Money items are tax exempt however curiosity from them is taxable

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I dwell in Poland and remit cash often to my brother in India, who takes care of agricultural property in our village. He deposits this cash in an account in his personal title. Does he must pay tax on it? Additionally, does he should pay tax on any curiosity earned on this cash? My brother has different sources of earnings, apart from agriculture and recordsdata a tax return yearly. 

—Pushpinder Bajwa

Switch of cash to your brother with no consideration will quantity to a present within the fingers of your brother. There isn’t a reward tax in India. Nonetheless, earnings tax is payable on any sum of cash, movable property or immovable property acquired by a person with out consideration (that’s, with no quid professional quo), besides items acquired from a relative. Beneath the income-tax regulation, the time period ‘relative’ consists of:

i. partner, 

ii. brother or sister, 

iii. brother or sister of the partner, 

iv. brother or sister of both of the mother and father, 

v. any lineal ascendant or descendant, 

vi. any lineal ascendant or descendant of the partner, and 

vii. partner of the individual referred to in clauses (ii) to (vi). 

Due to this fact, a present of cash to your brother is not going to be topic to tax in India. Your brother will likely be required to pay tax on the curiosity earnings and report it in his India income-tax return. He might get a deduction below Part 80TTA of the Earnings-tax Act, 1961 for curiosity earnings from financial savings financial institution accounts in India as much as Rs10,000.

I’m a everlasting resident of United States. I dwell within the US and India however generate profits solely in India. How do I switch my earnings to a US checking account? Is it okay to remit from my Indian checking account to a US checking account? Are there any restrictions or limits? Additionally, is it okay to switch cash to my US accounts, from a taxation standpoint? 

—Kailash 

Beneath the change management regulation, a non-resident Indian is allowed to repatriate an quantity of as much as $1 million per monetary yr out of balances held within the non-resident (atypical) (NRO) account arising “from his/her reputable receivables in India”. That is topic to a certificates issued by a chartered accountant within the prescribed format. All remittances are topic to cost of taxes as relevant in India. The residential standing below the change management regulation is completely different from income-tax regulation. 

Taxability in India depends upon the next elements: 

(a) supply of earnings, and

(b) residential standing as per income-tax regulation.

Usually, supply of earnings lies the place the providers are carried out, or the place the asset, from which the earnings arises, is positioned. Residential standing below the income-tax regulation is set primarily based in your bodily presence in India within the present monetary yr (1 April to 31 March) and the previous 10 monetary years. 

A person qualifying as non-resident is taxable solely on India-sourced earnings (that’s, earnings earned in India or acquired in India) and isn’t required to report property held outdoors India within the India income-tax return. You’ll qualify as a non-resident in India in case any of the next circumstances are glad:

(a) You might be bodily current in India for lower than 60 days within the present monetary yr; or

(b) You might be bodily current in India for greater than 60 however lower than 182 days within the present monetary yr and have been bodily current in India for lower than one year within the previous 4 monetary years. As a non-resident (as per provisions of Indian tax legal guidelines as talked about above), the earnings earned and acquired in India is taxable in India and you’re required to report the identical within the India income-tax return.

In case the earnings is taxable within the US, then profit below the Double Taxation Avoidance Settlement between India and the US could also be explored to keep away from double taxation, albeit it’s topic to the character of earnings. Accordingly, you might switch the quantity in your NRO account topic to cost of the due taxes and a certificates issued by a chartered accountant within the prescribed format.

Queries and views at mintmoney@livemint.com

Sonu Iyer is tax associate & individuals advisory providers chief, EY India.

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