Legal & income Tax


  1. By May-2006 I will be having X amount in my NRE account. Will I be taxed for this in India? If not then for how many years I have this benefit? Is the tax only on interest or both on interest and the principal?
    No tax on principal at any stage. Tax on interest will arise once you become an ordinary resident in India, typically in about two years after your return.
  2. I have stock options that I can exercise. If I exercise them in 2007 May and bring that money to India, will I be taxed?
    No tax in India
  3. After 62 years I will be eligible for Social security. At that age assuming I'm not in US and still in India, will I be taxed for the social security benefits I receive?
    No tax on this.
  4. If I work for US company in India and payroll is run in India, do I still need to pay tax in US?
    Please seek due clarification from a US tax consultant.
  5. I have rental properties in India. Since I will be living here for 332 days, do I still need to pay tax on these rental properties to US?
    Please seek due clarification from a US tax consultant.
  6. I have read that I will be in status of Resident but not ordinary resident. What is the advantage of that status?
    Under this status foreign sourced income will not be taxed.

No taxes should arise in India on these accretions and withdrawals to the extent it can be demonstrated to pertain to the period when you were NR and NROR. However, capital gains, interest and dividends earned in US by a ROR of India will be taxable in India. If you require a detailed legal opinion, please contact a tax advisor, as this is a complex issue.


Withdrawal of investment is return of capital and cannot be taxed as income based on the basic tenets of law. You can refer to decided cases on what is income from any of the standard text on Indian tax law. However, accretions in the form of income are taxable by the resident country under the double tax avoidance agreement between the two countries. The tax expert whom you approach for advice will help clarify the details to you.
The bank alone can clarify on the issue of rate of interest. The exemption on interest is linked to the residential status of the income earner
The withdrawal of the entire principal contributed, and accretions/income earned before becoming ROR will not be taxable in India. However the income earned upon becoming ROR can be taxed, subject to the provisions of the double tax avoidance agreement with USA. PIO status is not relevant for tax purposes.
Upon encashing the investment capital gains may arise and be subject to tax depending on the nature of the asset sold and the period for which it was held. Repatriation is possible subject to RBI approval-normally allowed up to 100,000$.
The transfer itself does not cause tax liability. However, depending on the residential status the check the tax liability if any on the original income.
Obligation to file a tax return arises when the total income exceeds Rs 50,000/-. Liability to tax will depend upon rebates, if any, for eligible investments etc.
As long as you are an NRI the pension income earned in Ireland is not taxable in India. After you become a resident in India it will be taxable in India subject to double taxation relief as applicable.
Inter-company deputation is not a taxation issue but in any case my understanding is it is legal subject to the local rules and regulations.
For the financial year 06-07 you will have to pay taxes in India on the April salary earned in Hong Kong since you will be treated as a resident in India for that financial year. For the financial year 05-06 the salary earned in Hong Kong is not taxable in India since you are a non-resident.
You will be treated as a co-owner of the property with your brother and the consideration of 12 lakhs is exigible to capital gains tax here. The exact tax will depend on the cost of acquisition of the previous owner and so on. There are exemptions from capital gains tax on account of specific reinvestment of the gains/ consideration.
Prima Facie, no tax implications. Only thing to ensure that any income earned in India is offered to tax here.
Since your stay in India in that year exceeds 182 days you will be treated as a resident in India. The income earned in Germany is taxable in India at the appropriate slab rate, the maximum being 30%. You can get set off of the tax paid in Germany on this income.