Your Taxes

My friend is an American citizen holding a PIO Card and has been settled India since many years. He also holds a PAN card. He earns income both in India and the US. All his income in India and the US is received after TDS. Please advise whether it is mandatory for my friend to file IT returns in India and also in the US.

Leela Raman

According to the provisions of income tax law, an individual is taxed on the basis of his residential status in India. Under Indian domestic tax law, a resident and ordinary resident (ROR) individual in India is taxable on his worldwide income in India.

Based on limited facts, I understand that your friend will qualify as ROR and accordingly, his global income will be liable to be taxed in India. In case his global income is also taxed in the US, benefit of the Double Taxation Avoidance Agreement (DTAA) between India and the US can be claimed. For claiming the benefit of the DTAA, each income source would need to be analysed separately based on the relevant DTAA articles.

It is pertinent to note that in case any exemption is claimed in the India tax return on his income from the US, a Tax Residency Certificate needs to be obtained from the US tax authorities.

For his US return filing obligation, please check with a tax accountant in the US.

My wife and I jointly purchased a house in Vijayawada. Both of us work in Hyderabad. The house in Vijayawada fetches us a rent of ₹15,000. Can we show rental income of ₹7,500 each in our respective tax returns? For ease of operation, the full rent of ₹15,000 is received in my bank account and I subsequently transfer ₹7,500 to my wife’s account.

Chintakayala Ravi

I understand that the property was purchased and registered in a joint name with your wife, wherein you both paid the funds to purchase the property.

You and your wife are joint owners of the property. Therefore, you and your wife both can show the rental income in your respective returns in proportion to the contribution made while purchasing the property.

Further, if the funds to purchase the property came from a loan, in case of a let-out property, interest actually payable during the year can be claimed from the annual rental value of the house property. The deduction will be subject to a certificate from the lender specifying the interest payable during the year on the capital borrowed.

The same can also be claimed by you and your wife in proportion to the contribution made while purchasing the property.

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