The Hindu Business Line : Taxing money earned in US

I am working in the US on a H1 visa. I would like to transfer some money from my US bank account to a bank account in India. Will this give rise to a tax in India? — S. Upendra

You have through your query nowhere indicated your residential status in accordance with the Income-Tax Act. Under the I-T Act, if you a are a resident and ordinarily resident in India, the salary earned in the US will be taxable in India irrespective of the fact that it is already taxed in the US.

You may, however, be able to enjoy tax credit in the country or residence in accordance with the double taxation avoidance agreement (DTAA) between India and the US.

The tax credit will be lower of the tax payable in the country of source or the country of residence on such doubly taxed income.

If, however, you are a resident but not ordinarily resident or a non-resident, your income earned in the US will not be taxable in India. All these will be irrespective of whether you remit the money in India or not.

I have sold shares in the financial year 2007-08, which were acquired by me between 1986 and 1991. These shares were sold by me through a recognised stock exchange.

The contract note issued by the stock broker shows that I have been charged with securities transaction tax at the time of sale of these shares. Under these circumstances, I would like to know whether the capital gain, earned by me, from the sale of the shares, will be exempt or will be chargeable to tax particularly in the light of the fact that securities transaction tax has been paid by me only at the time of sale of the shares. — Ravi Venkata Subrammanian

Section 10(38) of the Income Tax Act exempts income arising from the transfer of a long-term capital asset being equity shares in a company or units of an equity oriented fund, if securities transaction tax is chargeable at the time of sale of the shares.

In your case, the assets are apparently long term, since they have been held by you for a period exceeding 12 months, which is the time period stipulated for an asset to be treated as long term, if such asset is shares.

You have also paid securities transaction tax at the time of sale of shares and therefore the capital gains arising from the sale of the shares would be exempt in your hands under Section 10(38) of the Act.

Please clarify whether losses arising from dealing in futures and options will be treated as short-term capital loss and whether the same can be carried forward and set off against income by way of short-term capital gains in subsequent years?

Also clarify for how long such loss can be carried forward? — N. Sundharesan

Dealing in futures and options will be treated as a business and the gain or loss would be treated as a business income or a business loss. The gain or loss will be treated as from a speculative business unless

The transaction is carried out electronically on screen-based systems.

The transaction is carried out through a registered broker or sub-broker.

The transaction is supported by a time-stamped contract, issued by such broker or sub-broker.

The contract note indicates the unique client identity number and permanent account number.

If the loss is treated as a regular business loss, the same can be set off against income in the same year from any source or any head other than income by way of salary.

The balance, if any, can be carried forward and set off against business income within a period of eight assessment years, immediately succeeding the assessment year in which the loss was first computed.

If on the other hand, the loss is treated as a speculative loss, the same can be set off only against speculative income of the year and the balance, if any, can only be carried forward and set off against speculative income within a period of 4 assessment years immediately succeeding the assessment year in which the loss was first computed.

I have sold a property and have used the gain to clear a loan taken for purchase of a land.

I intend to construct a house on this land. I am also proposing that the house would be constructed within two years.

In such circumstances, can I claim exemption in respect of the gain arising from the sale of the property, which moneys were used for clearing the loan taken for purchase of the land on which I propose to construct a house? — Yogesh

You have not indicated whether the property sold by you is a residential house or any other capital asset.

If it is a residential house, the gain would be exempt under Section 54, while in other cases, the exemption would be available under Section 54F.

In either case, the exemption would be available subject to satisfying the conditions stipulated by the said Sections.

In this connection, you may note that the board has through circular No. 667 dated October 18, 1993, specifically clarified both in the context of Section 54 and Section 54F that the exemption under these Sections would be available even if the proceeds are used for purchase of land, so long as the purchase and the construction are completed within the stipulated time.

(Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002)

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