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Chapters
VII to X of the Income Tax Act list the exemptions granted to
non-resident Indians on their income in India.
Calculating the NRI
income
To simplify the calculation of the net income of a
non-resident from his gross receipts in India, the law
provides for taxation of the income of the non-resident on
'Gross income basis', which means that the tax liability is
determined on the basis of gross receipts without going into
the question of expenses incurred in earning those receipts.
Such 'Gross receipt basis' taxation operates in two
ways:
By laying down the rate of
tax to be applied on gross
receipts
The rates are determined at a figure lower than the general
rate of tax applicable to total income as it takes account of
the possible expenses in earning the income. Such provisions
are:-
i. Tax
on dividend (other than dividend from domestic companies),
interest, royalty, fee for technical services and income from
Units
ii. Tax on income and capital gain in respect
thereto from units purchased in foreign currency by off shore
funds
iii. Income and capital gain in respect thereto from
Bonds and shares purchased in foreign currency or acquired in
resulting or amalgamated company as a result of de-merger or
amalgamation
iv. Tax on income other than dividend of
Foreign Institutional Investors from Securities & Capital
gains arising from their transfer
v. Income of sportsman
or Sports association
By laying down a
percentage to be applied on gross receipts to determine the
net
income
The tax is then calculated at the normal rate of tax on such
presumptive income. Such provisions are:-
i. Profits of
shipping business
ii. Profits of business of providing
services etc. to be used in the business of prospecting,
exploration or production of mineral oils
iii. Profits
from operation of aircraft
iv. Profit from business of
civil construction etc. in certain turnkey power projects
The
scheme of Advance Ruling has been introduced in Chapter XIX-B
in the Income Tax Act, which enables non-residents entering
into a transaction with residents or non-residents to obtain,
in advance, a binding ruling from the Authority for Advance
Rulings on issues which could arise in determining their tax
liabilities.
Such Advance ruling helps non-residents in planning their
income tax affairs well in advance, apart from avoiding
tedious and expensive litigation.
Tax
Exemptions from Property InvestmentsIncome from House
Property
Income from House Property is the annual value of House
Property, of which the assessee is the owner. House property
consists of buildings or land. The land may be in the form of
a compound housing the building. Any rent received from
standalone vacant plot is not assessable as "Income from House
Property".
One self-occupied House Property or part of such property
owned by an individual and used for personal use, but not let
out, in the previous year, will not be taxable.
From the assessment year 2002-03, Income from House property
is classified as: Let out Property (L.O.P.), and Self Occupied
Property (S.O.P.)
The following two deductions are available from the income
under the head "Income from house property" under the Income
tax Act, 1961.
Standard Deduction:
30% of net annual value is deductible irrespective of any
expenditure incurred by the taxpayer.
Interest
on Borrowed capital: Interest on borrowed capital is
permitted as deduction if capital is borrowed for the purpose
of purchase, construction, repair, renewal or reconstruction
of the house property. When more than one property is occupied
for own residential purposes: Where the person has occupied
more than one house for his own residential purposes, only one
house (according to his choice) is treated, as self-occupied
and all other houses will be "deemed to be let out".
Tax
Exemptions from Other Assets and InvestmentsDividend Income
All dividends, received from domestic companies are exempt
from tax under the I.T. Act, 1961. Income received in respect
of units of specified Mutual Funds and the Unit Trust of India
is exempt from tax.
Interest Income :
Any income arising on a deposit with a Bank or any
financial institution will be treated as Interest income and
will be chargeable under the head "Income from other Sources".
Interest income may be treated as investment income and
chargeable at a special rate under certain specified
situations.
Capital
gains
A 'gain' or the excess of 'sale price over' cost that arises
on transfer of a capital asset is taxed under the head
'Capital Gains'.
- A
capital asset held for 36 months or more (12 months or more
for certain shares or units) is treated as a long-term
capital asset, and gain resulting from its transfer is
called long-term capital gain subject to tax at the rate of
20% (10% in certain cases) plus surcharge, if applicable,
and education cess.
- Long-term
capital gains arising on sale of equity shares in company or
units of equity oriented fund are not chargeable to tax
Short-term Capital gains arising on sale of equity shares in
company or units of equity-oriented funds are chargeable to
tax @ 10%.
- Capital
gain amount received on the transfer of bonds or Global
Depository Receipts made outside India by a non-resident to
another non resident will not be liable to Capital gain tax
in India.
- Short-term
Capital gains arising on sale of equity shares in company or
units of equity-oriented funds are chargeable to tax @ 10%.
Gifts Any
sum of money received, in excess of Rs.25, 000/- from a person
would be taxed in the hands of the recipient. However, gifts
received on the occasion of the marriage or from a relative or
under a will or by way of inheritance or in contemplation of
death of the payer, would not be subject to tax. |
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