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Budget highlights for NRIs

March 02, 2005 17:27 IST

1) General

  • Substantial reduction in rates of taxation of individuals whereby tax relief of Rs 24,000 is given to each taxpayer having income upto Rs 250,000.

  • No change in taxation of capital gains.

  • NRIs having income other than capital gain shall be required to claim refund of tax deducted at source.

Income Tax Rates
Individual IncomeRateIndividual IncomeRate
Upto Rs 50,000NilUpto Rs 100,000Nil
Rs 50,000 to Rs 60,00010.00% of the amount by which the income exceeds Rs. 50,000Rs 100,000 to Rs 150,00010.00% of the amount by which the income exceeds Rs 100,000
Rs 60,000 to Rs 150,000Rs 1,000 plus 20.00% of the amount by which the income exceeds Rs 60,000Rs 150,000 to Rs. 250,000Rs 5,000 plus 20.00% of the amount by which the income exceeds Rs 150,000/-
Above Rs 150,000Rs 19,000 plus 30.00% of the amount by which income exceeds Rs 150,000 Above Rs 250,000Rs 25,000 plus 30.00% of the amount by which income exceeds Rs 250,000
Surcharge @ 10.00% (If income exceeds Rs 850,000)Surcharge @ 10.00% (If income exceeds Rs.1,000,000)

  • No change in education cess i.e. education cess is 2.00% of total tax payable is levied.

    2) Interest on NRE & FCNR Account
    The Finance Act 2004, had withdrawn tax exemption on NRE/FCNR deposit w.e.f. April 1, 2005. However, The Finance Bill, 2005, has specifically withdrawn the provision and exemption is restored back. Thus, now Interest on NRE/FCNR deposit is exempt from tax.

    3) Tax Deducted at Source
    There is no change in the TDS Rates. The rates at which taxes are required to be deducted are as under:

    Rates for TDSRateSurchargeCessTotal
    1) Capital Gains on Equity shares and equity oriented
    Mutual fund sold on Recognised Stock Exchange
    i) Short term10.00%10.00%2.00%11.22%
    ii) Long TermNILNILNILNIL
    2) Capital Gain on Mutual Fund and equity shares
    other than 1) above
    Short Term30.00%10.00%2.00%33.66%
    Long Term10.00%10.00%2.00%11.22%
    3) Capital gain on Other Assets
    i) Short term30.00%10.00%2.00%33.66%
    ii) Long Term20.00%10.00%2.00%22.44%
    4) Interest on Bank Deposits30.00%10.00%2.00%33.66%

    4) Securities Transaction Tax (STT)

    Nature Of TransactionCurrent
    Equity shares transaction in a Recognised Stock Exchange: -
    1. With Delivery
    2. Without Delivery0.075%0.100%
    Derivative transactions in a Recognised Stock Exchange
    Sale of Units of Equity Oriented Mutual Fund
    Seller 0.150%0.200%

    5) Zero Coupon Bond
    The financial instrument, Zero Coupon Bond shall be treated as a capital asset and shall be liable for capital gains tax at prescribed rates i.e.20% in respect of long term capital gains and 30% in respect of short term capital gains.

    6) Trading in Derivatives
    Trading in derivatives as defined in Securities Contracts (Regulation) Act, 1956 carried out on recognised Stock Exchange will not be considered as speculative business. It shall be treated as capital gains transaction.

    7) Rebate/Deduction
    The provisions for deduction from tax payable in respect of investments/contributions in specified schemes/plan like LIC [Get Quote], ULIP, bonds, mutual funds etc is eliminated. However, such investments up to Rs 100,000 shall be eligible as deduction from the gross total income.

    The above proposals are effective only after The Finance Bill, 2005 is passed by the Indian parliament and assented by the President of India. Once this procedure is completed, the proposals shall be effective w.e.f. April 1, 2005 (i.e. for Financial Year: 2005-06 and Assessment Year : 2006-07) .

    This document should not be considered as substitute for specialized professional advice and expert guidance may be sort before acting upon.

    The Budget highlights for Taxation have been contributed by

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  • Budget 2005-06: Complete Coverage

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