I-T limit of Rs 1 lakh not applicable for NRIs

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: I am on a personal family visit to the US. Is the current limit of 1 lakh, applicable to Residents only and not to NRI on their income in India from dividends, LTCG on investments prior to their leaving India. The tax on LTCG has been removed. Here again, is this not applicable to NRIs on the IA income in India on shares held in India?
S Puri

The limit of Rs 1 lakh is not applicable to NRIs. However, dividends are tax-free in the hands of the investor, whether he is an NRI or Resident. Also (eligible) LTCG is tax-free in the hands of the investor, regardless of his status.

We are NRIs/PIOs. We have invested in an open-ended tax-planning scheme - dividend option. What are our tax obligations? Why do these funds perform so well as compared to pure equity funds? Please comment.
Asim Ghosh

There are no tax obligations, none whatsoever. The dividends are tax-free and so is the capital gains as and when you sell the units. Thanks to the lock-in of three years, the fund managers have better freedom to play. Since they need not keep as much funds liquid to meet repurchase obligations as they would have to in a pure equity-based open-ended scheme.

My parents came to the US in November last and they may not return to India during the current FY 2004-05 and stay here for a minimum period of 60 days to retain their Resident status. Thus, they would be NRIs for the current FY, right? My father is a retired person drawing pension in India. Besides pension, he has interest income on his bank deposits in India. He is a senior citizen and has been filing his IT returns regularly.

I would like to have your advice on the following points:

1. Can he now open a new PPF account in his name and deposit money into the account from out of the balance in his SB account with his bank in India. Will he be entitled to the income tax rebate u/s 88 of the IT Act insofar as the return for the current FY 2004-05 is concerned? I read somewhere that pursuant to a Government notification some time in 2003 or so, NRIs are not allowed to open PPF accounts. Is this right and if so what is the implication of the notification?