India Abroad May 2, 2014 A43 BUSINESS
My daughter, a United States citizen, wishes that I start liv-
ing with her. She has applied for a Green Card for me. I can-
not completely wind up my life in India, so at least for a start,
I plan to stay for around 8, 9 months of the year in the US and
the rest of the time in India.
I will have no income in the US. In India I have a couple of
bank accounts, fixed deposits and shares. My total income for
the year through interest and dividends is around Rs 750,000
($12,275). I file my tax returns as a
Senior Citizen in India.
1. Will my status change to
Nonresident Indian? If so, to which
authority do I have to declare it to?
2. Can I continue to maintain my
bank accounts and other invest-
ments and file my tax returns the
way I have been doing?
3. As an NRI, will I continue to be
entitled to the additional benefit of
tax exemption for Senior Citizens?
— S Mistry
An Indian resident is one who is
in India for 182 days or more in the
financial year or one who is in India for 60 days or more and for 365
days or more in the course of the past four financial years.
Though the first condition would not be applicable to you
(since you will not be in India for more than 182 days), you
need to check if you satisfy the second condition (60 days in
the financial year AND 365 days in past four years). As long
as you satisfy this condition for each financial year, you will
continue to be a resident of India for that financial year. In
other words, you will have to keep on ascertaining whether
you qualify as a resident of India for each new financial year.
As long as you continue to be a resident of India, you may
continue your resident bank account and also avail of the
higher tax exemption for senior citizens.
For any year that you do not qualify (and become an NRI),
you will have to inform the banks of the change of status. The
higher exemption for senior citizens is not available to NRIs.
I live in the United Kingdom while my brother resides in
India. We jointly own a property in Mumbai, which has been
rented out to a corporate. As I am the first holder of this prop-
erty, so far I was receiving the rent and it was being credited to
my Nonresident Ordinary account. Not only does the corpo-
rate deduct tax at 30 percent, I also have to file my tax returns
in India. I find this inconvenient.
Is it possible to receive the full rental income only in the
name of one holder, since it would be much easier if my broth-
er (who is the joint holder of the property anyway) were to
receive the rent instead of me? Withholding tax credit wise as
well as return filing wise, this would be much easier. And peri-
odically, say once in 2, 3 years, he would send me the rent by
way of wire transfer. What paper-
work would be required to ensure
this new proposed arrangement?
— Jon Doshi
For the purpose of income tax,
the ownership of any asset, held
jointly by two or more persons, has
to be decided on the basis of the
person(s) who has subscribed
funds for purchase of the asset and
not on whose name is first.
For example, there are many persons who buy an asset in the
name of their spouses or children,
In your case, the property may have been purchased jointly, but the beneficial ownership for tax benefits would be in
proportion to the actual contribution of each joint owner
towards the purchase cost of the property.
In other words, your brother can only receive so much rent
as is his contribution towards the purchase cost of the property.
I am a naturalized US citizen. I had purchased property in
India in 1980 when I was residing in India as an Indian citizen. Now I am in the process of selling it. I have an NRO
account in India and the proceeds from the sale will be
deposited into it. After paying the taxes I wish to repatriate
the proceeds to the US.
However, the property has been acquired so long ago that I
have absolutely no record of the amount that I had paid to
acquire it. How do I estimate the appropriate amount of tax?
Someone in India mentioned that in the absence of any proof,
I have no option but to submit the entire sale proceeds as capital gains and pay tax on the same.
— M K Chakraborty
For assets purchased prior to April 1, 1981, the income tax
law allows the taxpayer the option of adoption the fair value
of the asset as on April 1, 1981 instead of the historical cost.
Since the property has been acquired by you prior to 1981,
you can take advantage of this provision.
Get your property valued as on April 1, 1981 from an official valuer operating in the city where the property is located.
Multiply this valuation by the Cost Inflation Index (to
account for inflation) which is 9.39 for FY 13-14. Subtract the
result from your net sale price. That would be your capital
gain. The tax rate is 20.6% on this amount.
You can, if you desire to do so, save the tax by taking some
actions, but that would lock your funds for some years.
Employ a tax consultant to assist you in paying tax and give
you a certificate. This certificate is required by the bank if you
wish to remit the money.
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
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
Managing rent from jointly owned property
It isn’t right to presume that a rise in rate of interest will
curb inflation. Inflation is actually a rise in food prices
caused by bottlenecks in agriculture. And if the food prices
go up, there is an escalation in prices of all commodities
across the board.
Hence, inflation should not be the reason to hike interest
Moreover, if rates are cut, it sends out a positive signal to
the industry and in turn paves the way for industrial recovery.
Now that our current account deficit has come down, we
must consolidate our position economically.
In a recent interview to India Abroad (April 4), economist
Ashok Mitra had said the Indian economy can’t improve
unless the American economy looks up. Do you agree?
This is true only as long as we are overtly dependent on
exports to first world countries and also on investments by
An indiscriminate approach to globalization is indeed
flawed. To ensure growth, we must focus on domestic
It’s a pity that the proportion of irrigated area in agriculture in our country is still around 48 percent only. We need
to put more emphasis on agriculture and proportion of irrigated area should be expanded to 75 percent.
It’s unfortunate that 10 government-owned fertilizer factories are now either shut or are sick. They have to be
revived for the benefit of the agricultural sector.
Do you think foreign direct investment in retail should be
allowed? Will it help the economy?
Foreign direct investment in single brand retail has been
prevalent in India for some time. We need to do a thorough
assessment of its impact on the economy. Unless we are satisfied with the data, we should not invite more FDI in retail.
We need to guard the interests of the unorganized retailers. Any mechanical obsession with FDI in retail is bound to
be disastrous for the economy.
It’s being alleged that Petroleum Minister M Veerappa
Moily has been backing the interest of the Ambani family.
What is your opinion?
I wouldn’t like to take the name of any minister or any cor-
porate house regarding this.
But I must mention that even 20 years back, we could
meet 30 percent of our oil and natural gas requirements.
But our self-sufficiency has decreased in recent times and
now we import 80 percent oil and natural gas.
We need to ask ourselves, why. We have such huge
Public sector units like Oil and Natural Gas Corporation
and Coal India Limited should be given the full right to
explore our resources so that we don’t become excessively
dependent on foreign countries to meet our needs.
I have nothing against imports. But there has to be a balanced approach.
Can India become a superpower? How long would it take
the country to achieve that status?
I have strong faith in India’s potential. I don’t belong to
the group that believes that all the good things that India
ever got are because of the British regime. But to become a
superpower, India needs to revitalize its economy.
Besides, it has to ensure equal health and education facilities for all. We must not forget that we don’t rank well in the
human development index.
‘India’s economy can never improve if agriculture is neglected’