Legal & income Tax


Sale of listed shares in India attracts capital gains tax if short term in nature at 10%. If it is long term in nature capital gains is exempt from asst year 2005-2006. In case of an NRI you could opt to come under chapter XIIA of the Act where a flat 10% tax will apply for long-term capital gains. A return of income has to be filed with the Dept.
Refund can be claimed by filing a proper return of income and claiming the TDS as refund.
Property held for more than 3 years will qualify as long-term asset, taxable @20%+surcharge and cess. The cost of acquisition can be indexed. Relief from tax is possible by investing the part or full consideration in specified bonds. Short-term gain is taxable at the slab rates. Repatriation is possible.
The exact period of stay may become important to determine your residential status in India to ascertain if any part of the remuneration received would be taxable in India. This has to be checked for the relevant financial years April-March. However the mere repatriation of the funds will not create any tax liability in India.
For two tax assessment years post your return to India, you will have the status of a not ordinarily resident and not liable to tax on any income arising outside India. However, thereafter the interest would be taxable in India.
Contributions in to an NRI a/c will not constitute taxable income in India. However the interest earned on the same is taxable. Deposits held with companies in India, among certain other assets specified, are treated preferentially and interest on the same will be subject to a flat rate of 20% tax + surcharge @8% on income exceeding Rs.8lakhs, as against the slab rate which taxes income above Rs 1.5lacs at 30% + surcharge as stated. There is an education cess of 2% applicable on the tax and SC. Since some of the banks are also companies the deposits will also qualify for the lower tax.
The determination of the tax position is dependent on the existence of a business presence through a permanent establishment. This would depend on the detailed facts and the actual business model/supply chain details. We recommend that a specific advice from a tax lawyer in US be taken. There is no tax on mere transfer of money from US bank a/c to Indian bank a/c and no limits on the same.
You can open and NRE a/c or a FCNR a/c. The bank will advice on the relative benefits from money management perspective.
  1. Pension will not be taxed in India if it is paid by the Govt. of Switzerland. If not, (ie.) paid by non-govt. institution, it is taxable only in India and no tax will arise in Switzerland. Since the non-govt pension is taxable in India of approx. Rs 6,60,000, the normal schedule of tax rates will apply. For income exceeding 1.5 lakhs, the tax is Rs19,000+ 30% of the income exceeding Rs 1,50,000/-. Education cess of 2% on tax will apply. This is without considering any tax rebate as applicable to a senior citizen or any other relief that you may be entitled to. However, the DTAA with Switzerland helps to avoid tax on pension paid by a Government. Form 2E can be made use of by you.
  2. This is coming in the purview of the Ministry of Home affairs. Contact your local immigration office in the State of Uttaranchal for guidance.
  3. Resident Foreign Currency a/c is permitted. The bankers will open an account if you so desire.
Remittance of money from U.S per se does not constitute income under the Income tax law in India. One has to see the definition of income contained in section 2(24) of the Act and then decide whether it constitutes income in the hands of the recipient. In this case the father has not earned any income in India for the receipt to be taxable in India. The son has to examine the law in the U.S however and pay the tax in U.S on his income earned there. As regards the repayment of the loan of the father the answer is the same. It does not constitute income in the hands of the father for the same reasons mentioned above. It would at best amount to gift but since there is presently no gift tax in India there is no tax liability on this score also
It would be better to give the money to the your dad first; the loan can be given by your dad to the friend who can repay it in Indian Rupees. The act of giving the money to your dad doesn't give rise to any regulatory issues in India.
In case you have already sent the DD to your friend, he can encash the DD and transfer the money to your father and this can be directed by you specifically. Your father can later issue a cheque to make over the loan to your friend and specify the repayment terms.
Normally, citizenship carries voting rights, and any other privileges that may be conferred under the constitution of the relevant country. For example, under the Constitution of India the right of freedom of speech is guaranteed only to a citizen. Certain countries may limit ownership property to citizens. In India, the Exchange Control regime is more favourable for citizens of India to own property in the country. If citizenship-based taxation system is followed, it may count as a disadvantage, like the US taxing their citizens even on income earned outside the said country.
From the question, it is not clear whether the shares held are that of an Indian company or a German company. If the shares are that of a German company and sold there then there is no tax implication in India. However, the employee will have to reckon with the German tax laws and pay tax in Germany. If however the shares are that of the Indian company any sale thereof gives rise to capital gains in India. The gain will be computed taking into account the sale price and the exercise price of the ESOP. Attention is also drawn to the concessional tax treatment for NRIs in Chapter XII A of the Act where the employee can pay tax at 10% plus surcharge subject to certain conditions mentioned in the chapter. Even in this case, the tax laws in Germany and the DTA Agreements will have to be applied to arrive at any tax liablity in Germany also.
NRI status for tax purposes arises once the emigrant stays outside India on employment beyond 183 in a financial year.For the tax assessment year 2005-6(previous year 2003-4) you will be a NRI on crossing 182 days stipulation.
Mere transfer of money to NRI a/c doesnt result in any tax liability.
If the ESOP grant was as per the Income tax approved scheme the liabulity to tax arises only on sale of the shares. If at the time of sale you are not resident in india for tax purposes and the shares are not of a Company registered in India no tax liability arises in India.
The exemption referred to by you is only in respect of some 'specified' equity shares purchased between 1/3/03 and 1/3/04. Your case, obviously, does not fall under this.You will be subject to to tax at 20%+SC , with indexation or at 10%+SC without indexation. (SC refers to surcharge on tax @10% on the tax payable where the the total income exceeds INR 8,50,000).