimum 1 year. On the other hand, liquid/debt fund- Finance minister has recently increased the dividend distribution tax. What, in your opinion, will give higher/better returns?

A : Yes, post the distribution tax, yields on both the NRE as well as liquid schemes will be the same. However, if you invest in a short-term debt scheme, which is distinct from a liquid scheme the problem will be overcome. Also, MFs are coming out with liquid-plus schemes now which technically do not suffer the distribution tax. Look out for the same.

Q : I have paid 50% advance for an apartment in Mumbai city from funds in my NRE account. The balance I would like to pay by sale of another flat I own in the outskirts of the city which I had bought way back in 1998 when I was an Indian resident.
Now, under this situation:
Can I deposit the proceeds on sale in NRE A/c?
Would there by any tax on capital gain?
Can I request the buyer of my second property to directly pay the builder of the first property on my behalf?

--- Pritam

A : 1. The answer to your first question is in the negative. Funds from NRE are repatriable and no non-repatriable money can be credited to the NRE account. You may credit the sale proceeds to your NRO account.
2. Since you are purchasing another flat, you may not have to pay capital gains tax depending upon the capital gains earned and the cost of the new flat.
3. You certainly can. However, it is advisable to pay through your own account to avoid any subsequent requirements of any proofs.

Q : Hi, I am a US Citizen. I have NRE as well as NRO account. I have following questions:
01) I am being taxed on interest earned on my NRO account. It is not very significant but can I still file a return and see if I am eligible to receive refund? This is the only form of income that I have in India. Also I assume I will have to have a PAN card for filling a return, correct? Can a US citizen have a PAN card?

A : 1. The interest on NRO is fully taxable at the rates applicable to Residents. But there is no income threshold under which TDS is not chargeable. However, TDS is applicable @30.9% the only practical recourse open is to claim refund by filing tax returns.
2. Yes, it is necessary to have a PAN for filing returns.
3. You are a person of Indian origin. Even if you were a rank foreigner, you could have applied for PAN.

Source:http://sify.com/finance