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April 20, 2000

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"Do I get taxed on allowance earned and spent abroad?"

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 worked in India for about five years before taking up a assignment in Oman. During this time, I filed form 16A twice and had applied for a PAN. But I was not alloted one since the expansion of my initials was not filled by me. I will be proceeding to Dubai on a fresh employment visa.
Unfortunately, I have lost all my earlier filed forms and I am unable to produce any proof for having filed the returns.
Kindly let me know if having been an NRI since 1997, do I have to still produce a tax clearance certificate while taking a new assignment in other country?

Haja Alaudeen

Since you are a NRI, you need not file your return of income if you do not have any income other than capital gains and income from securities and if tax on the same have been deducted from them. In the light of this, you do not need to produce documents pertaining to prior 1997 now for the purpose of taking up a new assignment in another country. The copy of your passport may be necessary to prove your NRI status.

I stayed in the UK for a period of one year in 1998 on work permit. I had a bank account in UK, where all my remuneration use to get transferred. I did not transfer the savings to my Indian account while leaving the country then. Presently, I am in UK again on a business visa.
Could I transfer the amount standing in my account then in UK account to the Indian account? Will there be any tax liablity if I do so (as I had already paid tax on them while I was working here)? As a proof, I have the past bank statements sent by the bank to my residential address in India. By what means can I transfer that money now?

Partha Saha

You can transfer the amount to your Indian account.
As for the tax liability, the answer could be more accurate if we had your residential status for the financial years 1997-1998 and 1998-99. However, presuming that you were a NRI for that period, the income earned by you for services rendered in UK would not be taxable in India if your employment contract was with company outside India. In case your contract was with an Indian Company then such income would have been taxable in India. In case of taxability of such income again in India, double taxation avoidance treaty if available between India and UK can be invoked to get an exemption on being taxed twice.
The money can be transferred through the regular banking channel.

I have learnt from your site that any allowance given while on a business trip abroad is taxable . Now what I would like to know is if I am getting $65 a day on a business trip abroad, over a month it accumulates to $1,950. If I spend all of it there, do I still have to pay tax of 25 per cent?

Naga Bhaskar

Residential status of an individual is the key factor in deciding taxability of the income of that individual. From the data provided by you we presume that you are a resident of India. Global income of a resident is taxed in India and hence allowance too being part of salary is taxed.
Regarding tax on the 25 per cent of $1,950, we presume you are referring to the deduction under section 80RRA of the Income Tax Act, 1961.
You have to note that the deduction is available only to technical persons (specifically mentioned in the above referred section) and only in case such income earned outside India is brought back into India within six months of return to India. Hence in your case as you would have spent the entire allowance in USA and would not be remitting any sum back to India, you would be taxed on the entire allowance received by you in USA.

I am a permanent employee of Nokia, residing in Finland since November 1999 and paying taxes here.
According to the definition I should have been in India for a minimum period of 182 days during the previous year. Is this the financial year? If yes, then how exactly is it defined? I don't have any property in my name, here or in India. But, I do have a mobile phone, which is the property of Nokia, and on which I am required to pay tax.
Do I have to pay taxes in India?

Shrikumar Sharma

Residential status of an individual is decided on the basis of his stay in India during the financial year starting April 1 and ending on March 31 of the following year. Hence in your case as you have left India only in November 1999, for the FY 1999-2000 you are a resident Indian.
In such a case, your global income would be taxed in India. The rate of tax depends on how much of an income you earn per annum.
Up to Rs 50,000: Nil
More than Rs 50,000 - Rs 60,000: 10 per cent
More than Rs 60,000 - Rs 1,50,00: 20 per cent
More than Rs 1,50,000: 30 per cent
A surcharge of 10 per cent on tax is applicable if the income exceeds Rs. 60000.
India has double taxation avoidance treatise with Finland.

I am of Indian origin but have resided in Dubai since 1973 and now migrated to Canada. I sold my property at Bangalore in February this year ( the property was constructed in 1985). The capital gaiins calculated by my chartered accountant is Rs 3,00,000. I am planning to invest in mutual funds and block it for seven years under section E54B. Or in the new scheme E54C for 5 years. The rest of the money (Rs 1.5 million) is in my NRO account. The banks has said that 30 per cent TDS is applicable.
I was filing tax returns prior to selling my house as I was getting rental income from the house. I don't have any other income in India. Can I contiue to file tax returns and get the TDS refunded? Can I get permission from the Reservor Bank of India to repatriate the money to Canada?

Vaithainathan

The current year's budget has introduced the new section 54 EC replacing the earlier 54 EA & EB. The implication of this is that investments eligible for claiming exemption from capital gains can be made only in bonds issued by National Highway Authority of India or NABARD.
However, in your case as you have sold the property in February 2000, you have the option of investing in 54 EA and/or EB up to August 2000, post this period only section 54 EC would be applicable.

Interest earned or accrued on amounts deposited in NRO a/cs are not covered under the relief/exemption under section 10 of the Income Tax Act, 1961 and hence they are liable for TDS.
Non-resident Indians need not file Income Tax returns only if his income consists of income from securities or from long term capital gains and TDS has been made from such income. As in your case you have interest income you will need to file IT returns in India.
As your deposits are in NRO a/c, the same are not repatriable outside India. Special permission from the Reserve Bank of India (RBI) would be required to repatriate the same.

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

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