Legal & income Tax


The tax rate on long-term capital gains is 20%, plus a surcharge of 10% on the tax payable, if the taxable income exceeds INR 1million. An education cess of 2% is applicable on the above. In computing the cost of the property (which is deducted from the sale value to compute the taxable income) inflation indexation as prescribed by the Government will be admissible.
FCNR/NRE income is not taxable till you become an ordinary tax resident of India. Normally two-year time frame would be available. This rule operates on the basis of the tax assessment years. The exemption, if applicable, will not be available beyond 31/3/07, at best. Since the applicability of this depends upon exact no of days stayed in India in preceding years etc., the generic advice given needs to get validated on specific facts.
Sale of property is subject to capital gains tax. Rate will be 20% + surcharge (as applicable) and education cess, if the property is more than three years held by you. Gift doesn't attract any tax in India.
The position on PIO card needs to be ascertained from the immigration officials in the Indian embassy. On taxation of pension, for two tax assessment years after return to India, tax will not arise due to the tax residence status in India. After that point of time under the terms of the tax treaty between Canada and India, only Canada would have the right to tax pensions. However, detailed professional advice on the operation of the treaty rules may be taken.
You will have to check the U.S law and then act accordingly. Interest on NRE Account is not taxable in India.
For arriving at the cost of acquisition in case of asset acquired by will, the cost of the previous owner has to be considered. Thereafter the fair value as at 1.4.1981 is to be taken and the indexation applied till the year of sale, which is the current calendar, in your case.
After selling some shares, in order to avoid capital gains tax, I invested the money (1 lakh min.) in REC bonds 3 years back. Now they have given us an option for withdrawal after 3 years or continue with a lesser interest rate. I opted for withdrawing the money with accrued interest. Would like to know whether 1) I will have to pay any capital gains tax on this amount? 2) Is the interest taxable?
Since my total income is less than $80,000, I don't have to pay any US tax. My questions are as follows:
  1. If I purchase and sell stocks / mutual funds in the US, what are the tax implications in India (on any profit or loss)?
    Indian taxes will apply on global income for a tax resident in India, which you would be unless you stay outside India for a minimum period of 182 days in the relevant previous year.
  2. Can I purchase shares/mutual funds and other investment products in India freely just as any other Indian citizen? Are there any restrictions?
    You can deal with investments in India freely.
  3. If I were to give a gift of Rs. 3.5 lakhs each to my brother and sister, do they have to pay any taxes on it? Would any official start asking questions?
    Gift to brother/sister will not give rise to any tax in their hands. Even if the officials question, explanation should be possible in this case.