Financial Daily from THE HINDU group of publications
Sunday, Jul 25, 2004
Financial Daily from THE HINDU group of publications Sunday, Jul 25, 2004 |
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Investment World
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Income Tax Columns - Tax Talk Dollar remittance for family maintenance T. Banusekar
Udaya Prakash Reply The tax implications will depend on your residential status in accordance with Section 6 of the Income-Tax Act. If you are a resident and ordinarily resident (ROR) in India, the income will be taxable in India. On the other hand, if you are a resident but not ordinarily resident (RNOR) or a non-resident, the income will not be taxable in India. If you are an ROR, it is not merely the income that you transfer into India that will be taxable in India in accordance with the I-T Act but also the entire income that is earned by you throughout the world. It is assumed that the income is earned by you first in the US and thereafter remitted by you into India. The answer to the question will not vary whether the money is transferred into your account or into that of your wife's. Query What is the tax inflation index of the financial year 2004-05? Jeevan Reply The tax inflation index of 2004-05 is 480. Query I have taken a housing loan with my wife being a co-applicant. The house is registered in my name and is let out to my employer company, which in turn is allotted to me for my use as rent-free accommodation. While the rent that I receive from my employer company is treated as income from house property in my hands and taxed, the value of rent-free accommodation is treated as a perquisite and assessed in my hands as income from salaries. This leads to a tax disadvantage. I, therefore, propose to gift the flat to my wife. My wife does not have any other income. This way the rental income can be assessed in her hands and can give us a tax advantage. Will this be possible? Sukumar Mishra Reply Gifting the property to your wife will not give you any tax advantage. Under Section 64(1) of the Act, if an individual transfers a property to the spouse of such individual for inadequate consideration, the income from such property will be clubbed in the hands of the transferor. This will mean that the income from the property will still be clubbed in your hands even after the gift is made. You will, therefore, have no tax advantage in this scheme. Query I work for a multinational corporation in India and travel abroad frequently. I am given an allowance for every day of my stay abroad, by my employer. Will such allowance be taxable in India? Can I claim deduction under Section 80RRA in respect of such allowance if the same is taxable in India? Ravi Reply The allowance to the extent actually spent by you during your stay abroad will not be taxable. The excess over the amount so spent will be taxable as salary if you are `resident and ordinarily resident' in accordance with Section 6 of the Act. Section 10(14)(i) read with Rule 2BB provides that any allowance, whether granted on tour or for the period of journey in connection with the transfer to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty, will be exempt to the extent to which "such sums are actually spent". While this is so, the onus of proving that the sum has actually been spent would lie on the person who seeks to claim the exemption under this section. It may also be noted that if the employee is a `resident but not ordinarily resident' or a non-resident, the said allowance will not be taxable if it is received abroad, as it will be for services rendered abroad and will therefore be deemed to accrue or arise outside India and, hence, will be non-taxable in India. However, the income will be taxable in India to the extent it is not spent if the employee is `resident and ordinarily resident' in India. Section 80RRA allows a deduction to an individual who is a citizen of India and who earns remuneration for service rendered by him outside India. It is felt that the allowance will be in the nature of remuneration and may, therefore, qualify for deduction. It may however be noted that the deduction is available only if the individual is a technician as defined in the section and if the terms and conditions of his service outside India are approved by the Central Government or the prescribed authority. It may also be noted that the deduction under this section for the assessment year 2004-05 (previous year 2003-04) would be 15 per cent of the amount brought into India in convertible foreign exchange within the stipulated time and also that there will be no deduction under this section for the assessment year 2005-06 (previous year 2004-05). Query There are a number of persons who have retired from the Government service and settled in the US with their children. While some are green card holders, the others are American citizens. Though many of them have a pension exceeding Rs 6,000 per month and also rental income and interest from bank deposits, they are neither filing returns in India nor have they applied for permanent account number (PAN). I understand that if their income exceeds Rs 50,000 per annum they are required to file a return in India and that such failure could lead to penal consequences. I also understand that they have to file a return if they satisfy any one of the six economic criteria, such as occupation of a house exceeding a specified floor area, and so on. Are these correct? T. V. Rao Reply You are correct in your understanding that if an individual's total income exceeds Rs 50,000 per annum, he/she would be required to file a return of income in India in accordance with Section 139 of the Act. It will make no difference whether the persons are green card holders or American citizens. Failure to furnish a return within the end of an assessment year may invite a penalty of Rs 5,000 under Section 271F. However, insofar as the economic criteria is concerned, the satisfaction thereof will not lead to the requirement to file a return if the person is a non-resident. The Central Government has issued Notification No. SO 507(E) dated June 11, 2001, exempting non-residents from the requirement to file a return as a result of satisfying any one of the six economic criteria mentioned in the proviso to Section 139(1).
(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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