I purchased a house in Mumbai
on mortgage and gave it out on rent.
The rent is set off against the mort-
As per my chartered accountant,
there is another tax deduction on
payment of the capital part of the
mortgage that too can be set off.
Consequently, only a small portion
of the rent is left over that remains
I purchased this property in June
2010. I wish to sell it. But I have
read in your columns that to claim
tax deduction, the property should
not be sold for a minimum period of
five financial years from the date of
If the purchase date was June 2010, would the financial
year April 2010 — March 2011 be considered as the first
financial or would it be the following year? Do I have to wait
until April 2015 (2010+5 years) to sell my flat?
The clause is that the property should not be sold before
the expiry of five years from the end of the financial year in
which possession of the property has been obtained. So, in
your case, if you have purchased the property in June 2010,
it would mean possession has been obtained in FY 2010-
2011. Consequently, if you will sell the property before March
31, 2016, the past deductions claimed will be added back as
income. It is not 2010+5 years as mentioned in your query
instead it is 2011+5 years. You will have to wait till April 2016
to sell the flat if you don’t want to lose the income tax deductions claimed in the past.
Under the memorandum of Family Settlement (notarized)
between legal heirs of my father, I received my share of Rs 10
million ($167,000) in the family shop retained by my brother.
Am I liable to pay tax on this?
— J P Mehta
It is an established principle under the Indian law that a
family settlement, per se, doesn’t give rise to any tax liability.
More specifically, family arrangement is an agreement
between the members of the same family, intended general-
ly and reasonably for the benefit of the family either by com-
promising doubtful or disputed
rights or by preserving the family
property or the peace and security
of the family by avoiding litigation
or by saving its honor. Such
arrangements are governed by
principles which are not applicable
to dealings between strangers. It is
for the interest of the family, for the
harmonious way of living. So, such
realignment of interest by way of
effecting family arrangement
among the family members will not
amount to transfer and there is no
chargeable capital gains arising
from that transaction. (See CIT v A
L Ramanathan -245-ITR-
In an earlier column, you mentioned if the property was self
acquired, the owner could bequeath his assets to anyone as
per his/her wish. You advised the owner to get the will registered for adequate precaution lest it got contested. Can a registered will not be contested and even if contested, shall the
spirit of the will prevail?
— H S Ahluwalia
Anyone who desires to contest a will, per se, can do so. It is
their birth right. To protect oneself against those who use
this privilege indiscriminately, the law has provided a protection by way of registration. Registration of the will signifies
that it is authentic and official. If someone contests your
claim, in spite of registration, you have better chances of winning.
I am a United States citizen and a Person of Indian Origin
card holder. I am going to work as an independent management consultant in Mumbai over the next one year starting
October 15. I have also obtained a Permanent Account
Number card. I will exceed 183 days in India from financial
Do I need anything from the visa perspective prior to taking
What is the best way to structure my income from Indian
and US tax purposes?
— Sanjeev Mahajan
1. From the data provided by you, it appears that you will
be in India for a little over 167 days (and not 182 days) dur-
ing FY 2014-2015. Therefore, you will continue to retain
your Nonresident Indian status in this FY (2014-2015).
2. If your stay in India exceeds 182 days, it appears that you
will be a Resident but not Ordinarily Resident and in that
case, your overseas income will not be taxable in India.
RNOR is one who satisfies one of the following conditions:
a. S/he has been a non-resident in India in nine out of the
10 previous years preceding that year, or
b. S/he has, during the seven previous years preceding that
year, been in India for a period of, or periods amounting in
all to 729 days or less.
3. You will have to arrive in India with a proper visa. Your
PIO card will be a good support, but obtain a proper visa.
4. If your Indian income is taxable in the US, you will be
able to claim the benefit of Double taxation Avoidance
Agreement between India and the US.
A N SHANBHAG SANDEEP SHANBHAG
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 firstname.lastname@example.org
Under Indian law, a family settlement
doesn’t give rise to tax liability
Tihar Jail gets a new factory
For eight hours a day, six days a week, inmates of Tihar
Jail in Delhi gather in an airy tin-roofed shed in Jail Two to
tape long strands of insulated wire into harnesses for the
Alto 800, one of Maruti Suzuki’s most popular cars. The
plant, operated by Minda Furukawa Electric is a public-pri-
vate-partnership between the Tihar prison complex and the
private auto component maker. The company has trained
30 inmates, and work is underway to build a much larger
facility, to employ 250 prisoners on two shifts.
Haryana government twisted
norms to favor DLF
The Haryana government favored real estate giant DLF to
make windfall gains through the allotment of prime proper-
ty in Wazirabad village of Gurgaon in 2010 by twisting
norms of allotment in the company’s favor, according to a
report in Business Standard. DLF was banned by the
Securities and Exchange Board of India earlier this month
from accessing the capital markets for three years as it sup-
pressed information during its initial public offering.
India’s airlines face talent crunch
India’s aviation sector has seen an exodus of talent. With
stressful jobs, lack of opportunities, many senior aviation
executives have migrated to other countries. Airlines are
now struggling to bring in chief executives from overseas.
Airbus, Boeing bullish on India
Aircraft manufacturers Airbus and Boeing see big busi-
ness in India. Airbus has zoomed ahead of Boeing with a
backlog of 502 plane orders to be delivered in the next 10
years. That is more than four times the order book of
Boeing’s 130 planes.
India decontrols diesel pricing
The Indian government, in a much-awaited reform on
energy pricing, deregulated — linked the price of diesel to
market price — effective October 10. India had decontrolled
petrol pricing in 2010.
Abhishek Bachchan to launch sports venture firm
Actor Abhishek Bachchan is keen to explore sports entre-
preneurship more seriously after his stint as the owner of a
team in the Pro Kabaddi League. He is in the process of set-
ting up a separate company to handle his ventures in the
business of sports, which should be in place by the time the
second season of the PKL takes off in March 2015.
Bachchan earlier snapped up the opportunity to own a
football team in the ongoing Hero Indian Super League.
the week that was 3Page A27