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Archive for March, 2007

How to promote your blog

Posted by Yogesh Agrawal on Sunday, 4 March, 2007

This is a cool link which gives you a lot of techniques to promote your blog.


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NRI: Everything you want to know about the property you buy or sell or inherit Part 1

Posted by Yogesh on Friday, 2 March, 2007

1) What are the tax implication if you sell a property in India and your status is NRI or PIO ?

A.1 You will have to pay tax on capital gains, if any, which will be as follow

‘Short-term capital asset’ is a financial asset held for 36 months or less immediately preceding the date of transfer.
This holding period is 12 months only for equity shares, units of MFs and listed scripts, bonds, debentures, etc. An asset which is not ST is a Long-term asset.

Long-Term Capital Gain (LTCG) is to be computed by deducting from the full value of the consideration i) any expenditure incurred in connection with the transfer ii) indexed cost of acquisition and iii) indexed cost of improvement.

LTCG is taken as a separate block and charged to tax at a flat rate of 20%.
In the case of securities including equities and units of MFs, the option of paying tax @10% on the difference between the sale proceeds and the cost of acquisition, loosely called as gains without indexation is available to the assessee. No deductions are allowed under Chapter-VIA like u/s 80C, 80D etc., for LTCG.

The tax on all long-term capital gains which are chargeable to tax, can be saved by investing within 6 months the amount of capital gains in infrastructure-related Bonds of NABARD, NHAI, NHB, REC or SIDBI u/s 54 EC. The lock-in period is 3 years. The current interest rate is around 5.5% and this is fully taxable. Obviously, the interest is quite low and what is given by savings in tax is taken away by earning low interest and the tax on this interest.

2) What steps are needed to do with RBI to repatriate the money back?

A) Circular 67/2003-RB dt 13.1.03 supplemented by RBI Master Circular 4/2004-05 dt 1.7.05 makes it possible for an NRI or a PIO to remit as much as US$ 1 million per calendar year for bona fide purposes out of the sale proceeds of assets held in NRO accounts. He should have acquired the assets in question, out of rupee resources when he was in India or by way of legacy/inheritance from a person who was a resident in India.

The following Funds/assets are eligible for remittance :

a) Sale proceeds of immovable property.
b) Assets acquired by way of Inheritance/legacy.
c) Deposit with a bank or a firm or a company.
d) Provident fund balance or superannuation benefits.
e) Amount of claim or maturity proceeds of insurance policy.
f) Sale proceeds of shares and securities.
g) Any other asset held in India, in accordance with the FEMA.

In the case of immovable property acquired out of rupee funds, the remittance of sale proceeds is available subject to the condition that the property should have been held for a minimum period of 10 years. If such a property acquired out of Rupee funds is sold after being held for less than 10 years, remittance can be made, if the sale proceeds have been held by the NRI for the balance period in NRO Account (savings or term deposits) or in any other eligible security, provided such investment is traced to the sale proceeds of the immovable property.

For remittance of sale proceeds of assets, both financial and immovable property acquired by way of inheritance/legacy or settlement from a person who was Resident, there is no lock-in. The remittance can be effected only when it is sought for all bonafide purposes to the satisfaction of the AD. An undertaking by the remitter and certificate by a Chartered Accountant in the format prescribed by CBDT vide their Circular 10/2002 dt 9.10.02 has to be produced.

It is necessary to file Form-A2, FEMA Declaration, Certificate from an accountant, and undertaking for payment of income tax, in the specified format. A No-Objection-Certificate from the income tax department will be useful, but not necessary.

3) I am an NRI (US – PR). I left India when I 8 yrs old. Do I have to pay cap gains or income taxes if I purchase a house or stocks or have savings account in India.

A.3 If you earn any income in India, the income will be eligible to tax. Purchase of house may entail property tax, stamp fee, registration fee, etc.

4) I am in USA from March 2003 and working for I-flex Solutions Inc, which is wholly owned by Indian company, I-Flex solutions Ltd. I was paid in India, the basic in INR and US salary in USD in USA. I have filed the income tax returns in India for my INR income. Also in USA, I am filing the tax returns based on the W4/W2 In Nov 2005, I have moved to USA company which is not owned by any Indian Company. No More INR pay.
As per Indian IT tax rules, (Not FERA, Nor FEMA)

1. Will my income in USD, till Oct 2005, if remitted to India, do I have to pay any taxes? If yes how much.?
2. Will the income from Nov 2005 onwards, if remitted to India, do I have to pay any taxes? If yes How much?
3. If I have to pay taxes in India, will I get credit for the Social Sec tax paid in USA?

In US I am paying the Social, State, Federal taxes.

A.4 A deputy does not leave India in any year for the purpose of employment since he is already employed in India. Therefore, he gets the status of an NRI if his stay in India during the FY is less than 60 days. Moreover, if the source of his salary is an Indian company, the income is taxable in India, even if he is an NRI and even if the salary is received abroad. On the other hand, if the income is paid by an independent body separately incorporated abroad distinct from the Indian company and the Indian company does not reimburse the foreign entity for the emoluments paid, then such income is foreign income and not taxable in the hands of an NRI.

Your salary is taxable in India whether the savings therefrom are remitted to India or not.

If your income is taxed in India as well as your host country, there is no need to worry. The Double Taxation Avoidance Agreement between the two countries will protect you. Such agreements between India and other countries are available on –

However, the observations of the Supreme Court of India in the case of Sedco Forex Drilling International Inc (Civil Appeal Number 351-355 of 2005 and Others) and the Delhi Tribunal’s decision in the case of DCIT v Vivek Paul [ITA No: 4236/Del/1997] has taken the view that income which is not attributable to services rendered in India is not taxable in India.

However, due to the presence of both the above points of view, ITOs are known to challenge such incomes claimed exempt leading to litigations.

Incidentally, many proactive companies in India have got their offices abroad incorporated in that country just to bypass this problem. Salaries paid from such offices are not taxable in India if the employee happens to be an NRI for tax purposes. You will do well to enquire about this from your ex-employer.

Income earned from November 2005 is definitely not taxable in India.

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