A N Shanbhag, the highly respected investment guru, and his son Sandeep Shanbhag, answer your questions on NRI investment.
A Rediff India Abroad feature: We have some bank accounts with my name first and my wife's name second. We also have some other bank accounts with my wife's name first and mine second. The money in these accounts is from my earnings. Ideally we should have opened/ kept all bank accounts with my name first. My questions are:
For Income tax purposes, will the income earned from the money in bank accounts with my wife's name first be considered as her income?
Or, can I claim that it is my money and I will pay the tax on that income along with my income? In other words, my wife will not have any income at all; total income from all the banks will be mine.
-- Shidhaye
As you have observed, it is better to have your name first in all accounts where the money belongs to you. The names of others as joint holders can be inserted for the sake of safety. Nonetheless, it would be advisable to include the interest on the accounts standing with your wife's name first in your tax return. Note that NRE and FCNR interest is tax-free. Therefore, only the interest on NRO will have to be shown in your account.
I am a non-resident Indian living in Canada for 10 years. I have a couple of questions.
1) I have an agricultural land in India jointly owned by me and my father (worth about Rs 100,000). When I take Canadian citizenship and become an Overseas Citizen of India, what will happen to my agricultural land? Is there any way that as an OCI I can keep possession of agricultural land in India?
2) About the wealth tax rule that is mentioned on your Web site: Is the Rs 1.5 million limit per person or per couple? If my wife and I separately own fixed assets (land and jewelry) up to Rs 1.5 million each, will we be entitled for wealth tax.
-- Digambar
We presume you were holding this agricultural property even before you went abroad and became an NRI. After taking Canadian citizenship, you will become a Person of Indian Origin. The rights and privileges of an NRI and PIO are identical. The change in your citizenship -- even without an OCI card -- has no effect on your right to hold the agricultural land. You can sell it to a resident Indian without requiring permission from any authority in India.
In India, husband and wife are treated as separate entities for tax purposes; therefore, their incomes and assets enjoy separate thresholds, both for income tax and wealth tax purposes.
I have an NRE account. I have been working outside India for the past one year. Before that I have been filing and paying income tax as per the rules.
My questions:
1. From this current financial year would I have to file my IT returns? I received only a bonus from my previous
2. I have a housing loan for which I have been claiming income tax rebate for the past two years. I would like to repay the same from my NRE account; can I?
-- Ramadas
You need not file tax returns if your income is below the tax threshold of Rs 1,10,000 for the financial year 2007-08. This threshold is proposed to be raised to Rs 1,50,000 for FY '08-09 and subsequent years by the recent federal Budget. However, it is advisable to file returns to maintain continuity and also claim refund of TDS due, if any.
You are free to settle the housing loan, either from your NRE or NRO account. There will be no income tax or FEMA repercussions. However, the housing finance company may levy a small penalty for prepayment. Please check with the company regarding any penalty applicable for prepayment.
I am an NRI and I would like to know the tax benefit/ burden on share business (fund used from NRE account with RBI permission under PIS).
What is the tax percentage on profit made on stock transaction?
Will there be any tax on long-term capital gain (stock held more than a year) ?
Is it possible to set off the losses against the gain, then pay tax (loss made on one deal to be set off against gain made on another deal). If yes, how many years can the loss carry forward?
Will the mode of paying the tax be Tax Deducted at Source?
How does the broker come to know about the gain made on the deal?
Will TDS certificate be issued?
-- Salman Sheikh
1. The long-term capital gains are exempt.
2. Any LTCG arising out of sale or transfer of an equity share in a company and where such transaction takes place in a registered stock exchange in India is tax-free.
3. If the LTCG is tax-free, the long-term capital loss is also tax-free. In other words, the LTCL cannot be setoff.
4. The short-term capital gain arrived at after netting off short-term capital loss will be taxed at 10 percent. If the net is the STCL, it can be carried forward for eight years for similar setoffs.
5. TDS is not the same as tax payable. While filing tax returns, you compute the tax and subtract the TDS amount. If the result is negative, you will get a refund. If it is positive, you will have to pay the additional tax. Unfortunately, the law requires the bank (authorized dealer) to apply tax on your gains, without netting up the losses.
6. PIS is managed by your bank (authorized dealer) and it is they who will apply the TDS. It is aware of your cost of acquisition, since you have purchased the shares through it (and its broker).
7. Yes, TDS certificate will be issued by the bank to enable you file the tax returns.