I understand dividend from foreign companies is now taxable at 15%. Why has the government made this change?

Rajat Kathuria, Jaipur

Dividend from an Indian company is tax-free, with the company paying a dividend distribution tax of 15 per cent whereas dividend from a foreign company was taxable in the hands of the recipients at the applicable rates. Many Indian businessmen have invested in companies abroad controlled by them from which they do not take any dividend for the fear of exposing it to Indian tax. Before this change was made the government thought in terms of deeming foreign profits as dividend no matter dividend is declared or not. Ultimately the government seems to have chosen a middle path by offering a level playing field — the rate of tax is 15 per cent on dividend whether it is from an Indian company or a foreign company.

FCCB vs FCEB

What is the difference between Foreign Currency Convertible Bonds and Foreign Currency Exchangeable Bonds?

Shradha Vernekar, New Delhi

FCCB is pure convertible debenture except that it is issued in a foreign currency whereas FCEB while appearing to be the same has a few subtle differences. On conversion, one gets the shares of the company issuing an FCCB whereas in FCEB, the holding company gives the shares of its subsidiaries from out of its existing holdings. In other words, while in FCCB, there is only one company involved, in a FCEB more than one company is involved. Secondly, a FCEB is as much a fund mobilisation technique as it is a disinvestment route. The FCEB has not caught the fancy of Indian companies because holding companies in India do not like to loosen their grip on their subsidiaries.

No need to file I-I return

My salary income is Rs 2,00,000 but my Section 80C deductions are Rs 20,000 and accordingly I do not pay any income-tax. Am I required to file my income-tax return?

Prabjot Kaur, Patiala

Your total income is Rs 1,80,000 which is less than the tax-free limit of Rs 1,90,000 for womenbut the law requires anyone with a Gross Total Income of more than the tax-free limit to file a return. However, you need not file a return because recently the law has been amended to permit the CBDT to notify salaried person who need not file returns. Accordingly, the CBDT has vide a recent notification spared the salaried persons from filing return if their income from salary is not more than Rs 5 lakh and they have no other source of income except interest from savings bank account not exceeding Rs 10,000.

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(This article was published on July 24, 2011)
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