Computation of Eligible deduction as per Sec 80C

As per the provisions of the Act, all such income accruing or arising to a minor child shall be included. However, income of a minor child suffering from disability u/s 80U would not be included in the income of the parent but would be taxable in the hands of minor child. Also income of each minor child includible in the hands of the parent would be exempt to the extent of Rs. 1,500. Accordingly, in present case computation of income to be clubbed shall be as under:

In this situation, rent of Rs. 84,000 will be taxed in the hands of NRI.​ This is the case of transfer of income (rent) without transfer of asset (bungalow).

The capital gains will be taxable in the hands of father, as per the clubbing provisions. As the son is a minor, any income accruing to the minor will be clubbed in the hands of the parent.

Such interest received by wife will be taxed in the hands of husband as per the clubbing provisions.

Yes, the answer will differ and the interest income will be taxable in wife’s hands only.

The capital gains will be taxed in the hands of husband alone, unless he is able to substantiate that the share of 50% of his wife in the property is bought by her out of her own earned funds. In case the property is bought out of funds gifted by a husband to his wife, income will continue to be clubbed in the hands of husband.

PAN is a ten-digit alphanumeric unique identifier, issued by Income Tax Department of India.

PAN is mandatory for transacting in financial markets in India. PAN enables the department to link all transactions of the person with the Tax Department.

These transactions include tax payments, TDS/TCS credits, ROI, specified transactions, correspondence and so on. PAN, thus, acts as an identifier for the person with the Tax department.

Application for PAN can be made online/manually in paper in the prescribed Form along with required proof of identity and address and a passport size photograph to the PAN Authority.

Further, in case of NRIs, there may be certain unique scenarios where documents may need attestation by the Indian Embassy/Consulate/High Commission/Apostille. In certain cases, an Individual can digitally signed the PAN Application by using a DSC.

Any person who does not have a PAN and who enters into any transaction specified in the rules, shall make a declaration in Form No. 60 giving therein the particulars of such transaction either in paper form or electronically under the electronic verification code in accordance with the procedures, data structures and the standards specified by the Principal Director General of Income-tax(Systems) or Director General of Income-tax(Systems).

Yes, a minor can hold a PAN card. The minor will have to apply through a representative assessee and will need additional documents to be submitted along with the PAN application form. Further, photograph of minor shall not be printed on the PAN card.

Section 160 of the Act provides that a NRI, a minor, lunatic, idiot, and court of wards and such other persons may be represented through a Representative Assessee. In such cases, application for PAN can be made by the Representative Assessee.

While one endeavors to derive income, the possibility of incurring losses cannot be ruled out. Based on the principles of natural justice, a set-off should be available for loss incurred. The income tax laws in India recognize this and provide for adjustment and utilization of the losses against the income earned. However, there are conditions which have been introduced to prevent misuse of such provisions.

Set-off means adjustments of losses against the profit from another source / head of income in the same FY.

If, in a particular FY, the amount of loss incurred is not fully set-off against the income due to inadequacy of income, such loss may be carried forward to the subsequent years and set-off against income under the same head of income subject to certain exceptions. The specific provisions regarding carry forward of losses are explained in the above table.

If in any year, the taxpayer has incurred loss from any source under a particular head of income, then he is allowed to adjust such loss against income from any other source under the same head of income. This is known as inter-source or an intra-head adjustment. However, such set-off is subject to certain restrictions which have been summarized in the above table.

Exhibit 1: Where Loss of House A exceeds House B’s Income

Under the current Scenario the loss could be only set-offed to the extent of INR 30,000 rest 20,000 could be set-offed against the Income from other head if none then the same could be carried forward for next 8 years.

Exhibit 2: Where Loss of House A exceeds INR 200,000

Under the current Scenario the loss could be only set-offed to the extent of INR 200,000 rest 50,000 could be carried forward for next 8 years.

After making an intra-head adjustment, the assessee is then eligible to make an inter-head adjustment. If in any year, the taxpayer has incurred a loss under one head of income and has income under another head of income, then he can adjust the loss from one head of income against the other head. However, such set-off is subject to certain restrictions which have been summarized in the above table.

It shall be first necessary to ascertain the nature of the loss, i.e., whether it is short term capital loss or long term capital loss. Short term capital loss can be set-off against both long term and short term capital gains. Long term capital gains can be set off only against long term capital gains.

Now, if the loss incurred cannot be set-off entirely against the income earned in the same year, it may then be carried forward to the subsequent year provided Return of Loss has been filed within the prescribed time limit.

Taxable income for the FY 2019-20 will be INR 5,50,000. Loss from house property will be allowed to be set-off against other income.

No, she will not be allowed to carry forward the loss to the future years, as she has not filed the return within the due date.

Yes, if the loss is under the head ‘Income From House Property’, she will be allowed to carry it forward for the prescribed time period although the Return of Loss was not filed within the prescribed due date.

If income from any source is exempt from tax, then loss from such source cannot be set-off against any other income which is chargeable to tax or cannot be carried forward to subsequent years.

For example, if an assessee incurs loss from any agricultural activity, then such loss cannot be adjusted against any other taxable income.

• Profit and gains from any business or profession carried on by the assessee at any time during the previous year.

• Any compensation or other payment due to or received by any specified person

• Income derived by a trade, professional or similar association from specific services performed for its members

• Cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of Government of India

• Any duty of Customs or Excise repaid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971.

• Value of any benefits or perquisites arising from a business or the exercise of a profession.

• Interest, salary, bonus, commission or remuneration due to or received by a partner from partnership firm

• Any sum received or receivable for not carrying out any activity in relation to any business or profession

• Any sum received or receivable for not sharing any know-how, patent, copyright, trademark, license, franchise, or any other business or commercial right or information or technique likely to assist in the manufacture of goods or provision of services.

• Any sum received under a Key man Insurance policy including the sum of bonus on such policy

• Any profit or gains arising from conversion of inventory into capital asset.

• Income from speculative transactions. However, it shall be deemed to be distinct and separate from any other business.

• Any foreign exchange gain or loss arising in respect of specified foreign currency transactions shall be treated as income or loss.

• Assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Govt. or State Govt. or any authority or body or agency to the assessee would be included. However, in the following cases subsidy or grant shall not be treated as income:

  • The subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset

  • The subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution established by the Central Government or a State Government, as the case may be.

• Rent, rates, taxes, repairs (excluding capital expenditure) and insurance for premises

• Repairs (excluding capital expenditure) and insurance of machinery, plant and furniture

• Depreciation on buildings, machinery, plant or furniture, being tangible assets;

• Amortization know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature, being intangible assets

• Additional depreciation on new plant and machinery (other than ships, aircraft, office appliances, second hand plant or machinery, etc.).

• Deduction under section 32AC is available if actual cost of new plant and machinery acquired and installed by a manufacturing company during the previous year exceeds Rs. 25/100 Crores, as the case may be available to Company engaged in business or manufacturing or production of any article or thing.

• Investment allowance for investment in new plant and machinery if manufacturing unit is set-up in the notified backward area in the state of Andhra Pradesh, Bihar, Telangana or West Bengal for All assessee who acquired new plant and machinery for the purpose of setting-up manufacturing unit in the notified backward area in the state of Andhra Pradesh, Bihar, Telangana or West Bengal.

• Amount deposited in Tea / Coffee / Rubber Development Account by assessee engaged in business of growing and manufacturing tea/Coffee/Rubber in India.

• Amount deposited in Special Account with SBI / Site Restoration Account by assessee carrying on business of prospecting for, or extraction or production of, petroleum or natural gas or both in India.

• Revenue expenditure on scientific research pertaining to business of assessee is allowed as deduction.

• Contribution to approved research association, university, college or other institution to be used for scientific research shall be allowed as deduction.

• Contribution to an approved company registered in India to be used for the purpose of scientific research is allowed as deduction.

• Contribution to approved research association, university, college or other institution with objects of undertaking statistical research or research in social sciences shall be allowed as deduction.

• Capital expenditure incurred during the year on scientific research relating to the business carried on by the assessee is allowed as deduction

• Payment to a National Laboratory or University or an Indian Institute of Technology or a specified person is allowed as deduction. The payment should be made with the specified direction that the sum shall be used in a scientific research undertaken under an approved programme.

• Any expenditure incurred by a company on scientific research (including capital expenditure other than on land and building) on in-house scientific research and development facilities as approved by the prescribed authorities shall be allowed as deduction. Expenditure on scientific research in relation to Drug and Pharmaceuticals shall include expenses incurred on clinical trials, obtaining approvals from authorities and for filing an application for patent.

• Capital expenditure incurred and actually paid for acquiring any right to use spectrum for telecommunication services shall be allowed as deduction over the useful life of the spectrum.

• Capital expenditure incurred for acquiring any license or right to operate telecommunication services shall be allowed as deduction over the term of the license.

• Expenditure by way of payment of any sum to a public sector company/local authority/approved association or institution for carrying out any eligible scheme or project. Deduction in respect of `expenditure on specified businesses, as under:

  • Setting up and operating a cold chain facility

  • Setting up and operating a warehousing facility for storage of agricultural produce

  • Building and operating, anywhere in India, a hospital with at least 100 beds for patients

  • Developing and building a housing project under a notified scheme for affordable housing

  • Production of fertilizer in India

• Deduction in respect of expenditure on specified businesses, as under:

  • Laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network;

  • Building and operating, anywhere in India, a hotel of two-star or above category;

  • Developing and building a housing project under a scheme for slum redevelopment or rehabilitation

  • Setting up and operating an inland container depot or a container freight station

  • Bee-keeping and production of honey and beeswax

  • Setting up and operating a warehousing facility for storage of sugar

  • Laying and operating a slurry pipeline for the transportation of iron ore

  • Setting up and operating a semi-conductor wafer fabrication manufacturing unit

  • Developing or maintaining and operating, or developing, maintaining and operating a new infrastructure facility

• Payment to following Funds are allowed as deduction:

  • National Fund for Rural Development; and

  • Notified National Urban Poverty Eradication Fund

• Expenditure incurred by a company (not being expenditure in the nature of cost of any land or building) on any notified skill development project is allowed as deduction

• An Assessee can amortize certain preliminary expenses (up to maximum of 5% of cost of the project or capital employed, whichever is more)

• Expenditure incurred after 31-3-1999 in respect of amalgamation or demerger can be amortized by an Indian Company

• Expenditure incurred under Voluntary Retirement Scheme is allowed as deduction.

• Insurance premium covering risk of damage or destruction of stocks/stores

• Medical insurance premium paid by any mode other than cash, to insure employee’s health under scheme framed by GIC of India and approved by Central Government; or scheme framed by any other insurer and approved by IRDA

• Bonus or commission paid to employees which would not have been payable as profit or dividend if it had not been paid as bonus or commission

• Interest on borrowed capital

• Employer’s contributions to recognized provident fund and approved superannuation fund

• Any sum paid by assessee-employer by way of contribution towards a pension scheme, as referred to in section 80CCD, on account of an employee.

• Employer’s contribution towards approved gratuity fund created exclusively for the benefit of employees under an irrevocable trust shall be allowed as deduction

• Deposit of employee’s contributions in their respective provident fund or superannuation fund or any fund set up under Employees’ State Insurance Act, 1948

• Bad debts which have been written off as irrecoverable

• Expenditure incurred by a company on promotion of family planning amongst employees is allowed as deduction.

• Any expenditure incurred by a notified corporation or body corporate constituted or established by a Central, State or Provincial Act, for the objects and purposes authorized by the respective Act is allowed as deduction.

• Securities Transaction Tax paid

• Amount equal to commodities transaction tax paid by an assessee in respect of taxable commodities transactions entered into in the course of his business during the previous year is allowed as deduction

• Amount of expenditure incurred by a co-operative society engaged in the business of manufacture of sugar for purchase of sugarcane.

• Any other expenditure [not being personal or capital expenditure and expenditure mentioned in sections 30 to 36] laid out wholly and exclusively for purposes of business or profession.

Indexed Cost of Acquisition/ Improvement is a concept which grants deduction of a larger amount than actual cost of acquisition / improvement considering the prevalent inflation index for the FY.

Indexation benefit is not available on depreciable asset, bonds (other than capital indexed bonds issued by Indian Government) and debentures.

For indexation purpose, the Cost Inflation Index (‘CII’) is notified by the Government for every FY.

As per the provisions of the Act, the Resident Indian will be required to deduct tax at maximum marginal rate of 31.2% on short term capital gains or 20.8% on long term capital gains arising in the hands of NRI on sale of the house.

In some cases, the Resident Buyer may deduct tax at the maximum marginal rate of 31.2% on the entire sale proceeds.

NRI is actually liable to pay tax at the rate of 31.2% or 20.6% depending upon the period of holding only on the amount of capital gain arising on sale of the immovable property. However, as the buyer may deduct tax at the prescribed rate on the entire sale proceeds (in the absence of exact details of capital gains), the NRI can avail any of the following options to optimise tax deduction:

i. Obtaining Tax Exemption Certificate (TEC) from Income Tax Department

ii. Filing ROI and claim refund of excess TDS withheld by the buyer

Further, the NRI may also be a resident in another country and may also be liable to pay tax in the other country leading to double taxation of the same income. In order to avoid such hardship, NRI may avail benefits under the DTAA, if any, between the two countries. NRI may also claim credit of taxes paid in India in his country of residence.

Mr. R has the following options to claim complete exemption of capital gains arising on sale of his residential house, provided the house that was sold was a Long Term Capital Asset:

Reinvest in another residential house:

• Mr. R can avail the exemption if the new residential house was purchased one year before the date of transfer.

• Mr. R needs to purchase one/ two RESIDENTIAL house in India within a period of two years from the date of sale of the old residential house (i.e. before August 31, 2018), or,

• Mr. R can construct one/ two RESIDENTIAL house in India within a period of three years from the date of sale of old residential house (i.e. on or before August 31, 2019).

• If Mr. R has not purchased/constructed the new RESIDENTIAL house(s) before July 31, 2017 (i.e. due-date for filing tax return for the year in which the old residential house is sold), then he will have to open an account under the ‘Capital Gains Account Scheme’ with a Nationalized Bank and deposit the amount of capital gains. He needs to then utilize the amount out of this account for purchasing/constructing the new residential house within the time lines prescribed above.

Invest in Specified bonds:

• Mr. R can reinvest the amount of capital gains arising on sale of old residential house in specified bonds within 6 months from the date of sale of old residential house

• Such amount of investment in specified bonds should not exceed Rs. 50 lakhs in the current as well as subsequent financial year. Lock-in period of such specified bonds is ‘r’ years.

• Further, the government has notified that an additional amount of Rs. 50 lakhs may be invested in a ‘long-term specified asset’, to avail an exemption for the same. However, no such ‘long-term specified asset’ has been notified till date.

Investment in equity shares of a new eligible Indian company:

• Mr. R will be eligible to claim exemption in proportion of amount reinvested in equity shares of a new eligible Indian company or eligible start-up (as defined in Section 54GB of the Act) to the sales proceeds received on sale of residential property.

• There will also be further conditions to be complied with in order to claim this reinvestment exemption.

Yes, it will change as far as Point 1 and 2 of the FAQ is concerned. Though the timelines to reinvest in the new residential house will be the same, NRI will get exemption of capital gains in the same proportion as the proportion of amount reinvested in the new residential house bears to the sales proceeds received on sale of the old capital asset

Amount of Exemption = Capital Gains on Old Asset X Amount reinvested / Sale Consideration

One more difference is that he should not hold more than one residential property (other than the new residential house) on the date of transfer of the original asset.

Yes, the assessee has to file the return of income by prescribed due date for claiming the exemptions.

Amount which is not invested in the new property would be subject to the Long Term Capital Gain tax in the year in which the period of 3 years is completed.

At the time of inheritance:

There shall be no capital gains tax in the hands of NRI or his son at the time of inheritance, i.e. on the death of NRI.

At the time of Sale by son:

At the time of sale of the inherited house, the son shall be subject to capital gains tax on such sale. The details for the purpose of Capital Gains calculation shall be as follows:

• Cost: The son shall be allowed to adopt the cost paid by his father for acquiring the asset as his cost of acquisition

• Period of Holding: The period of holding the asset shall be computed from the year 2002

• Practical Issue: Computation of indexed cost of acquisition is litigative in India. There is a debate regarding whether the son will be allowed to index the cost from the year in which the father bought the property or the year of death of the father.

Gifts received on the occasion of marriage are generally exempt from tax as per the provisions of the Act. In view of the same, there shall be no tax liability on the residential house received as a gift by Mr. P on the occasion of his marriage.

In case NRI receives the residential house as a gift from his friend other than on the occasion of his marriage, the gift received shall be taxable under the head ‘Income from Other Sources’ as per the provisions of the Act.

Advance money/ earnest money retained by NRI shall be taxable under the head Income from Other Sources. NRI shall be required to pay appropriate taxes on the said income.

Compulsory acquisition of the property is regarded as ‘transfer’ within the meaning of Section 2(47) of the Act. Any gains arising will be subject to tax in the FY in which the property was compulsorily acquired.

If let out property and other assets are inseparable:

Where composite rent is received from letting out of building and other assets (like furniture) and the two lettings are not separable i.e. the other party does not accept letting out of buildings without other assets, then the rent is taxable either as business income or income from other sources, the case may be.

This is applicable even if sum receivable for the two lettings is fixed separately.

If let out property and other assets are separable:

Where composite rent is received from letting out of buildings and other assets and the two lettings are separable i.e. letting out of one is acceptable to the other party without letting out of the other, then

1. income from letting out of building is taxable under “Income from house property”

2. Income from letting out of other assets is taxable under the head “Profits and gains from business or profession” or “Income from other sources”, as the case may be.

This is applicable even if a composite rent is received by the assessee from his tenant for the two lettings.

In case of a resident in India (resident and ordinarily resident in case of individuals and HUF), income from property situated outside India is taxable, whether such income is brought into India or not.

In case of a non-resident or resident but not ordinarily resident in India, income from a property situated outside India is taxable only if it is received in India.

For more information on Residential Status, click here.

For more information on what income is taxable in India, click here.

Where the assessee owns more than two properties for self-occupation, then the income from any two such properties, at the option of the assessee, shall be computed under the self-occupied property category and their annual value will be nil.

The other self-occupied/ unoccupied properties shall be treated as “deemed let out properties”.

All provisions relating to a leased property apply mutatis mutandis to the deemed let out property.

Note: The option can be changed year after year in a manner beneficial to the assessee.

Actual rent received should not include any amount of rent which is not capable of being realised.

However, certain conditions are to be fulfilled for claiming such deduction. These are:

1. the tenancy is bona fide

2. the defaulting tenant has vacated, or steps have been taken to compel him to vacate the property

3. the defaulting tenant is not in occupation of any other property of the assessee

4. the assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless.

A NRI / PIO resident outside India can contribute to the capital of a firm or a proprietary concern in India on non-repatriation basis subject to certain restrictions. The amount is invested by inward remittance or out of an a/c maintained with an AD Bank by NRI/ PIO in accordance with the relevant Regulations.

A NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business or engaged in Print Media.

Yes, NRI is permitted to make FDI in an Indian LLP subject to certain conditions as prescribed by FDI policy.

A person resident outside India or an entity incorporated outside India shall be eligible investor for the purpose of FDI in LLPs. However, the following persons shall not be eligible to invest in LLPs:

• A citizen/ entity of Pakistan and Bangladesh or

• FII or

• FVCI or

• QFI or

• RFPI

FDI is permitted under the automatic route in LLPs operating in sectors/ activities where 100% FDI is allowed, through the automatic route and there are no FDI linked performance conditions.

FDI in LLP is subject to the compliance of LLP Act, 2008

Downstream investments by an Indian Company or LLP having foreign investment will be permitted to make downstream investment in another company or LLP in sectors in which 100% FDI is allowed under automatic route and there are no FDI- linked performance conditions. Onus shall be on the Indian Company/ LLP accepting downstream investment to ensure compliance with the above conditions.

A person resident outside India other than NRIs/ PIO may make an application and seek prior approval of RBI for making investment in partnership firm/ proprietary concern in India. The application will be decided in consultation with the Government of India.

NRIs / PIO may seek prior permission of RBI for investment in sole proprietorship concerns / partnership firms with repatriation benefits.

A firm or proprietary concern in India may make payment to or for the credit of a NRI or PIO the sum invested by such person in that firm or the proprietary concern or the income accruing to such person by way of profit on such investment.

Yes, a RI can lend money by way of crossed cheque /electronic transfer within the overall limit of USD 2,50,000/- per FY under LRS. The loan should be interest free and have a maturity of minimum 1 year and cannot be remitted outside India. Repayment of loan shall be made by way of inward remittances from outside India or debit to NRE/NRO/FCNR a/c of the borrower or out of the sale proceeds of shares/securities/immovable property against which such loan was granted.

The loan shall be utilised for meeting the borrower’s personal requirements or for hisown business purposes in India. It shall not be utilised for any of the activities in which investment by persons resident outside India is prohibited, namely in;

• the business of chit fund, or

• Nidhi Company, or

• agricultural or plantation activities or in real estate business, or construction of farm houses, or

• trading in Transferable Development Rights.

A resident Indian may borrow in rupees on non-repatriation basis from NRI close relative. Loan shall be received by way of inward remittance from outside India or out of NRE/ NRO/ FCNR/NRNR/NRSR a/c of NRI maintained with a Bank in India. The period of the loan shall not exceed 3 years and rate of interest shall not exceed 2% point over the prevailing bank rate. The borrowed amount is not permitted to be repatriated outside India.

The payment of interest, repayment of loan shall be made by credit to the NRI’s NRO a/c or NRSR a/c.

Funds borrowed in rupees from NRI close relative shall be utilized by Resident Indian for his own business purpose only other than certain specified businesses*. He is not permitted to utilize the loan funds for any investment, whether by way of capital or otherwise, in any company/ partnership firm/ proprietorship concern or any entity, or for relending.

* the business of chit fund, as Nidhi Company, agricultural or plantation activities or real estate business; or construction of farm houses, or trading in Transferable Development Rights.

Provided that RBI may permit such resident entities/ companies to use such borrowed funds:

• For on lending/ re-lending to the infrastructure sector; or

• For keeping in fixed deposits with banks in India pending utilization by them for permissible end-uses.

Yes, where a Bank in India has granted loan to a NRI such loans may also be repaid by any relative (as defined under the Companies Act), of NRI by crediting the borrower's loan a/c through the bank a/c of such relative.

Yes, NRI is permitted to avail loan from a Bank in India subject to terms and conditions specified by RBI. Banks can grant loan to NRIs against the security of shares and other securities and immovable property (other than agricultural land / plantation property / farm house).

Yes, NRIs are permitted to acquire loan from the Bank till the extent of 90% of the purchase price of the ESOPs or Rs. 20 lakhs per NRI employee whichever is lower. The loan amount shall be directly paid to the company and should not be credited to NRI’s a/c’s in India. Additional conditions have been laid down by RBI for the same.

Yes, an individual resident Indian can borrow sum not exceeding the LRS limit (current limit is USD 250,000/-) or its equivalent from his close relatives staying outside India, subject to the conditions that:

• the minimum maturity period of the loan is one year;

• the loan is free of interest; and

• the amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR a/c of the NRI.

She can freely avail loan/ overdraft against securities of her NRO/NRE FDs in India without any monetary ceiling. The end use of the loan amount is however specified under FEMA.

Third-party being RI, firms or companies resident in India can avail loan/overdraft against security of NRO deposits for personal/business purposes, subject to stipulated terms and conditions.

However, loan amount cannot be utilized for relending, agricultural/plantation activities or real estate business.

It is clarified that use of credit card in India by a person resident outside India shall not be deemed as borrowing or lending in rupees.

An AD Bank may allow continuance of loan/ overdraft granted to a person resident in India who subsequently becomes a person resident outside India, subject to following terms and conditions:

• The AD Bank is satisfied, according to his/ its commercial judgment, about the reasons to continue the loan or overdraft;

• The period of loan or overdraft shall not exceed the period originally fixed at the time of granting the loan/ overdraft;

• So long as the borrower continues to a remain a person resident outside India, the repayment shall be made either by inward remittance from outside India through normal banking channels or from the funds held in NRE/ FCNR/ NRNR/ NRO/ NRSR a/c of the borrower.

In case INR loan was granted by a person resident in India to another person resident in India and the lender subsequently becomes a non-resident, the repayment of loan by the resident borrower should be made by credit to the NRO or NRSR a/c of the lender maintained with a bank in India, at the option of the lender.

The tax liability on capital gains on sale of shares and securities shall be as under

* Plus surcharge (if applicable) plus education cess @ 2% plus Secondary Higher Education Cess @ 2%

Since the period of holding of the shares is more than 12 months, the capital gain shall be treated as long term capital asset. As per the provisions of the Act, LTCG on sale of shares, listed on recognized stock exchange and on which STT is paid is exempt

Yes, the LTCG on sale of shares on which STT is not paid at the time of acquisition of shares is taxable, subject to certain exceptions.

1. The person is required to intimate his Bankers about the change in the status as “Non Resident” under FEMA.

2. He may opt for giving a general / specific POA to a close relative to do things on his behalf during his stay abroad.

3. Intimate the companies, firms where he is a shareholder, partner, and deposit holder about the change in his status as non-resident under FEMA.

4. Retire from the firm / company if it is carrying on business of real estate, nidhi, lottery, betting, gambling, manufacturing of cigars, etc., trading in TDRs etc.

5. Planning the date and month of departure out of India so as ensure minimum tax liability in the year of departure (i.e. April to March).

6. Taxability of Income earned in and outside India in the year of departure and in the subsequent period.

7. Application of Double Taxation Avoidance Treaty, where applicable.

8. Advice / information on various aspects of Tax Laws / FEMA, 1999 in respect of holding of assets in and outside India / earning income in and outside India and its taxability.

9. When filing return of income in India, he should state his residential status as ‘NRI’ instead of resident.

An NRI on his leaving from India has to designate his resident accounts in India. Resident savings / current / fixed deposit accounts are to be designated to NRO savings / current / fixed deposit accounts respectively. He shall be eligible to open and maintain a NRE Bank account and FCNR Deposit account only after becoming an NRI.

Yes, a Recent Immigrant can hold the shares and securities in Indian Companies. However, he/ she will required to inform all the companies, fund houses, depository participants, etc. as to change of his residential status from resident to non-resident. Also, the Recent Immigrant is permitted to make further investments in stock market through route of Portfolio Investment Schemes only.

A Recent Immigrant shall have to determine his residential status for the year. In case he is a ROR, his income outside India shall be taxable. However, in case he is a non-resident for the financial year, income outside India shall be outside the scope of taxability and the income earned outside India shall not be taxable in India. He can avail the benefit of DTAA entered into between India and his home country to avoid double taxation.

RBI has not prescribed clear guidelines on continuation as a partner. But, person leaving India can continue as a Partner of his firm in India in general. However, it shall be ensured that the firm is not engaged in any agricultural / plantation activity or real estate business. Further, he shall obtain required permission from RBI in cases where the activities are prohibited / restricted to be undertaken by NRIs.

Yes, a person who had bought the residential / commercial property / agricultural land/ plantation property/ farm house in India when he was a resident can continue to hold the immovable property without the approval of RBI even after becoming an NRI. The sale proceeds may be credited to NRO a/c of the NRI.

Yes, from the balance in the NRO a/c, NRI/PIO may remit up to USD 1 Million, per FY, subject to the satisfaction of AD Bank and payment of applicable taxes.

For more information, see Repatriation of Funds.

PPF a/c can be opened only by an Indian resident. However, if an Indian resident after opening a PPF a/c becomes a NR, he can still continue to contribute to the account. The contribution can be made from either a NRO or a NRE a/c. On completion of the period of 15 years, if he is a NRI he will be unable to extend the PPF a/c and will need to mandatorily close the account and withdraw the sum.

The person can continue to contribute to the PPF a/c and get the benefit of deduction under section 80C of the Act out of his Indian income. The interest on PPF a/c would continue to be exempt under the Act.

The person can use funds in the NRE a/c or NRO a/c to make investments in the PPF a/c. As per the PPF rules an individual is required to at least invest Rs.500/- per FY in the PPF a/c. In case he fails to make the minimum investment in a year or years his account will be considered dormant. Subsequently, when the he wants to revive the account, he will have to invest Rs.500/- for each year for which he did not make investment plus a penalty.

A NRI is not eligible for extension on the PPF a/c. Hence, at the time of maturity the NRI is required to withdraw the balance from the PPF a/c. There is no tax implication in India on maturity of PPF a/c. The amount in the PPF a/c can be transferred to the NRO a/c.

In such cases the account will be considered ‘extended without contribution’ in blocks of 5 years for an unlimited period of time. Extended without contribution means that the NRI will not have to make the minimum yearly investment of Rs.500/-. His account will continue to earn interest at the prevailing rate. There are instances where banks allow NRIs to extend the PPF account only for 2 blocks of 5 years or 3 blocks of 5 years. But according to the rule book the extension can be made for an unlimited period of time.

Under the general permission by RBI, NRIs and PIOs are permitted to purchase immovable property in India. The general permission, however, covers only purchase of residential and commercial property. NRIs and PIOs are not permitted to purchase agricultural land / plantation property / farm house in India.

PIO who has purchased residential / commercial property under general permission is not required to file any documents with the RBI.

There are no restrictions on the number of residential / commercial properties that can be purchased. However, NRI / PIO can repatriate sales proceeds of only 2 residential properties outside India.

No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India. But, he may take residential accommodation on lease provided the period of lease does not exceed 5 years. In such cases, there is no requirement of taking any permission of or reporting to RBI. Further, he is not permitted to be a second holder to immovable property purchased by NRI / PIO.

Yes, but the person concerned would have to obtain the approvals, and fulfill the requirements if any, prescribed by other authorities, such as the concerned State Government, etc.

However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau and Hong Kong would require prior approval of the RBI. Such requests are considered by RBI in consultation with the Government of India.

Yes, NRIs and PIOs can freely acquire immovable property (residential and commercial properties) by way of gift either from a person resident in India, a NRI or a PIO. However they are not permitted to acquire an agricultural land / plantation property / farm house in India by way of gift.

A foreign national of Non-Indian origin resident outside India cannot acquire any immovable property in India by way of gift.

Yes, a person resident outside India i.e.

• A NRI

• A PIO and

• A foreign national of non-Indian origin can inherit and hold immovable property in India from a person who was resident in India. However, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan should seek specific approval of RBI.

Yes, he is permitted to inherit agricultural land property from his father who was also a Non-resident provided the father had acquired the property in accordance with the Foreign Exchange laws in force.

The PIO may transfer agricultural land/ farm house/ plantation property in India, by way of gift or sale to a person resident in India, who is a citizen of India.

A foreign company which has established a Branch office or Project office in India can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity, subject to certain conditions. A declaration is required to be submitted to RBI, in the prescribed Form.

However, if the foreign company has established a liaison office in India, it cannot acquire immovable property. They can acquire property by way of lease not exceeding 5 years.

Further, acquisition of immovable property by entities incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Hong Kong, Macau, Nepal and Bhutan who have set up Branch Offices or other place of business in India would require prior approval of RBI.

Payment can be made by NRI / PIO only out of funds remitted to India through normal banking channels or funds held in NRE / FCNR / NRO a/c maintained in India.

Yes, NRI/ PIO are permitted to obtain housing loans subject to conditions listed below:

• The quantum of loans, margin money and the period of repayment shall be at par with those applicable to housing finance provided to a person resident in India;

• The loan amount shall not be credited to NRE/ FCNR/ NRNR a/c of the borrower;

• The loan shall be fully secured by equitable mortgage of the property proposed to be acquired, and if necessary, also by lien on the borrower’s other asset in India;

• The installment of loan, interest and other charges, if any, shall be paid by remittances from outside India or out of funds in NRE/ FCNR/NRNR/NRO/NRSR a/c of the borrower in India;

• The rate of interest on the loan shall be as per directions by the RBI and/or NHB.

Housing loan can be repaid:

• by way of inward remittance through normal banking channel; or

• by debit to the NRE / FCNR / NRO a/c of the NRI / PIO; or

• out of rental income from such property; or

• by the borrower's relatives, through their a/c in India by crediting the borrower's loan a/c.

Yes, subject to certain terms and conditions.

He may sell agricultural land to a person resident in India.

Yes, he is eligible to sell an agricultural land, even if the same was purchased by him while he was a Resident.

A NRI / PIO may gift residential / commercial property to a person resident in India, a NRI or a PIO. Foreign national of non-Indian origin requires prior approval of RBI for gifting the residential / commercial property.

Gifting of agricultural land / a plantation property / a farm house situated in India:

A NRI / PIO can gift the above only to a person resident in India who is a citizen of India. A foreign national would require prior approval of the RBI.

NRI/ PIO can mortgage to:

• An AD/ housing finance institution in India- without the approval of RBI.

• A party abroad- with prior approval of RBI.

• A foreign national of non-Indian origin can mortgage only with prior approval of RBI

• A foreign company which has established a Branch Office or other place of business in accordance with FERA/ FEMA regulations has general permission to mortgage the property with an authorized dealer in India.

Yes, he may repatriate the sale proceeds of immovable property. The amount to be freely repatriated should not exceed the amount paid for acquisition of residential / commercial property:

• In foreign exchange received through normal banking channel or by debit to FCNR a/c; or

• The foreign currency equivalent, as on the date of payment, of the amount paid by NRE a/c.

Also, in case of residential property, the repatriation of sale proceeds is restricted to not more than 2 such properties.

The sale proceeds of residential/ commercial property in India acquired by way of debit to NRO a/c cannot be freely repatriated and should be credited to NRO a/c only. Amount can be transferred from NRO a/c to NRE a/c/ overseas a/c subject to the limit of USD 1 million per FY.

There is no lock in-period applicable for sale of such properties.

The sale proceeds of immovable property acquired by NRI by way of gift should be credited to NRO a/c only. From the balance in the NRO a/c, NRI/PIO may remit up to USD 1 million, per FY, subject to the satisfaction of the Bank and payment of applicable taxes.

Yes, general permission is available to the NRI/PIO to repatriate the sale proceeds of the immovable property inherited from a person resident in India. The amount of repatriation is restricted to USD 1 million per FY.

In case of a foreign national, sale proceeds can be repatriated in similar manner if the property is inherited from a person resident outside India with the prior approval of RBI.

Citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran are required to obtain prior approval of RBI. Repatriation of sale proceeds in foreign exchange to Nepal and Bhutan is not permissible.

Yes, but only with a prior approval from RBI.

Yes, NRI/PIO can rent the property without RBI approval. The rent received can be credited to NRO / NRE a/c or remitted abroad.

Yes, they may continue to hold the immovable property under holding license obtained from RBI. However, they can transfer the property only with the prior approval of RBI.

Income from long-term capital gains on transfer of equity share in a company or a unit of equity oriented fund where such transaction executed on a Recognized Stock Exchange and is chargeable to Securities Transaction Tax (STT).

From April 1, 2018, if the listed equity shares were purchased on or after October 1, 2004 and STT was not paid on purchase of such shares, long-term capital gains on sale of listed equity shares shall be taxable subject to certain exceptions.

No, only interest income earned on deposits in NRE a/c are exempt from tax. Accordingly, income on any other investments credited to NRE a/c, unless specifically exempted under the Act, would be taxable in the hands of the NRI.

A Returning Indian may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such assets were acquired, held or owned by him when he was a non-resident or were inherited from a non-resident person.

• Non-Resident Ordinary (NRO) a/c : To be re-designated to Resident a/c

• Foreign Currency Non-Resident (FCNR) a/c : Permissible to hold up to maturity and then to be converted into Rupee Account or Resident Foreign Currency (RFC) a/c*

• Non-Resident External (NRE) a/c : To be re-designated to Resident a/c or balance can be transferred to RFC a/c*

• Shares & Securities: Returning India is required to inform the Depository about change of his/her residential status from non-resident to resident

*RFC a/c - Returning Indians, on becoming residents are free to open and maintain such accounts with Indian banks. The funds held in RFC a/c can be fully repatriated and also denominated in forex. Funds in RFC a/cs can be withdrawn freely for local payments in rupees.

Once they return to India for good they ought to inform the following persons about the change in their residential status:

• All bankers with whom they hold banking accounts and get it redesignated,

• Depository participant with whom they hold DEMAT accounts,

• Companies where NRIs are Shareholders / Debenture holders and firms where they are partners.

A Returning Indian is not required to report about his change in residential status to RBI. However, he is required to mention his revised status while filling his return of income.

Further, a person who is Resident as per Act is required to report his Overseas Assets in his return of income to be filed in India annually. However, he is not required to report about his overseas assets to RBI.

• The tax liability of a person returning to India would depend on the Residential Status of a person as per the Act.

• Under the Act, income earned outside India is liable to tax in India only if the person is ROR.

• A returning Indian who has been a NR as per the Act for 9 years or more or whose stay in India was less than 729 days in preceding 7 years, then generally for 2 successive years he may be considered as a RNOR.

• Interest paid by schedule banks to NRI or to a RNOR on RFC deposits is exempt from tax under the Act. The exemption, in respect of RFC account, continues till such time as the account holder continues to be a RNOR.

• Pension from NRI’s former employer after return to India may be liable to tax in India subject to provisions of the Double Taxation Avoidance Agreement between India and the country from which the NRI is receiving such amount (and was resident in).

A Returning Indian should try to come back on or after February 1 (or February 2 in case of a leap year) of a FY in order to ensure NR status in the year of return.

Returning Indians, i.e. those Indians, who were non-residents earlier, and are returning now for permanent stay, are permitted to open, hold and maintain with an Authorized Dealer in India a RFC a/c to keep their foreign currency assets. Assets held outside India at the time of return can be credited to such accounts. The funds in RFC a/c are free from all restrictions regarding utilization of foreign currency balances including any restriction on investment outside India. The facility is also available to residents provided foreign exchange to be credited to such account is received out of certain specified type of funds/accounts.It shall be noted that returning Indians are required to re-designate their NRE / FCNR a/c to Resident / RFC a/c immediately on their return to India.

Balance in RFC a/c can be utilized without any restrictions for remittance and / or investment abroad. It can also be utilized for maintenance of dependents or any other personal purposes outside India.

Interest on RFC a/c will be exempt from tax so long as returning Indian’s residential status under the Act is determined as “Non-Resident” or “RNOR”.

RBI permission is not required.

The benefit of concessional tax treatment under Chapter XIIA may continue even after NRI becomes a resident subject to conditions specified in the Act.

Whenever a NRIs actual tax liability as per the provisions of the Act is lower than the TDS, it is certainly beneficial for him to apply for a TEC. Few instances are mentioned below:

*Plus surcharge (if applicable) plus education cess @ 2% plus Secondary Higher Education Cess @ 2%

The Assessing Officer generally issues a TEC within 30-45 working days from the date of application by the Assessee.

Normally the TEC is valid for the period for which such TEC is obtained. The Assessee has to re-apply for the TEC on the expiry of such period. Further, at the time of issuing the TEC Order, the Income Tax Authorities clearly mention the validity of the Certificate.

In most cases, the NRI has to compulsorily file his Return of Income in India within the prescribed due dates for the FY in which the TEC is obtained.

Yes. Foreign tourists of non- Indian origin during their short visit to India can open a NRO a/c (Current / Savings) with any Bank dealing in foreign exchange. Such a/c can be opened up to a maximum period of 6 months.

Funds remitted from outside India through banking channel or those obtained by sale of foreign exchange brought by the tourists to India can be credited to the NRO a/c.

Yes. Tourists can freely make local payments through the NRO a/c.

AD banks have been allowed to convert the balance in the a/c for payment to the a/c holder at the time of departure from India into foreign currency, provided the a/c has been maintained for a period not exceeding six months and the a/c has not been credited with any local funds, other than interest accrued thereon.

Yes. Foreign nationals employed in India holding valid visas can open and maintain a resident Rupee a/c in India subject to conditions.

Yes, AD Banks can remit proceeds of resident a/c opened by a foreign national resident in India. But AD Banks should ensure that the funds to be repatriated outside India were either received from abroad or they are repatriable in nature or permissible by RBI.

The foreign nationals employed in India holding valid visas are eligible to maintain resident a/c with an AD Bank in India. In order to facilitate such foreign nationals to collect their pending dues in India, AD Banks may, permit foreign nationals to re-designate their resident a/c maintained in India as NRO a/c on leaving the country after their employment to enable them to receive their pending bonafide dues, subject to conditions.

Any person resident outside India, not being a citizen of Pakistan or Bangladesh and also not a traveler coming from and going to Pakistan and Bangladesh, and visiting India may bring into India currency notes of Government of India and RBI notes up to an amount not exceeding Rs. 25,000/- while entering only through an airport.

A person coming into India from abroad can bring with him foreign exchange without any limit. However, if the aggregate value of the foreign exchange in the form of currency notes, bank notes or travellers cheques brought in exceeds USD 10,000/- or its equivalent and/ or the value of foreign currency alone exceeds USD 5,000/- or its equivalent, it should be declared to the Customs Authorities at the Airport in the CDF form, on arrival in India.

All types of income (including Dividend, Interest, Rent, distribution from any type of deposit, Sale proceeds of Mutual Funds, Shares, Immovable property, profits of business as partner/ proprietor) are eligible for repatriation (net of Income Tax).

The existing regulations permit NRIs to remit up to USD 1 million per FY for any bonafide purpose out of the balances in their NRO a/c.

The current income i.e. interest income, rental income, etc. can be freely repatriated i.e. without utilizing the limit of USD 1 million.

Form 15CB is a certificate issued by a Chartered Accountant. A Chartered Accountant shall verify that due taxes have been paid on the amount intended to be repatriated and shall subsequently issue Form 15CB.

On the basis of this certificate, Form 15CA is required to be filled online on the income tax e-filing site (https://incometaxindiaefiling.gov.in/). NRI is required to register herself on the income tax website for the said purpose.

The filled Form 15CA generated from the site shall be printed and signed by NRI and submitted along with Form 15CB at the branch from where the remittance is being made. Alternatively, Form 15CA can be electronically signed through Digital Signature Certificate (DSC) of the remitter.

The aforesaid transaction is tabulated below for easy reference

NRE a/c balances are freely repatriable. There is no limit specified for outward remittances from such a/cs.

NRI will have to approach his AD Bank where he holds his NRE a/c to make an outward remittance.

Mandate holder in the NRE a/c can initiate an outward remittance; however, it shall be ensured that the beneficiary of the remittance is the a/c holder.

Yes. Foreign tourists of non- Indian origin during their short visit to India can open a NRO a/c (Current / Savings) with any Bank dealing in foreign exchange. Such a/c can be opened up to a maximum period of 6 months.

Funds remitted from outside India through banking channel or those obtained by sale of foreign exchange brought by the tourists to India can be credited to the NRO a/c.

Yes. Tourists can freely make local payments through the NRO a/c.

AD banks have been allowed to convert the balance in the a/c for payment to the a/c holder at the time of departure from India into foreign currency, provided the a/c has been maintained for a period not exceeding six months and the a/c has not been credited with any local funds, other than interest accrued thereon.

Yes. Foreign nationals employed in India holding valid visas can open and maintain a resident Rupee a/c in India subject to conditions.

Yes, AD Banks can remit proceeds of resident a/c opened by a foreign national resident in India. But AD Banks should ensure that the funds to be repatriated outside India were either received from abroad or they are repatriable in nature or permissible by RBI.

The foreign nationals employed in India holding valid visas are eligible to maintain resident a/c with an AD Bank in India. In order to facilitate such foreign nationals to collect their pending dues in India, AD Banks may, permit foreign nationals to re-designate their resident a/c maintained in India as NRO a/c on leaving the country after their employment to enable them to receive their pending bonafide dues, subject to conditions.

Any person resident outside India, not being a citizen of Pakistan or Bangladesh and also not a traveler coming from and going to Pakistan and Bangladesh, and visiting India may bring into India currency notes of Government of India and RBI notes up to an amount not exceeding Rs. 25,000/- while entering only through an airport.

A person coming into India from abroad can bring with him foreign exchange without any limit. However, if the aggregate value of the foreign exchange in the form of currency notes, bank notes or travellers cheques brought in exceeds USD 10,000/- or its equivalent and/ or the value of foreign currency alone exceeds USD 5,000/- or its equivalent, it should be declared to the Customs Authorities at the Airport in the CDF form, on arrival in India.

No, currently there is no Inheritance / Estate tax applicable in India. However, an NRI shall also have to keep in mind the tax implications and reporting requirements of inheritance in his / her country of Residence.

Any person, whether or not resident / citizen of India is eligible to receive property by way of Inheritance. However, Transfer / Holding of the said property shall be subject to exchange control regulations in India.

Yes, an NRI is eligible to repatriate sale proceeds of an immovable property inherited from a person resident in India subject to certain conditions, payment of taxes and upto the monetary limits specified by RBI.

Yes, income earned from property acquired by way of Inheritance is taxed in India as under:

• Upto the date of death - taxed in the hands of the deceased. However, the same would be leviable and recoverable from the legal representatives of the deceased in a like manner and to the same extent as the deceased (liability restricted upto the value of property inherited).

• After the date of death - taxed in the hands of beneficiaries / executor(s) in their individual capacity.

When a person passes away without a Will, the provisions of the Succession law (as specified in the above Flowchart) shall have to be followed to distribute the deceased person's property among the legal heirs. The rules of succession will determine who the heirs of a deceased are and what would their share be in the Inheritance.

Further, an NRI may also have to obtain a Succession Certificate to substantiate that he / she is a legal heir as per the provisions of the Succession Law.

Individual may avail of exchange facility in excess of USD 250,000/- as prescribed under LRS in connection with Emigration, medical treatment abroad and studies abroad, subject to other prescribed conditions/ restrictions.

Persons other than RI can make remittances for:

• Donations for educational institutions;

• Commissions to agents abroad for sale of residential flats/commercial plots in India;

• Remittances for consultancy services and

• Remittances for reimbursement of pre-incorporation expenses within the limit and conditions laid down therein.

Such persons shall submit to the AD Bank a declaration to the effect that the limits and conditions relating to the remittances have been complied with.

Yes, LRS is in addition to the use of International Credit Card. There is no monetary ceiling fixed by RBI for remittances by use of International Credit Card towards meeting expenses while such person is on a visit outside India. Use of International Credit Card for payment in foreign exchange in Nepal and Bhutan is not permitted.

There is no restriction on the frequency. However, the total amount of foreign exchange purchased from or remitted through, all sources in India under the LRS scheme during the current FY should be within the LRS limit currently at USD 250,000/-.

RIs are eligible to avail benefit of LRS. The person must be a person resident in India as per FEMA. Once an individual is a resident under FEMA, he is eligible to avail benefits of LRS, whether or not he is an Indian citizen. Persons other than RIs are eligible to avail benefits of LRS but only for few transactions subject to limits and conditions as specified in FEMA.

Yes, LRS facility is available to all RIs including minors. In case of remitter being a minor, the Form A2 must be countersigned by the minor’s natural guardian.

Since he is carrying on business in India, he shall be treated as a person resident in India under FEMA. Hence, he would be eligible for availing the LRS even though he is not an Indian citizen.

Since he has left India for employment purpose, hence he shall be treated as a person resident outside India under FEMA. He would not be eligible for availing LRS even though he is an Indian citizen.

Remittances under LRS can be consolidated in respect of family members (including minors) subject to the individual family members complying with the terms and conditions of the Scheme. However, clubbing is not permitted by other family members for capital account transactions such as opening a bank a/c/ investment/ purchase of property, if they are not the co-owners/ co-partners of the overseas bank a/c, investment/ property.

It is mandatory to have PAN card to make remittances under LRS for capital account transactions. However, PAN card need not be required for remittances made towards permissible current account transactions up to USD 25,000/-.