Banking
Cards
General
Insurance
Lifestyle
Loans
NRI
Real Estate
Taxation
Travel

The Rediff Money Channel presents everything you wanted to know about tax issues, but didn't know whom to ask. Chartered Accountants from Ganesh Jagadeesh & Co are here to remove all your doubts.

Readers' Note: Please keep your questions short.

I am an Indian citizen working in the US for the past six years and am planning to return back in July. My current employer is ready to employ me in India. Once in India, can I legally work for a US company which does not have a branch or office here. Can I set up a company with me being the sole employee and execute the work for this American company? What are the formalities involved and is it expensive to take this approach?

— Ravi Bramhapuram

You may continue to work for your US employer in India in your individual capacity as an individual or you may form a company for the same. You can be the sole employee of the company. Nevertheless, you need at least two persons to promote a Private Limited Company and at least two directors. The formalities involved are as follows:

• Making a name approval application to the Registrar of Companies (ROC) of the state where you wish to register the company
• Drafting a Memorandum and Articles of Association
• Filing the duly stamped Memorandum and Articles of Association along with the requisite filing fees and also accompanied by the requisite forms, filing fees, declarations from the promoters and directors.

My son is employed in US. Soon, his company will go public. He is entitled to a quota of stocks for distribution to his people of choice. Can he assign some stocks to me to be purchased from my funds? I am now a resident in India after being an NRI for nearly 15 years.

— Radhakrishnan

The Income Tax Act, 1961, does not impose any restriction on purchase of share / stock. The exchange regulations of India have imposed some restrictions regarding acquisition and holding of shares / stock issued by foreign companies. However, such stocks may be acquired out of foreign exchange earned by you during your stay outside India, that maybe lying outside India or in RFC a/cs in India.

I am Professor at the Indian Institute of Science with Ph.D degree. I got a fellowship in Germany to spend 14 months there (June 1999-July 2000). The fellowship is tax free in Germany. Details of my stay in Germany as per assessment years are as follows:
Assessment year 1999-2000: time spent out of India was from June 1999 to March 2000.
Assessment year 2000-2001: time spent out of India was from April 2000 to July 2000.
For AY 1999-2000, I am NRI. During AY 2000-2001, I return to India (staying less than 182 days during this year). What happens to the NRI status for the assessment year 2000-2001?
Is the tax-free fellowship in Germany taxable in India?

— Jayant Modak

Based on the data provided by you, we believe you qualify as a resident Indian for both the Years 1999 - 2000 and 2000-01 i.e. for the AY 2000-01 and 2001-02. The clarification on this regard has been provided hereunder.
As per section 6(1) of the Income Tax Act, 1961, an individual is said to be resident in India in any previous year, if he satisfies any one of two conditions:

• he is in India in the previous year for a period of 182 days or more; or
• he is in India for a period of 60 days or more during the previous year and 365 days and more during 4 years immediately preceding the previous year.

A Resident is chargeable to tax on his global income. India has entered into a double taxation treaty with Germany and hence the fellowship received by you in Germany is chargeable to tax in India.

For the assessment 2000-01 you are eligible to claim deduction under section 80R of the said Act. The deduction is equal to 75% of amount brought into India in Convertible Foreign Exchange within 6 months from end of the previous year.
But for the assessment year 2001-02 the deduction under section 80R will be equal to 60% of the amount brought in convertible foreign exchange within 6 months from the end of financial year.
However the above deduction is available subject to certain conditions:

• Must be a Indian citizen
• Remuneration must be received outside India
• Must be received from any university or other educational institution established outside India or any other association or body established outside India
• Service rendered outside India
• Service rendered as a professor, teacher, or research worker.
• Assesssee furnishes certificate in Form 10H along with the return of income certifying that the deduction has been correctly claimed.

Send in your questions to perfin@rediff.co.in

Tell us what you think of this advice