VB Prabhu Verlekar
Q. My wife’s and my parents were born in Goa before liberation. We both were born in Mumbai. Our marriage was registered in Goa in the year 1990. Now my wife holds Portuguese passport and she is an OCI card holder, and she permanently resides in Goa (not NRI). Can we claim benefits u/s 5A of the IT Act?
SJ Monteiro, Mapusa.
Yes. You are governed u/s 5A which requires splitting your income equally between both of you (except salary income) although you were born outside Goa, since your parents were Portuguese citizens prior to liberation of Goa. Registration of marriage is not material. For the purpose of income tax both of you are, Ordinarily Resident in India though your wife has Portuguese citizenship.
Q. We have returned from Kuwait after retirement to settle in Goa long back. We have substantial NRI bank fixed deposits on which we don’t pay any tax in India. Bank manager has told me that I can keep as long as I wish by not reporting that you have returned to India for permanent settlement. How long we can hold these NRI deposits to avoid tax in India?
Cedric D’souza, St Cruz.
You cease to be a non-resident under Foreign Exchange Management Act (FEMA) after your return to India for permanent settlement. You have to re-designate these accounts as Ordinary Resident, bank accounts by giving notice to your bankers within reasonable period (about 3 months or more with justifiable reasons). Even if you remain silent, interest on these NRI accounts is already taxable. If this comes to the knowledge of income tax authorities, this will be treated as income earned in India and you will be liable for tax on the interest. In addition, you will be liable for interest on tax and for penalty for suppressing income.
Q. Out of the proceeds of my residential flat I have invested in another residential which is under construction to get the benefit of under section 54. However, the builder even after 3 years has not handed the possession. What are the tax implications? Will I be eligible for benefit of long term capital gains?
Manohar Gauns, Mapusa.
To get the benefit of exemption from long term capital gains from the sale of residential property, the taxpayer is required to buy the residential property within two years or construct the house property within three years. It means the construction must be completed and the possession must be given within three years. However, the jurisdictional authorities have taken liberal view considering the practical difficulties in allowing the claim provided that a substantial amount of purchase consideration is paid to the builder.
Q. What is the difference between Form 15 G and Form 15 H required to be given to the bankers for non- deduction of tax at source?
Daniel Pereira, Aldona.
All banks including co-operative banks are required to deduct tax at source (TDS) from interest on fixed and recurring deposits @ 10% if interest during the financial year exceeds Rs. 1,00,000 in case of Senior Citizens and Rs. 50,000 in case of others. A senior citizen i.e. above 60 yrs and very senior citizen i.e. above 80 yrs can file Form 15G, if their estimated total taxable income after claiming all permissible deductions and rebate is not likely to result in tax liability. A non-senior citizen i.e. of age less than 60 years, if his estimated total taxable income after claiming all permissible deductions and rebate is not likely to result in tax liability can furnish self-declaration in Form 15H. This form should be given for each financial year before TDS is deducted by the bank.
Q. I am selling my agricultural land in rural area of Sanguem district used for sugarcane cultivation for about Rs one crore. I had purchased it about 15 yrs ago for Rs 2 lakh. The purchasing party is insisting on deducting 1% TDS. Is this applicable to agricultural land? Please advise? Also, do I have to pay capital gains tax on this?
Keith Rodrigues, Fatorda.
Income tax is charged on capital gains on transfer of capital asset as defined u/s 2(14). This definition excludes agricultural land unless it is located within municipality or cantonment board or specified distance from such areas measured aerially. The location of your agricultural land to ascertain whether it is a capital asset or not is not known from your query. You should get this checked from your tax consultant. Capital gain from sale of agricultural land is exempt if such land is not a capital asset, i.e. if it is agricultural land in India and is not situated in the area as defined in Section 2(14) of the Income Tax Act, 1961. The agricultural land should not be within municipality or cantonment board or specified distance from such areas measured aerially. If the land is not a capital asset as per above definition, then the provisions of tax deduction at source under Section 194IA will not be applicable.
Q. I am a British citizen living in London. I have inherited estate of around Rs 20 crore by way of property and bank deposits from as inheritance legal share on death of my distant relative. Kindly advise about tax implications and any other legal matters I have to comply with.
Susanne Delaney-via email
There is no death or estate duty in India as the same is abolished few years back. Further there is no income tax on any amount or estate received through inheritance. Dealings with foreigners are regulated by Foreign Exchange Management Regulations under which foreigners cannot acquire by way of purchase or gift any immovable property in India without permission of Reserve Bank of India. To this, exception is the property acquired through inheritance. To get the property legally transferred in your name, you should approach a legal consultant.
The writer is well established, senior practising chartered accountant with wide experience in taxation and finance. He is also a strategist in turn round management of institutions.
