A N Shanbhag, the highly respected investment guru, and his son Sandeep Shanbhag, answers your questions on NRI investment.
A new Rediff India Abroad feature:
I am of India descent and have been a US citizen for a few years. I represent two Indian companies that sell natural stones in the United States on a commission basis.
These companies have now informed me that they are required to hold 5 per cent to 7 per cent of my commission amount and pay it as tax in India. Also they want to deduct tax at source for 2005 and 2006.
Is there a law allowing tax to be cut for someone based in the US?
-- Ranjit Dhillon, Champaign, Illinois
The Indian companies were right. Your income arises in India and, therefore, is taxable in India. The tax deducted at source is not the same as your tax liability. This liability will be computed on the basis of income tax rates, which again depend upon your income and the exemptions, deductions and rebates you can claim.
If your tax liability is less than the tax deducted at source, the only practical way to get a refund is to file tax returns.
Are Non-Resident Indians allowed deductions under 80C for investing in the Public Provident Fund, National Savings Certificates, etc? Is the initial Rs 100,000 tax-free in those schemes?
-- Vasudev Bhagia, Pearland, Texas
The recent Union Budget increased the tax threshold to Rs 110,000. NRIs are allowed deduction under section 80C for contributions of PPF, NSC etc. Please note that NRIs cannot open new PPF or NSC accounts but continue existing PPF accounts opened before they changed their status to NRI.
I am an NRI in USA for 30 years. I own rural/farmland in India that I purchased in rupees before coming to the US and becoming an NRI. I want to sell the above land. These are my questions:
1. Can I transfer the sale proceeds of the above land to USA if so, what is the maximum amount?
2. Will I have to pay any tax in India? If so, w hat is the tax rate?
-- Ajit Singh, Cohoes, New York
Yes, you can sell the land and remit the proceeds to the US. You will have to submit an undertaking to the bank along with a certificate from an Indian chartered accountant that you have all taxes have been paid on the deal.
There are prescribed formats of these documents that the bank will provide.
You may or may not have to pay tax depending upon the distance of the land from municipal limits.
I am an NRI who has invested in capital gains deposit with the National Bank for Agriculture and Rural Development in 2002. I was paid 100 per cent interest yearly until and including 2003, after which tax was deducted at source at the rate of 33 per cent of the interest.
How did this change come about? Is there any time frame for the department to refund tax deducted at source?
-- Omkar Nath, Fullerton, California
Do give us all the details, including dates. We also like to know how and when you informed NABARD about your becoming an NRI.
The TDS (tax deducted at source) is not the same as your tax liability. This liability will be computed on the basis of income tax rates, which again depend upon your income, and the exemptions, deductions and rebates you can claim.
If your tax liability is less than the tax deducted at source, the only practical way to get the refund is to file tax returns. The returns have to be filed by July 31 of the next financial year, latest by March 31.
Can I, a naturalized US citizen, inherit ancestral agricultural land in India after the demise of the parents?
-- Chaitram J Talele
NRIs are not allowed to buy agricultural property. There is no bar on inheritance.
I am a US citizen, since 1972. I gave my farm to my brother in India in 1980. Now I want to buy as a investor as well as owner of farm. Can I buy land? How should I buy in Ahmedabad, Gujarat vicinity. Can I open an account as an NRI?
-- Mani Patel, North Potomac, Maryland
NRIs are not allowed to buy agricultural property in India.
The authors may be contacted at wonderlandconsultants@yahoo.com
