Your Taxes

I was in the UK from July 2014 to June 2015. In April 2015, my company announced bonus for FY 2014-15, which was credited to my bank account in the UK (after tax). My organisation had considered bonus amount (paid in the UK) in the Indian salary as well, for FY 2015-16, and again deducted tax on it. Will I get relief on the double taxation?  

Amol Kokate

According to the provisions of the Income Tax law, an individual is taxed on the basis of his residential status in India. The Indian domestic tax law states that a resident and ordinarily resident (ROR) in India is taxable on his worldwide income in India.

Based on the limited facts share, I understand that since you returned to India permanently, post-June 2015, you are likely to qualify as ROR in FY 2015-16.

Accordingly, your global income will be liable to tax in India, that is, including the bonus received by you in the UK bank account for FY 2014-15.

Since the bonus paid to you was also subject to tax in the UK, provisions of the Double Taxation Avoidance Agreement (DTAA) between India and the UK can be analysed to check if it could provide relief. Such details in relation to claiming of foreign tax credit are to be reported in Schedule FSI, FA and TR of appropriate income tax return form.

I constructed a house in Nellore where my parents live and I bought an apartment in Bengaluru where I live. Both these properties had home loans. To get higher tax relief, I have shown my Bengaluru home as “deemed let out” property and the one in Nellore as “self occupied”. I have paid off my home loan on my Bengaluru home now and want to know if I can show my Nellore property as “deemed let out”.

Krishna Kishore

When an individual owns more than one residential property that are used for his/her own residential purpose, any one residential property at the discretion of the individual can be considered as self-occupied property (SOP) and the other as “deemed let out property” (DLOP). For the said DLOP, the deemed rent is liable to tax.

An individual can claim tax deduction towards the actual municipal taxes paid and standard deduction of flat 30 per cent (after deduction of municipal taxes) towards repairs and maintenance charges against the deemed rent.

The entire interest on housing loan can be claimed for tax deduction against the net rental value.

The balance rent amount, if any, will be taxable as “income from house property”. Additionally, one can claim deduction towards repayment of the principal portion of housing loan subject to overall cap of ₹1.5 lakh per financial year under Section 80C of the Income Tax Act, 1961.

In your case, you can choose to consider the Bengaluru property as SOP and the Nellore one as DLOP and claim the allowed tax deductions. There is no other requirement to formally communicate the same to the tax department.

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in