Legal & income Tax


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).
  1. The capital gain arising from the sale of the Mumbai apartment (on the premise that the asset is long term in nature) will be completely exempt from capital gains tax if the entire capital gains are invested in SIDBI bonds within a period of six months from the date of transfer. If only a part of the gains are invested then the exemption will be worked out on a proportionate basis. This is spelt out in section 54EC of the Income Tax Act. It may be noted that though you are a US citizen, the gain or income arises in India and is taxable in India, subject, of course, to the exemptions provided in the section 54EC. SIDBI was notified is this section effective assessment year 2003-2004. Kindly also note this the investment has a lock in period of 3 years.
  2. Repatriation of Indian assets or earnings is possible only in the case of non residents. In the case in question, repatriation is prima-facie possible. The only point to check is whether the flat in Mumbai is acquired out of inward remittance inheritance or legacy. If it is so, then the proceeds can be repatriated. In some cases, remittance is done by banks without RBI approval and in other cases it requires RBI approval.
  1. Can rent of flat be treated (in full or 50%) as income of my wife for tax purposes?
    This is possible only if the investment had been made in like proportion.Otherwise it would be clubbed in your hands even if the wife receives the rent under the agreement with the tenant.
  2. Can my wife file separate tax return for her income in India about Rs. 2000 per year on deposits?
    If the investment can be established as made out of her income, separate tax return is possible. Otherwise, it would be clubbed in your hands.
  3. Am I liable to pay tax considering all deductions on pay and rent.I learnt that deduction for rent is 30% and salary also 30,000 or 1/3 of income. Thus my total income for tax after deduction is about Rs 96000. Less deduction for senior citizens. I heard that senior citizens are exempt upto income of 100,000.
    Rent is 30% deduction as stated by you. Standard deduction on salary is 40%, subject to a ceiling of Rs30000. The rebate for senior citizen is available only if the person is 65 years or more.
Section 6(4) of FEMA specifically provides that a person resident in India may hold, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security, or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India. There are no tax implications on the capital; however the income theron will be subject to tax in terms of the 'residency' and the exemption under the relevant double taxation treaty.
The savings can be brought in through normal banking channel and would be converted at the appropriate rate. No tax implications arise in India on repatriation. It is also possible to hold in foreign exchange as currently permitted under the exchange regulations.
Mere transfer of funds to India does not constitute income in India. Further, there is also no gift tax in force. Your income in UK is liable to be taxed in UK in accordance with the tax laws in force there. You will have to file a return of income in India, in respect of any income earned in India.
This income is taxable in India since it is earned in India. This is irrespective whether you are a non resident or a resident since the source of the income is in India. You are entitled to the deductions and reliefs available in the Act.
This income is taxable in India since it is earned in India. This is irrespective whether you are a non-resident or a resident since the source of the income is in India. You are entitled to the deductions and reliefs available in the Act.
From the facts stated, it would appear that you are a resident in India during the period of stay in US and hence your earnings in US will be subject to tax in India. However the remittance of the savings will not be subject to any tax. The money can be retained as forex or converted into INR as you choose.
As per section 6(1) of the Income Tax Act you will be a resident in India if and only if your physical stay in India during the financial year 2003-2004 is 182 days or more. Since you expected stay is not likely to exceed 170 days you will continue to be treated as a non resident for tax purposes and consequently you overseas income whatever be the source will not be subject to tax in India.
Tax would not arise merely on account of transfer of money into India. However, you would need to check your residential status for the tax year(s) concerned to determine any tax liability.
  1. Do we need RBI permission to seek repatriation of rupees into dollars for sale proceeds of Indian property?
    No, but only if the repatriation of sale proceeds of Indian Property, is complying with the conditions set out in January 13, 2003 circular. For these conditions, you may approach banker remitting such sale proceeds.
  2. Does the $1 million USD per year permission now mean that you still need to get permission from RBI to repatriate your sale proceeds if they are $100,000 to $1 million per year?
  3. No. If the remitter strictly complies with the requirements and conditions of January 13, 2003 circular.