BUSINESS
Wealth tax for NRIs
On a visit to India, an accountant mentioned that there is
wealth tax applicable in India. Is it applicable to a non-resi-
dent Indian?
— Nirman
Wealth tax is almost as old as income tax. Over the years,
its sting has been diluted. It is levied only on unproductive
assets and, therefore, investments in shares, debentures,
mutual funds, etc, are exempt from wealth tax. Only the
following are considered as ‘assets’ for wealth tax:
Any building or land used as residential or commercial
purposes situated within 15 miles from the local limit of
any municipality, but does not include-
a. Residential house of a company allotted to its employ-
ee or a whole-time director with a gross annual salary of
under Rs 500,000 ($10,000)
b. Houses forming part of stock-in-trade
c. Houses used for business or profession
d. Residential property let out for a minimum of 300
days in a year
e. Commercial establishments and complexes
f. One house or part of a house or a plot of land not
exceeding 500 square meters, belonging to an individual or
an HUF
Motor cars, yachts, boats, aircraft, jewelry, bullion, furni-
ture, utensils or any other article made wholly or partly of
precious metals other than those used in the business of
running them on hire or as stock-in-trade used for com-
mercial purposes.
Cash in hand in excess of Rs 50,000 ($1,000) of individuals and HUFs and in other cases, amounts not recorded in
the books of accounts.
Net Wealth is the aggregate value of all these assets in
excess of the debts outstanding on such assets. The minimum threshold of wealth tax is as high as Rs 300,000
($6,000). Above that limit, the tax is as low as 1 percent.
should I provide — my India address or London one? Do I
have to apply as a resident Indian or an NRI? By taking a
PAN will I be liable to filing income tax returns?
— Panchal
Obtaining a PAN doesn’t make you liable for paying
income tax. Your liability to tax arises solely on the basis of
whether you earn Indian income or not. As you are in
London on employment, you will be an NRI and your
London income will not be taxable in India.
You have to make the application of PAN in form 49A.
Download the form from tin.nsdl.com. For proof of residence, submit the photocopy of your passport. The address
that appears therein will do.
A N
SHANBHAG
SANDEEP
SHANBHAG
being his GPA holder in my name. Should the proceeds be
reflected in my tax returns or his?
— Sajeed
a. There is no limit on the amount he can send to India.
b. Yes, the amount withdrawn by you either for household
expenses or investments in your names would be treated as
gifts to you. Gifts by close relatives are not liable to Indian
income tax and being your son, as per the law, he qualifies
to be your relative. There is no limit on the amount that can
be gifted.
To safeguard against any hassles, it is advisable to follow
proper gift procedure. All that is required is an offer by the
donor and acceptance thereof by the donee in black and
white. The donee should request the donor for a gift and
then the donor should remit the amount to the donee.
Alternatively, the donor can offer the gift. In either case, it
is necessary for the donee to accept the gift in writing
(maybe through a thank you note). Only then it would be
considered as a gift in India. It is preferable to mention the
relationship between the donor and the donee. The department has a right to inquire into the genuineness of the
gifts.
c. The rent is his own income and exigible to tax in his
hands. Consequently, if his Indian income is over Rs
180,000 ($3,600), he will have to file returns. He will also
have to indicate that this amount is gifted to you as per
para-2 above.
I live in the US. I am planning to buy a residential proper-
ty in Thane, Maharashtra. I have got different opinions
about whether I have to submit Form IPI-7. What are the
tax implications on sale of this property?
— Pranav Hugar
The Reserve Bank of India has given general permission
for NRIs to acquire immovable property, so Form IPI-7 is
not required. If you hold the property for three years or
more, you will have to pay long-term capital gains tax at 20
percent on indexed cost. Else, the profit on sale will be
added to your normal income and taxed at the slab rates
applicable to you.
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:
I am a senior citizen. My son is in the United States and
works with an information technology company.
a. Is there any limit on his remittance/repatriation (out of
his salary) to his non resident external account?
b. As a general power of attorney holder, I invest the
money received in my/my wife’s name. Is it mandatory to
reflect the money received by us in our income tax returns
or only the interest earned is to be accounted for?
c. Is it obligatory on his part to endorse his remittance as
gift to parent? Can it be deemed to be gifted to parents?
d. My son owns a flat and the rent is being invested by me
Address:
To invest in India either in the stock market or in mutual
funds, one requires a permanent account number. How do I
apply for PAN from London, where I work? Which 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
‘India’s growing economy should not be seen as a burden on the US’
;Page A38
‘The forum reviewed progress on past
recommendations, identified initiatives
that have been completed since the last
round of the CEO Forum in November
2010, and highlighted new initiatives
undertaken by US and Indian public and
private sector groups for 2011,’ Cote and
Tata said in their statement. ‘The members
of the US-India CEO Forum are pleased
with the commitment of the US and Indian
governments to prioritize this important
economic and strategic relationship.’
The new initiatives agreed upon at last
week’s meeting, according to the statement,
were the Infrastructure Debt Fund; clean
drinking water and conservation, where
the CEOs ‘pledged to work together to
develop a water awareness fund and cam-
paign, analyze water conservation in indus-
trial use… create a private sector advisory
group to the Indian ministry of water on
technology and global best practices for
policy;’ an energy-efficient buildings proj-
ect; and a cold chain storage and distribu-
tion project.
