|NRI can continue making deposit in the existing PPF account|
TAX TALK-03.10.2016-THE HITAVADA
CA. NARESH JAKHOTIA
NRI can continue making deposit in the existing PPF account
My son is working in a US firm since Nov 2015.Hence he has completed more than 180 days stay in US. I understand that now he will be treated as Non-resident Indian (NRI) for Income tax purpose. For last year i.e., A.Y. 2016-17, he has already filed IT return as resident Indian. Please enlighten me on following points:
Any citizens of India between 18 - 60 years of age, whether resident or non-resident, are eligible to subscribe NPS. In the present specific case, your son can continue depositing Rs. 50,000/- in the NPS A/c to claim deduction under section 80CCD(1B).
3. Investment in Shares:
As per RBI mandates, there are certain restrictions for investments in shares India, like NRI cannot hold more than 10% of the total holdings in an Indian listed company (20%, in case of public banks), they cannot trade shares in India on a non-delivery basis, which means they cannot do intra-day trading or short-selling etc. NRIs can invest in Indian stock markets under the portfolio investment scheme (PIS) of the Reserve Bank of India (RBI). Under this scheme, an NRI has to open an NRE/NRO account with an RBI-authorized Indian bank.
As far as the tax treatment of investment in equity market by NRI is concerned, it may be noted that tax liabilities are almost same as that of a resident investor. Long Term Capital Gains [ LTCG ] arising from sale of listed shares or equity schemes of Indian Mutual Funds which are subject to securities transaction tax [ STT ] are totally exempt from tax. Short term capital gains (sale within one year of date of purchase) of listed shares or equity schemes of Indian Mutual Funds which are subject to securities transaction tax is subject to a flat rate of 15% taxation.
4. Taxability in India:
India follows a ‘source rule’ basis of taxation, i.e. it taxes all incomes which accruing/ arising from an employment or work done in India. Any income accruing or arising to any individual in India is taxable in India. It is irrespective of the residential status of the person. Since your son is a non resident, none of his income accruing or arising in USA would be taxable in India. The ground rule for non-resident Indian is that income which is earned outside India is not taxable in India. [The residential status of an individual depends upon the physical stay of the person in India. Confusion often prevails whether the person is a resident or non-resident. Reader may refer Tax Talk dated 27.06.2016 to know more about it].
In your specific case, income in the nature of rent, interest from bank deposits etc will be taxable as per the applicable tax slab of an individual. Dividends from equity shares, equity mutual funds and debt mutual funds are exempt in the hands of the share or unit holder.
5. Return Filing:
Income Tax Return must be filed by an NRI when their total Indian income (before any deductions) is more than Rs 2,50,000 (for AY 2016-17). Income Tax Return must be compulsorily filed in the following cases:
a] NRI has short term or long term capital gains from any investments or assets (even when gains are less than Rs 2,50,000/-).
b] To get a tax refund
c] To carry forward losses so they can be adjusted later.
A return need not be filed if income from short term or long term capital gains is the only income the NRI has and TDS has been done on it.[Section 115G of the Income Tax Act-1961 & Circular No.372 Dated 8.12.1983 issued by CBDT]
[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
or email it at firstname.lastname@example.org]