I have a long-term capital loss of Rs 39,000 on transaction done on NSE/BSE on shares, where I have paid STT.

I have shares of Ambuja cement, which I had purchased more than a year ago. If I submit these shares in the forthcoming open offer of Ambuja cement in November 07, I will incur long-term capital gains. As this transaction will be outside the market (exchanges), I will not pay STT. So I will have to pay capital gains tax at 20% with indexation benefit or at 10% without indexation.

Can I set off this capital gain (from open offer) from the above mentioned long term loss of Rs 39,000?

?R C Randeria

The long-term capital loss on which you have paid STT cannot be set-off against non-STT paid long-term capital gains.

Currently I am working in Chennai and claiming HRA for tax deduction. I am planning to buy a flat through a home loan in Bangalore this year for my mother. I understand, since I don’t live in Bangalore I can claim both HRA and interest on a housing loan as deductions from my salary for income tax calculation. But if I shift to Bangalore in the near future and stay in a rental house, then in that case, can I claim both HRA and interest on housing loans as deductions? Actually my mother is dependent on me and she will be staying in the flat in Bangalore and I have to go for the rental house. I guess, since I am not going to earn any rental from my flat hence I don’t have to add any amount to my “Income from other sources category” while calculating the income tax.

?GhanShan

The HRA and home loan deductions are separate and distinct. One is not connected with another. As long as you are paying rent, then irrespective of whether you own a property or not, you will be allowed to claim the HRA deduction. Similarly, if you own a property and pay EMI thereon, then irrespective of whether you stay in the property or not, you would be allowed the deduction.

I have opened a PPF account on my name before becoming a NRI. Presently my child (8 years) is also a NRI. Can I open a PPF account in his name? I am not interested in tax exemption as applicable for filing tax returns for an Indian citizen, but interested in an 8% return earned on PPF.

?Padukon

NRIs are prohibited from opening a PPF account or investing in any of the post office schemes as well as the RBI savings bonds. However, if a resident who subsequently becomes a NRI during the currency of its term or a NRI who has opened the account before the date of this notification (GSR 585(E) dt 25.7.03) may continue to subscribe till maturity on a non-repatriation basis. This means, they cannot open a new account or extend the scheme beyond its maturity.

I am a citizen of India and staying in India. I am working in a software company. My company wants to send me to US for project related work. I have a H1B VISA. My stay in USA will be 1 year initially. The duration can be extended if needed. Here are my questions:

1. Shall I be called a NRI during my stay in US?

2. I have a Demat account here and I possess shares of different companies. Do I have to sell them before moving to the US?

3. Can I sell them when I am in the US?

4. Can I buy shares when I am in the US?

5. Do I have to pay any tax for the trading?

?Pappu

A resident is one who during a Financial Year (FY), which is from April to March, satisfies any one of the following 2 basic conditions: He is in India for at least a) 182 days in the FY or b) 365 days out of the preceding 4 FYs AND 60 days in the FY. The stay in India need not be continuous. Most persons going abroad for an employment for the first time will have the status of resident since they will be covered by the ‘b’ clause above.

Therefore, if an Indian citizen leaves India in any year for the purpose of employment, or as a member of the crew of an Indian ship, the 60 days in the clause ‘b’ above is to be replaced by 182 days. In other words, they will be treated as residents only if they are in India for 182 days or more in the current FY. A person who is not a resident is a NRI.

You do not have to sell the shares of your existing companies. However, your Demat account will be redesignated as NON PINS and you cannot buy any shares in such a Demat account. You will have to open a separate Demat account in your new status as a NRI under the PINS scheme. Your bank will help out with the procedure for the same.

You can continue to buy shares when you are in the US. The tax depends upon the nature of your trade. However, note that long-term gains are tax-free for all categories of investors, NRIs or otherwise.

?The authors may be contacted at wonderlandconsultants@yahoo.com