BUSINESS
Maintaining your NRI status for tax reasons
I am an Indian citizen and stay in India. My company wants
to send me to the United States for a project. I have an H1-B
visa. My stay there will be for a year initially; the duration
can be extended.
1. Will I be considered a non-resident Indian during my
stay in the US?
2. I have a demat account here and I possess shares of dif-
ferent companies. Do I have to sell them before moving to
the US?
3. Can I sell them when I am in the US?
4. Can I buy shares when I am in the US?
5. Do I have to pay any tax for the trading?
— Bhandary
A Resident is one who during a financial year, from April
to March, satisfies any one of the following basic condi-
tions. He is in India for at least
a) 182 days in the FY, or
b) 365 days out of the preceding four FYs and 60 days in
the FY. The stay in India need not be continuous.
Most persons going abroad for employment for the first
time will have the status of resident since they will be covered by the ‘b’ clause above. Therefore, to provide for such
a situation, if an Indian citizen leaves India in any year for
the purpose of employment, or as a member of the crew of
an Indian ship, the 60 days in the clause ‘b’ above is to be
replaced by 182 days. In other words, they will be treated as
residents only if they are in India for 182 days or more in
the current FY. A person who is not a resident is an NRI.
You do not have to sell the shares of your existing companies. However, your demat account will be redesignated as
NON PINS and you cannot buy any shares in such a demat
account. You will have to open a separate one in your new
status as NRI under the PINS scheme. Your bank will help
out with the procedure. You can continue to buy shares
when you are in the US. The taxes depend upon the nature
of your trade, however, note that long-term gains are tax-free for all categories of investors, NRIs or otherwise.
When should I return to India for the most tax optimali-
ty? As of now, I am planning to return December 1, 2011.
The record of my past stay in India is as follows:
FY
07-08
08-09
09-10
10-11
11-12
In India
275 Days
15 Days
0 Days
176 Days
122 Days
Out of India
90 Days
350 Days
365 Days
189 Days
243 Days
- Bhadha
The factors that make a resident or an NRI are listed in
the question above. The forex income of an NRI is not taxable in India. In the case of a resident, the Indian income,
along with the forex income is taxable in India, whether it
is sent to India or not.
For NRIs who come to India on vacation or short trips
A N
SHANBHAG
SANDEEP
SHANBHAG
(business or otherwise), if an Indian citizen or a person of
Indian origin, who is out of India, comes to visit India, the
period of ‘60 days’ is to be replaced by 182 days.
For those returning permanently to India, this replacement of 60 days with 182 days is not available.
Consequently, those returning within four years become
residents immediately on return, unless they return in
February or March.
If you apply this rule, you will find that you are definitely
an NRI for three successive years from 2008-2009 to
2010-2011. In the case of 2011-2012, the requirement is of
60 days and not 182 days.
Therefore, your status would depend upon whether you
return to India permanently on or after February 2, 2012.
After my parents’ death, I inherited our ancestral home in
India. I am planning to sell the house and move the money
to the United Kingdom, where I live. Will I have to pay any
tax? I have read in the past that India does not impose any
inheritance tax.
— Shrikant
Yes, India does not impose any inheritance tax.
Therefore, there will be no tax upon the inheritance of the
house per se. In other words, if you were to continue to own
the house, there would be no tax incidence. However, when
you sell the house, in effect, you are selling an asset that you
own. So, capital gains tax will be payable.
The holding period of the property by your parents will
be combined with your holding period in order to arrive at
the fact whether the asset is long-term or short-term. If
your combined holding period is for over three years, this
sale will attract long-term capital gain tax.
LTCG is to be computed by deducting from the full value
of the consideration
Any expenditure incurred in connection with the transfer
Indexed cost of acquisition
Indexed cost of improvement.
Indexed cost = Actual cost x (Index for the year of sale /
Index for the year of purchase).
For example, assuming that your parents purchased the
property in 1981-82, if you sell it in the current FY, you can
multiply the cost paid by them by 7.85 (=785/100) since the
CII for FY 11-12 is 785 and that for FY 81-82 is 100. This
will be your indexed cost of acquisition. Subtract this cost
from the net sales proceeds (after deducting
brokerage/commissions etc) to arrive at the LTCG.
Readers who wish to ask A N Shanbhag a question can
fill in the following details and mail the coupon to: The
Business Editor, India Abroad, 42 Broadway, 18th Floor,
New York, NY 10004
Or fax it to 212-727 9730
Your question:
Name:
Address:
A N Shanbhag is an investment consultant and author of In the
Wonderland of Investment; How to Convert a Taxpayer into a
Taxsaver; NRI Investment Guide. This article does not constitute
tax or legal advice. Consult your tax or legal advisor before making
any tax- or legally-related investment decisions. The authors may
be contacted at wonderlandconsultants@yahoo.com
;Page A32
had worked with PepsiCo and Visa), spoke
about the ‘disruption of money.’
‘Do we serve at the altar of money or
should money be serving at the altar of peo-
ple,’ he asked.
Tracing money from its origin, he pondered over what the future of money would
look like. Thus far, he noted, money had
evolved around ‘form’ (coins, livestock, and
currency). He urged the disruption of this
‘linear thinking’ about money.
‘Each time you swipe a card, you leave a
little bread crumb of your intent and
actions through your transactions and if I
In the business of disruption
can get really smart about understanding
your intent, actions and your transactions…
what can I possibly do next with that… I
can understand your future intent and I
can begin to shape the future intent and
your behavior,’ he said. ‘The next innova-
tion of money will be money with IQ, intel-
ligent money.’
Masand also asked entrepreneurs not to
get hung up on the ‘how’ of the idea, but to
first come up with the big idea.
Rohan Oza, who has worked with Coke
and Vitamin Water and formed Idea
Merchants Capital, described as a platform
for inventing and building iconic brands,
spoke of creative disruption in the food and
beverages sector.
