Budget highlights for NRIs

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

Existing		Proposed
Individual Income	Rate	Individual Income	Rate
Upto Rs 50,000	Nil	Upto Rs 100,000	Nil
Rs 50,000 to Rs 60,000	10.00% of the amount by which the income exceeds Rs. 50,000	Rs 100,000 to Rs 150,000	10.00% of the amount by which the income exceeds Rs 100,000
Rs 60,000 to Rs 150,000	Rs 1,000 plus 20.00% of the amount by which the income exceeds Rs 60,000	Rs 150,000 to Rs. 250,000	Rs 5,000 plus 20.00% of the amount by which the income exceeds Rs 150,000/-
Above Rs 150,000	Rs 19,000 plus 30.00% of the amount by which income exceeds Rs 150,000	Above Rs 250,000	Rs 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The Finance Act 2004, had withdrawn tax exemption on NRE/FCNR deposit w.e.f. April 1, 2005. However, The Finance Bill, 2005, has specifically withdrawn the provision and exemption is restored back.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 TDS	Rate	Surcharge	Cess	Total
1) Capital Gains on Equity shares and equity oriented Mutual fund sold on Recognised Stock Exchange:
i) Short term	10.00%	10.00%	2.00%	11.22%
ii) Long Term	NIL	NIL	NIL	NIL
2) Capital Gain on Mutual Fund and equity shares other than 1) above
Short Term	30.00%	10.00%	2.00%	33.66%

Long Term	10.00%	10.00%	2.00%	11.22%
3) Capital gain on Other Assets
i) Short term	30.00%	10.00%	2.00%	33.66%
ii) Long Term	20.00%	10.00%	2.00%	22.44%
4) Interest on Bank Deposits	30.00%	10.00%	2.00%	33.66%

4) Securities Transaction Tax (STT)

Nature Of Transaction	Current Rates	Proposed Rates
Equity shares transaction in a Recognised Stock Exchange: -
1. With Delivery
Purchaser
Seller	0.075%	0.100%
2. Without Delivery	0.075%	0.100%
Seller
	0.015%	0.020%
Derivative transactions in a Recognised Stock Exchange
Seller
	0.010%	0.013%
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, 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.

NOTE:
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) .

DISCLAIMER:
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 nritaxservices.com

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