Taxability is decided upon when you earn income, not when you invest funds

I lived in the US from 1980 to 1998. I returned to India in July 1998 and have been living in India ever since. I have invested my earnings (earned during the period 1980 to 1998) in the US in US stocks and received income as dividends and capital gains, and some pension fund withdrawals. Am I liable to pay taxes in India on US investments although they were earned as a NRI and invested as a NRI during 1980 to 1998?

?Kumar Swamy

Taxability is decided upon when you earn the income and not when you have invested the funds. Since you are currently a resident of India, your global income is taxable in India, including income from investments abroad. If you are being taxed on the same income in both countries, you can take shelter under the Double Taxation Avoidance Agreements between India and the US.

My annual income from salary and interest is below the basic exemption limit. So I have never filed my income tax return. I don?t have a PAN. The bank has deducted TDS on annual interest on FD as it exceeds Rs 10,000. How can I:

a) Get the TDS back?

b) Do something to stop the bank from deducting TDS in future?

?Aarti

Sec 197A read with Rule 29C provides to residents furnishing declarations by the payees in Form-15G (Form-15H for senior citizens) in order to enable the payer make the payment without deduction of tax at source if the tax payable on his estimated total income is nil.

The declaration under Form-15G can be filed only if both the following conditions are satisfied —

1. The tax on estimated total income of the applicant (after claiming deductions under Chapter VI-A related with Sec 80C to Sec 80U) is nil.

2. The second condition is quite complicated. It states that the aggregate of income from (i) dividend other than dividends from domestic companies, (ii) interest on securities (iii) interest other than interest on securities, and (iv) repayment of deposits under the National Saving Scheme, does not exceed the maximum amount, which is not chargeable to tax. Since your total income is below the tax threshold you can file form 15G/H to the bank.

To mitigate the pressure on senior citizens arising out of these complications, the second condition is not applicable to them (tax threshold Rs 2.25 lakh).

This declaration should be made before the very first payment during the year becomes due. If the ITO discovers a defect in the declaration, it is his duty to allow the defect to be rectified if the assessee submits a petition to rectify the defect – Vijay Hemant Finance & Estate Ltd v ITO (1999) 105Taxman519, 238ITR282(Mad).

This facility of using either of the forms is not available to NRIs.

If you have not filed the requisite form and therefore, you have suffered TDS, the only way of obtaining the refund is by filing the returns before the due date for filing returns. This date in your case is July 31 of the next financial year. You will have to apply for PAN for filing the return.

I would like the following information with regards to Public Provident Fund (PPF).

1. To start the PPF account, where do I go? Is it the post office or some banks?

2. What is the legal procedure and documents required to start the PPF account?

3. The investment per year is Rs 500 and the maximum is Rs 70,000. Please correct me if I am wrong.

4. Is there a lock-in period like other Ulip Plans?

5. If I open the account and if I pass away what would happen to the account?

6. If I want to close the account is there a penalty?

?Jonas Barboza

1. You can start a PPF account either with the post office or with any nationalised bank such as SBI, BoB, etc.

2. Normal account opening formalities are needed in terms of photograph, PAN photocopy, address proof, etc.

3. The minimum contribution is Rs 500 per year and the maximum Rs 70,000.

4. The lock-in period is 6 years. After that, you can withdraw 50% of the balance to your credit four years back.

5. One can nominate anyone to receive the proceeds in the event of the account holder passing away. This should be done at the time of opening the account.

6. The account cannot be closed prematurely per se. It is a 15-year scheme and one needs to contribute the minimum Rs 500 per year.

One of our friends passed away and we would like to contribute some money to his family/wife for the welfare of his children. Please let us know what?s the best way to do it and avoid any taxes associated with it. We were thinking of transferring money directly to his wife?s account and asking her to convert that to fixed deposit and receive income every month. I?m not sure that?s the only way. Any help would be appreciated.

? David S

Where any sum of money exceeding Rs 50,000 is received without consideration by an individual or an HUF from any person, the whole of such sum will be charged to income tax of the recipient under the head, Income from Other Sources.

Assuming that your friend?s wife does not have any income, you can give a gift of Rs 1,80,000 to her without attracting any tax liability in her hands.

Note that the phrase any sum of money suggests that the new provisions are applicable to cash gifts only and not other assets such as immovable property or jewellery, bank FD, shares, etc. In other words, such other assets gifted even by a stranger will be free from tax.

The authors may be contacted at wonderlandconsultants@yahoo.com