Taxes on pension from India
My brother (an Indian citizen) and I (a non-resident
Indian) inherited land in India. My wife (a United States cit-
izen) and I have built a home on that property, by remitting
dollars, in increments via a bank in India in the late 1990s.
My brother lives in the home and maintains it. We have
agreed to sell the house.
1. How do you establish the value of the land, which was
bought by our parents many years ago? No purchase price is
2. How do we pay capital gains from the sale, since the cost
basis of the house is difficult, because the particular bank in
India closed some years ago? We have some documents of
remittance, but not all. We have used some traveler checks
3. How do you divide the proceeds of the house sale? How
can I repatriate my portion? Is there a limit?
— Manas K Ghosh
If the land purchase and subsequent house built has been
prior to April 1, 1981, and the house has been constructed
then the Fair Market Value as on that date (April 1, 1981) as
assessed by an official chartered valuer can be adopted as
the official cost of the property.
The land in all probability has been acquired before April
1981. However, if the house has been built subsequently,
you will have to have some documentary proof (payments
made to contractors, builder, etc in rupees) as to its cost.
Else you will have no other option but to adopt the cost as
Dividing the net sales proceeds (after taxes) between the
family members can be done as per the will of your parents
or in the absence of a will, by way of family arrangement. In
the case of any dispute, you will have to apply for a probate.
The limit for remitting the funds abroad is the equivalent
of $1 million per year. If your share is more than this, you
can stagger the proceeds over the years.
Is pension (from one of the state governments of India)
taxable in the US or India for a US citizen with overseas cit-
izenship of India?
shares. Just remember that no additions are allowed in the
non-PINS demat account. Just like in the case of MFs,
amounts representing sale proceeds of shares can be remitted abroad. The total amount that can be remitted abroad
from your Indian investments made before you became an
NRI is limited to $1 million per annum. Investments made
after becoming an NRI, if effected through the non-resident external account, can be repatriated abroad without
A relative has acquired British citizenship and has OCI.
How are the rules relating to PPF, tax laws different for
NRIs and OCI?
In other words, any pension paid to by a state government
of India will only be taxable in India.
I am 30 and live in India. I have invested in shares, mutu-
al funds, public provident fund and life insurance policies. I
also own an apartment. Now, I have been offered a job in the
US and intend to relocate there. I will be based in the US at
least for the next decade. Can I continue to buy and sell
shares? What about mutual funds? May I transfer the pro-
ceeds from my PPF and life insurance to my US bank as and
when these investments mature?
Our articles refer to NRIs and persons of Indian origin. A
PIO is an NRI who has subsequently taken up foreign citizenship. Almost all rules and regulations are equally applicable to NRIs and PIOs. OCI is a facility provided to PIOs
— it is not a legal status under the law. So your relative is a
PIO under the law who has acquired OCI and PPF and tax
laws applicable to him are the same as applicable to an
Readers who wish to ask A N Shanbhag a question can
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— Raj (Mahesh Rajyaguru)
As per Clause 2(a) of Article 19 of the Double Tax
Avoidance Agreement between India and the US, any pension paid by, or out of funds created by a Contracting State
or a political sub-division or a local authority thereof to an
individual in respect of services rendered to that state or
sub-division or authority shall be taxable only in that state.
— Tamal Batra
Even after you move to the US, you can continue to invest
in the PPF account till its 15 year period. Upon maturity,
the money will be credited to your non-resident external
account in India (which you will have to open if you have
not already). Ditto for life insurance maturity proceeds.
The money can be remitted to the US. You can continue to
hold your MF investments, buy or sell as you desire. Again,
the sale proceeds, net of applicable taxes, if any, can be
credited to the NRO account and remitted therefrom.
Regarding shares, Indian laws allow you to buy and sell
shares on any Indian stock exchange even if you are US
based. However, you will have to open a separate demat
account known as the portfolio investment scheme demat
account. After obtaining NRI status, you can only trade in
this PINS demat account. Your existing share investments
will have to be transferred to a non-PINS demat account.
You will not be allowed to buy into this non-PINS demat
account, you can only sell from the same. Of course, if you
have a long-term horizon, you may continue to hold the
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 email@example.com
One of the key initiatives we are working
on is a project to clean River Yamuna,
reportedly one of the most polluted rivers in
the world and, as many experts say, the most
polluted in India. Students, with the help of
experts, have drawn a business plan, and
implementing it would be one of the biggest
projects undertaken by any NGO in India.
Which other American schools are
involved in the project?
We are working on starting chapters at
some 30 universities across America and
the list includes University of Chicago,
Johns Hopkins in Maryland, Rice in Texas
and Princeton in New Jersey.
Today, as we help nurture chapters all over
the US and India and set our sights on even
more ambitious interactions, we have the
confidence to continue forward and push
the boundaries of what is possible within
the US-Indian relationship. Hopefully, as
we move forward with our work, ( we will)
bring more engaged and excited students
into the organization to help spread our
mission and build more bridges along the
‘There was no good forum for interaction
between young people in US and India’
You have written an essay in the Harvard
Crimson about your experience in the
Silicon Valley during a summer. Why did it
have such a deep impact?
The support for and belief in second
chances and risk-taking seems to be the
keystone to the rest of the growth and innovation that abounds in the Bay Area. The
Harvard community (and business schools
and would be entrepreneurs anywhere)
would benefit if we encouraged similar risk-taking, created support structures that offer
resources for experimentation and provided
a safety net when those experiments fail.
In San Francisco, I met many people who
had failed, some after taking tens or hun-
dreds of millions in venture capital funding,
who were now successful entrepreneurs.
One entrepreneur who was fairly senior
at Go.com, a tech company that took a huge
amount of VC funding before going bust,
stands out particularly. Rather than causing
his career to stall, his experiences
at Go.com helped him build a reputation as
a tough entrepreneur who was willing to
keep trying to innovate and work hard at
new ideas, a tenacity that was rewarded as
he received VC funding for his latest start-
up. In that environment, where failure can
be an asset, it is no wonder that new start-
ups appear and innovate at a rapid pace;
many fail, but there is little stigma to that