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Questions:
- What are the cases under which gifts made by a Non-Resident Indian would attract gift tax?
- If an NRI's income consists only of investment
income or income by long-term capital gains or both, would he be
required to furnish a return of his income?
- What is the rate at which tax is computed if
- the NRI has income only from investments or
long-term capital gains or both
- when the NRI has income in addition to the
income stated above?
Are NRIs exempt from the provision of quoting
their Permanent Account Number in the transactions?
In the case of NRIs, what are the heads of
income, which if received, will not form part of total income?
What is the status of non-residents on a
temporary visit/stay in India?
What will be the status of bank accounts held
in India, if the NRI decides to become a resident? What then would be
the status of a foreign currency account held abroad if the NRI
decides to return to India?
Can NRIs returning to India continue to hold on
to securities that they had acquired during their stay abroad?
What are the reasons under which a citizen
could be deprived of his citizenship by the Government?
What is the necessity of Double Taxation
Avoidance Agreement (DTAA) and how do such agreements work?
What are the features of the DTAA signed between India and other countries?
In case of dispute in the interpretation of
the DTAA terms, how can the same be redressed?
Answers:
- What are the cases under which gifts made by a
Non-Resident Indian would attract gift tax?
There is no Gift
Tax for the time being in India and therefore the question of
application of Gift Tax in respect of gifts made by a non-resident
Indian does not arise.
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- If an NRI's income consists only of investment
income or income by long-term capital gains or both, would he be
required to furnish a return of his income?
If an NRI's income
consists only of investment income or long term capital gains or both
and the relevant tax deductible on such income has been deducted at
source, it is not necessary for him to file a return of income under
section 139(1) of the Income-tax Act (the Act). This is a
concessional treatment given to NRIs in accordance with section 115G
of the Act.
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- What is the rate at which tax is computed if
- the NRI has income only from investments or
long-term capital gains or both
- when the NRI has income in addition to the
income stated above?
In accordance with the
special provision for computing the total income for non-residents
contained in section 115D of the Act, where the non-resident income
has only investment or income by way of long term capital gains or
both, he will not be entitled to any deduction under chapter VIA of
the Act and he will also not be eligible to claim indexed cost of
acquisition / improvement (as per second proviso to section 48) in
computing the long term capital gain. Where the gross total income of
an NRI includes investment income or long term capital gain and also
includes other components of income, then the gross total income
shall be reduced by the amount of such income and deductions
relatable to Chapter VIA shall be allowed as if the gross total
income as so reduced were the gross total income of the NRI. On the
rate of income-tax applicable in respect of investment income, the
non-resident has to pay tax at twenty per cent and in respect of long
term capital gains, he has to pay tax at ten per cent. These amounts
will have to be increased by surcharge as applicable.
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Are NRIs exempt from the provision of quoting
their Permanent Account Number in the transactions?
Where a
non-resident receives income from which tax has been deducted in
accordance with Chapter XVIIB of the Act, he shall intimate his
Permanent Account Number to the person responsible for deducting such
tax. If PAN is not available, such NRI shall intimate General Index
Registration (GIR) number till the PAN is allotted. The only
exception from quoting PAN available is in respect of NRIs referred
to in section 115AC of the Act which deals with tax on income from
bonds or GDRs purchased in foreign currency or capital gains arising
from their transfer. Exemption is also available from quoting PAN for
non-resident sportsman, sport associations etc.
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In the case of NRIs, what are the heads of
income, which if received, will not form part of total income?
In the case of NRIs,
the categories of income, which is not includable in total income
exempt under Chapter III of the Act are
- Interest on
securities or bonds issued by Central Government and notified.
- Interest on
moneys standing in Non-resident (External) account.
- Interest on
saving certificate issued before 01/06/2003 by the Central Government
These exemptions have
to be read in the context of various schemes / notifications issued
by the Central Government from time to time.
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Returning NRIs
What is the status of non-residents on a
temporary visit/stay in India?
Under FEMA, intention of
stay is relevant. Accordingly, it could be opined that if the
intention is for a temporary visit / stay, the person would continue
to be a non-resident.
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What will be the status of bank accounts held
in India, if the NRI decides to become a resident? What then would be
the status of a foreign currency account held abroad if the NRI
decides to return to India?
- NRE accounts
would have to be redesignated as resident accounts or converted into
RFC (Resident Foreign Currency) Accounts.
- FCNR(B) Accounts
can be retained in their present form upto maturity and thereafter
converted into RFC Accounts
- NRO Accounts have to
be redesignated as resident accounts.
- NRIs who return
to India can freely maintain and operate their foreign currency
accounts with banks abroad, but are restricted from opening new ones
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Can NRIs returning to India continue to hold on
to securities that they had acquired during their stay abroad?
A person resident in India
is free to hold, own, 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.
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Citizenship rules
What are the reasons under which a citizen
could be deprived of his citizenship by the Government?
While following are the
reasons for which citizenship can be deprived, their applicability to
a citizen would depend on the mode of acquisition of the citizenship:
- the
registration or certificate of naturalisation was obtained by means
of fraud, false representation or the concealment of any material
fact; or
- citizen
has shown himself by act or speech to be disloyal or disaffected
towards the Constitution of India as by law established; or
- citizen
has, during any war in which India may be engaged, unlawfully traded
or communicated with an enemy or been engaged in, or associated
with, any business that was to his knowledge carried on in such
manner as to assist an enemy in that war;
- citizen
has, within five years after registration or naturalisation, been
sentenced in any country to imprisonment for a term of not less than
two years;
- citizen
has been ordinarily resident, out of India for a continuous period
of seven years, and during that period, has neither been at any time
a student of any educational institution in a country outside India
or in the service of a Government in India or of an international
organisation of which India is a member, not registered annually in
the prescribed manner at an Indian consulate his intention to retain
his citizenship of India.
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Double Taxation Avoidance Agreements
What is the necessity of Double Taxation
Avoidance Agreement (DTAA) and how do such agreements work?
A DTAA is a
bilateral arrangement between two countries which forms part of the
fiscal code of the respective country. This agreement can be accessed
by the residents of either country and does not restrict the basic
right of a sovereign country to tax the income in question. As per
the Indian Income-tax Act, 1961 (the Act) or DTAA whichever is
favourable can be applied by an assessee with reference to a
transaction.
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What are the features of the DTAA signed between India and other
countries?
Most of the DTAAs are
drafted on the same lines. There are around 25 articles covering
general matters and matters relating to definitions. The substantive
portion of the articles specify the rates of tax applicable to
various streams of income, relief from double taxation in respect of
various categories of income and also covers procedures to resolve
disputes.
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In case of dispute in the interpretation of
the DTAA terms, how can the same be redressed?
Any dispute in the
interpretation of DTAA is resolved by the mutual agreement procedure.
These are contained in Rules 44G and 44H of the Income-tax Rules.
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