I wish to know the provisions of a gift under income tax. If I receive a gift from my brother, who is an NRI, or make a payment through check of an NRI account here in India, of an amount greater than Rs 500,000, will I be charged tax for the amount received as a gift? If yes, then how much? If not, what documentation is required to be done in order to show the validity of that gift? Also, will I have to show the same in the income tax return I will file for the year in which I have received the same gift?
- Mohan Sardesai
As per Section 56 of the Income Tax Act, there is no gift tax applicable for gifts between relatives. So your brother can give you any amount of gifts and the same will not be taxable in your hands.
As far as documentation is concerned, all that is required is an offer letter from the donor and an acceptance letter from the recipient.
I am an NRI. I am planning to buy a house under construction for Rs 42 lakh (Rs 4.2 million). I can dilute Bank FD and pay Rs 20 lakh (Rs 2 million). I have a house which generates Rs 3,000 rent per month. I may get up to Rs 15 lakh (Rs 1.5 million), if I sell it. For the balance Rs 7 lakh, I can still redeem MF worth Rs 1 lakh (Rs 100,000), FD Rs 1.5 lakh (Rs 150,000) and contribute about Rs 3 lakh (Rs 300,000) before completion of the project in April08. Is it better to sell the old house or go for a loan for Rs 15 lakh? Why?
- Sarvodaya
It is better to go for the loan, as in all probability you would earn a higher return from your house property than the interest you pay on the loan. Additionally, tax benefits are available only on loan and not on the use of own funds.
I am an NRI who does not have any other source of income from India except the Short Term Capital Gains (STCG) that I have got from either MFs or shares -- and if this amount doesn't exceed Rs 100,000 in the case of a male and Rs 145,000 in the case of a female (non-senior citizen) -- does it mean that I do not have to pay any income tax at all? Alternatively, if the gain exceeds the above mentioned amount even by a rupee, my understanding is that he/she would have to pay tax at the rate of 10 per cent flat. Let me know if my understanding is correct in this regard.
- Charudatta
Your understanding requires a little modification. Any short-term gain from shares or mutual funds is taxable directly. In other words, the benefit of the basic exemption is not available to short-term gains irrespective of the amount thereof.
I am in the US on an H1-B visa. Over time, I have saved some money from my salary here. I intend to transfer a part of such savings to my parents' account in India. This money will be used by them for their day-to-day expenses. Will I or my parents have to pay any tax on this?
- Nikhil
In essence, you will be gifting your parents the funds. There is no tax on gifts from relatives and you qualify to be a relative of your parents as per the Income Tax Act. Hence neither you nor your parents will be taxed on such a transfer.
I am an NRI employed in a Gulf country. I have been investing in equity mutual funds. However, I am confused about taxation. I would like to know whether I would be charged any capital gain tax if I exit from these funds during a period of 2 to 3 years time. I do not have any income from other source in India.
- Dilip
As per the current tax laws, if you sell equity-oriented funds after a holding period of one year, the capital gains (profit) is tax-free. You have not specified whether the mutual funds you hold are equity-based or not. If the same are not equity-based, you will have to pay a tax of 10 per cent.
I went to Canada along with my wife for 1 year. My son was born in Canada on May 26, 2006. So by birth he is a Canadian and also holds a Canadian passport. We came back to India on July 29, 2006. We have taken a PIO card for my son for visa-free entry. I already have a PPF account in SBI. I want to know if I can open a PPF account in SBI for my son who is a PIO card holder.
- Rohit
In my opinion, yes, you can open a PPF account for your son as he becomes a tax resident in India as per the Income Tax Act. He no longer remains an NRI as per the Income Tax Act. The term PIO is FEMA-defined and the Income Tax Act does not recognise the same.
I am a mariner working in the merchant navy. In case of not being able to complete more than 182 days outside India I will lose my NRI status. In such a case what are the tax laws if I am short by 10-15 days? Please note that all my income will be earned in foreign currency outside India.
- Arush
The 182-day rule is critical to decide your NRI status. If you fall short by 10-15 days, then it is suggested that you do not come back to India before such time, go on a vacation directly from the job. This way you would still be considered out of India on employment. If you come to India and then during the year go out on vacation for the remaining 10-15 day period, it would not count as you are not leaving India on employment.