Vishnu Nandan Prasad

Reply

You must file a return in India since you have an income of Rs 3,50,000 by way of salary in India, which will be taxable in India. The allowance received by you in US, it appears, will not be taxable since you will be a non-resident in accordance with Section 6 of the Act.

If the salary income is your only source of income, it is chargeable to tax in India, you can claim rebate u/S 88 since your gross total income does not exceed Rs 5,00,000.

The rebate can be claimed at 15 per cent of the payments and investments. The amounts remitted by you out of your savings from the US to India will not become chargeable to tax in India.

Query

The Income-Tax Act gives an option to pay tax on long-term capital gains at 10 per cent of the gains computed without the benefit of indexation in respect of shares.

If the sale is of bonus shares, should the tax be paid on such gain at 20 per cent of the gain computed with the benefit of indexation or at 10 per cent of the gain computed without the benefit of indexation?

S. S. Hitkari

Reply

The cost of acquisition of bonus shares is taken as nil in accordance with Section 55 of the Act. Therefore, the tax on bonus shares should be taken at 10 per cent of the gains computed without the benefit of indexation.

Since the cost is taken as nil, the benefit of indexation will effectively not be available in case of sale of bonus shares. It is assumed that the shares are listed, for only in such case can the tax be taken at 10 per cent of the gains computed without the benefit of indexation.

Query

I have been holding the shares of several companies specified in the BSE-500 index of the Mumbai Stock Exchange. These shares were acquired by me several years ago by way of subscription to a public offer made by these companies.

I have sold some of these shares in the financial year 2003-04. Will I be liable to pay capital gains tax on the gain derived from their sale?

Reply

You may not be eligible for an exemption in respect of the capital gains. Tax will be charged on the same. An exemption is available under Section 10(36) if the following conditions are fulfilled:

Eligible equity has been defined in the Section to be shares purchased in the secondary market and where such share is a constituent of the BSE-500 index of the Stock Exchange, Mumbai, on March 1, 2003 and where the purchase and sale is entered into on a recognised stock exchange in India.

If the share is allotted through a public issue on or after March 1, 2003 and is listed in a recognised stock exchange before March 1, 2004 and the transaction of sale is entered into on a recognised stock exchange in India.

It may be noted that what is relevant is the date of purchase of the shares.

In your case, since you have indicated that the acquisition was by way of public issue of shares, several years ago, the exemption may not be available to you.

Query

I returned to India ain the end of March 2002 after working abroad continuously since April 1993. During these nine years, I did not stay in India except for very brief visits to India for annual vacations.

My stay was not enough to make me a "resident and ordinarily resident" or a "resident but not ordinarily resident". I have kept my savings in FCNR and NRNR deposits.

One of the deposits matured in May 2002 and was renewed as a NRE deposit.

At that time, I had renewed it as a NRE deposit since I was entertaining thoughts of continuing to remain abroad.

Since I did not continue abroad, I took up an employment in November 2002 at Kolkata. This employment I left in November 2003 and took up another employment in Chennai.

I continued to be a resident but not ordinarily resident for the financial years 2002-03 and 2003-04 (assessment years 2003-04 and 2004-05).

Can I now file my returns at Chennai for these two assessment years? Do I have to send any communication to the Assessing Officer at Kolkata about my change of address? Is the NRE account interest taxable?

Sarathy R. P.

Reply

The NRE account interest will not be taxable only if you are resident outside India in accordance with the Foreign Exchange Regulation Act.

In your case, it appears that you may not be classified as a resident outside India and, therefore, the NRE account interest will be chargeable in the assessment years 2003-04 and 2004-05. From your query, it appears that you have not filed any returns in Kolkata.

You can, therefore, proceed to file a return in Chennai without intimating the Assessing Officer at Kolkata. You can also file a return for the said two assessment years now.

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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