Get your tax doubts clarified here. Chartered Accountants Ganesh Jagadeesh & Co are here to remove all your doubts.

Q:I am an NRI but I have investments in India. I get dividend & interest from such investments. Do I have to file my return and pay any tax on such income?

A: Section 115G of the I.T Act, 1961 lays down that a NRI need not furnish a return of income under section 139 (1) of the Act, if

1. His total income in respect of which he is assessable to tax during the previous year consisted only of investment income or income by way of long term gains or both; and

2. The tax deductible as per the provisions of the Act, has been deducted from such income

I am an NRI staying in UK for a short term. I draw a pay packet both in India and in UK. But the money I get in UK is the living allowance. If I bring back the money I save here in UK is that taxable? If yes, what's the percentage?
Ramanathan

Your NRI status confers exemption on all income earned and received by you outside India. Further, with specific regard to the money being received by you in UK, Section 9 (1) (ii) of the Income Tax Act, 1961 specifies that income chargeable to tax under the head "Salaries" is deemed to accrue or arise in India if it is earned in India. In your case, if, the living allowance in UK is received by virtue of a contract of employment with an entity based in U.K, it is deemed to have been earned outside India and hence not taxable.

However, if you are receiving the living allowance from your employer who is based in India, the allowance is still taxable. You are eligible for a deduction under Section 80RRA, of upto 75% of the amount remitted by you into India within six months from the end of the financial year. This deduction is available only if you are a technician as defined under explanation © to sub-section (2) of Section 80 RRA and further, the terms & conditions of your service outside India are approved in this behalf by the Central government or the appropriate authority. The balance 25% is taxable at the marginal rate of tax.

An NRI having stayed in the US for the past two years returns to India for good. Is there any forex rule in India for keeping the US bank account active and holding the dollar savings there?
PM

I am sorry but this is not a question relating to personal taxation. You have to check with your bank.

If a person draws a salary in US on H1-B visa but is not resident for more that 180 days i.e., not an NRI, is he liable to pay income tax in India on his US salary? Does the tax consider the dollar savings brought back to India? If so, how is the income tax calculated?
Pradeep

Section 6 (1) of the Income Tax Act, 1961 contains the conditions whose fulfillment or otherwise would determine the residential status of an assessee. A person attains the status of a resident Indian for the purpose of tax if he satisfies one of these two conditions: 1. He is in India in the previous year for a period of 182 days or more; or 2. He is in India for a period of 60* days or more during the previous year and 365 days or more during the 4 years immediately preceding the previous year *(Note: 182 days to be substituted for 60 days in case of a person who proceeds abroad for the purpose of employment outside India)

It is presumed, based on the data provided by you, that you have not been resident in India for more than 182 days during the previous year. Hence, you are a NRI for the purpose of tax.

Section 5 of the Act deals with the scope of income of an assessee. The salary earned by you as a NRI in US falls outside the ambit of this section and is consequently not liable to tax. Further, since the Act provides that all income earned and received abroad which is exempt will not attract any tax when it is remitted into India, the income earned in US by you will not qualify for tax when you bring it back at a later date.

I am an NRI with no source of income in India. I am planning to make some investments in the Indian equity markets. These invesmtents would largely be short-term in nature. What will be the tax implications in terms of capital gains/losses?
Purushotam

All capital gains earned in India are subject to Indian Income Tax. Capital gains are classified as short-term or long-term. Capital gains earned on transfer of short-term assets are short-term capital gains. Short-term assets are those which are held by an assessee for a period of less than -

• 12 months, in case of listed securities, units of UTI or of a Mutual Fund

• and 36 months, in case of any other assets.

Since you intend to make short-term investments in equity shares, it is inferred that you will hold such shares for a period of less than 12 months. Transfer of these shares by you would result in a short-term capital gains or loss. Short-term capital gains are subject to tax at the marginal rate of tax applicable to an assessee. Any capital loss suffered (short-term and long-term) is available for set off against short-term or long-term capital gains. Any unadjusted loss can be carried forward for a period of eight subsequent assessment years.

I am at present working in UK for an Indian firm. I will be staying here for 90 days and will be returning to India. My payment is meant as allowance. Can you please advice me regarding the safest mode to take my savings back to India and how the income tax will be calculated for the amount?
Nandakumar Rajan

Since you have not mentioned your residential status, we are assuming that you are a resident of India for the purpose of Income Tax Act. A resident Indian is chargeable to tax on all income earned by him. So the allowance received by you is taxable as salary.

However, you are eligible for a deduction under section 80RRA of upto 75 per cent of the amount remitted by you into India within six months from the end of the financial year. This deduction is available only if -

• You are a technician as defined under explanation (c) to sub-section (2) of section 80 RRA, and

• The terms & conditions of your service outside India are approved in this regard by the Central Government or the appropriate authority.

The balance 25% is taxable at the marginal rate of tax.

You can remit the amount into India through any authorised dealer in foreign exchange.

I am an NRI for the last two years and I have got a NRE savings account. What will happen to my NRE account if I return to India for good? Is the Principal amount or Interest is taxable after I return to India?

-- Chandra Nailadi

The interest earned on the balance lying to the credit of an NRE account with any bank is exempt from Income Tax under Section 10 (4) (ii) of the Income Tax Act, 1961.

Foreign exchange regulations permit an NRI to maintain her/his NRE account for a certain period of time even after s/he loses NRI status. Proviso to the said section grants exemption from tax to the NRI till such time as the NRE account is allowed to be maintained under the foreign exchange regulations.

As far as the principal amount is concerned if the credits in the NRE account are on account of income earned while enjoying the NRI status, such balance would not attract any tax liability.

I was an NRI in the financial year 1998-1999 with income exceeding Rs 300,000. I have no other Indian income. Do I need to file my tax returns? If I have to, which form should I fill up?

-- Sharad Kulshreshtha

A non resident is liable to pay tax only in respect of any income which is received or deemed to be received or accrued or deemed to accrue in India. Since you have given your income in terms of Indian rupees, we do not know whether you have earned the income in India or in a place outside India.

Accordingly, if you have earned the income in India, you are assessable for tax on such income in spite of being an NRI and hence you will have to furnish your return of income. Since your income exceeds Rs 300,000 you will be required to furnish your return in Form No 3 or Form No 2D (Saral).

However, if you have earned the income in a place outside India, Section 115G of the Income Tax Act, 1961 lays down that a NRI need not furnish a return of Income under section 139(1) of the Act if:

1. His total income in respect of which he is assessable to be taxed during the previous year consisted only of investment income or income by the way of long term gains or both.

And

2. The tax deductible as per the provisions of the Act has been deducted from such income.

I am a resident of India working as a software engineer in Paris from August 1998. I draw pay both in India and in Paris. But the money I get in France is for my living expenses, which is paid by my company in Bangalore. I have a work permit to work in Paris, which gives me temporary residential status in France. I am not paying tax in France. Could you please clarify the following points.