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T. Banusekar

I AM a non-resident. My wife and I were earlier working in India. I have since moved over to Dubai where both my wife and myself are employed. We have made substantial savings out of our earnings in Dubai and our savings have been invested in a flat in India, RBI relief bonds, PPF accounts, mutual funds and shares.

I now propose to return to India and I will become a resident next year. After I become a resident what will be the tax implications in respect of the income from these investments? I filed my return until the year ended March 31, 2000, in India. but have not done so after that. Can I now file a return in India for the year ended March 31, 2005?

Neil Kaye

Reply

It appears that all the investments are in India. The taxability of the income from these investments will therefore not vary irrespective of your residential status. The income from all these investments will be taxable in India unless they are otherwise exempt. You may note that interest from PPF account, income from mutual funds and dividend from shares are exempt.

Insofar as income from RBI relief bonds is concerned, the taxability will depend on whether the bonds are tax-free or not. If they are tax-free, the income from the same will not be taxable. Else, the same will be taxable. Income from the flat in India will be taxable if the property is let out. If for the years ended March 31, 2001 to March 31, 2004, you had income exceeding the maximum amount not chargeable to tax, you would have had to file a return in India.

One aspect that may be mentioned is that the fact of not filing a return for earlier years will not affect your filing the return for the year ended March 31, 2005. It would, however, be advisable for you to file a return for the earlier years if the total income has exceeded the maximum amount not chargeable to tax.

Query

I bought a flat in November 2004, and paid the full consideration for it on December 15, 2004. Possession was given to me the same day and I occupied the flat immediately. I started paying the EMI from November 2004. Can I claim the tax benefit in respect of the EMI payments of November and December 2004 in the financial year 2004-05?

Mahendra

Reply

You can claim the tax benefits in respect of the principal and interest components of the EMI relating to November and December 2004 in the assessment year 2005-06 (previous year 2004-05). This is because you have already taken possession of the flat, the purchase of which was completed in financial year 2004-05 itself.

Query

Please clarify whether rebate under Section 88B will be available to a senior citizen who is a non-resident.

M. Mathews

Reply

This rebate will not be available to a non-resident. Only a senior citizen who is resident in India can claim this rebate.

Query

I own two residential properties, one each in Mumbai and Kolkata. I work in Mumbai and stay in a rented premises, as it is not convenient for me to stay in the house that I own in Mumbai. I have been claiming the property at Kolkata as self-occupied and have been offering the notional income from the property in Mumbai to tax.

I have also been claiming the interest on housing loan borrowed for acquiring the property in Mumbai as a deduction in computing the income from this property. I now propose to purchase one more residential house in Mumbai. For this, I propose to take a housing loan.

I will be staying in this new residential house that I propose to purchase. Can I continue to claim the residential house Kolkata as a self-occupied even though I would be staying in the new house that I am to purchase in Mumbai?

D. Pal

Reply

You cannot treat the house in Kolkata as self-occupied. You will have to offer the notional income from the property to tax. It is only the new house in Mumbai which can be treated as self-occupied. Your claim that the property in Kolkata is self-occupied until date is not correct. The law permits a person to treat a property as self-occupied if it is in the actual occupation of the owner and where he derives no benefit from such properties.

The only relaxation in such a case will be where the property is located at a place different from where the person exercises his business, profession or employment and where such person does not own any other house property.

In the instant case, though your employment was in Mumbai while the property which you claimed as self-occupied was in Kolkata, the same should not have been claimed as self-occupied though not let out since you own one other property in Mumbai.

Short-term confusion

I AM government servant and during the financial year 2004-05, my taxable salary income was Rs 1,36,451. This apart, there is a short-term capital gain of Rs 24,425, which I have earned from sale of shares invested at the time of the initial public offer made by companies.

Some persons have advised me that the short-term capital gain is to be added to my salary income and tax is to be paid at the slab rates that are applicable.

However, certain other persons also advise me that the short-term capital gain will be taxed only at 10 per cent. Which of these is the correct position in law?

J. K. Rajesh

Reply

If the sale of shares is through a recognised stock exchange on or after October 1, 2004, and if securities transaction tax has been paid on such transaction at the time of sale, tax will be payable on such short-term capital gain at 10 per cent (to be increased by an additional surcharge of 2 per cent).

If any of these conditions are not satisfied, capital gains tax will be taxed at the normal rates applicable to you after taking into account the other income that is earned by you.

(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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