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"Will my father be taxed if I send him money to buy a flat in my name?"

Readers' Note: Please keep your questions short.

I am returning to India after 6 years having stayed in the USA.I have all my money in an NRE account in India. After coming there, how long willi continue to hold the NRI status? Or how long I can hold my money in NRE account? I understand that as long as my money is in the NRE account, the interest earned is totally exempted from income tax.

-- Chitrabanu Duraisamy

Section 6 (1) of the Income Tax Act, 1961 contains the conditions whose fulfillment or otherwise would determine the residential status of an assessee. A person attains the status of a resident Indian for the purpose of tax if he satisfies one of these two conditions
1. he is in India in the previous year for a period of 182 days or more; or 2. he is in India for a period of 60* days or more during the previous year and 365 days or more during the 4 years immediately preceding the previous year

*(note: 182 days to be substituted for 60 days in case of a person who proceeds abroad for the purpose of employment outside India)

Hence in your case you would lose your NRI status if your stay in India is for 182 days or more in any year (1st April to 31st March).

The second aspect of the question in relation to the time limit for holding an NRE account pertains to FERA and not Income Tax and hence the same cannot be answered here.

Your understanding with regard to the exemption of interest on deposits made in NRE account from income tax is correct.

I am an India Citizen settled in the USA (holding a Green Card). I am planning to buy an apartment in Bombay so that my parents can live comfortably. The apartment will be in my name. Will my father face any tax liability if I send in the money from here (Rs 20 lakhs) in his name and he uses that money to buy the apartment on my behalf? What are the other ways to go about this deal so that my parents don't have to undergo any tax issues. My father is 65 and is retired with no income

-- Neeraj Varma

Based on the information provided by you, we infer that you are an NRI with no source of income in India. The Income Tax Act, 1961, specifies that income earned and/or received by an NRI outside India is not taxable in India and hence the same is also not taxable on later remittance in to India.

You could possibly open an NRE account in any of the scheduled banks in India for remitting the money into India for the purpose of acquisition of apartment. Also, the interest earned from such NRE account is also not subject to income tax.

Whether such apartment can be purchased in your name and the procedures and modalities required for the same is a question of FERA and hence is outside the purview of personal taxation.

I am in Canada right now on a short-term assignment. Whatever allowance we get here is taxable (Note: we get an allowance and not a payment). If I save some money and take it back to India do I have to pay tax on that?

-- Himanshu Vyas

The information provided by you does not clearly specify your residential status for the relevant year (whether an NRI or Resident). The Income Tax, 1961, specifies that global income of a Resident Indian is taxable in India. In case of an NRI, the income earned outside India is not subject to income tax in India.

Section 9(1) (ii) of the Income Tax Act, 1961 specifies that income chargeable to tax under the head "Salaries" is deemed to accrue or arise in India if it is earned in India. Hence in your case, if you are an NRI and if the living allowance in Canada is received by virtue of a contract of employment with an entity based in Canada, it is deemed to have been earned outside India and hence not taxable.

However, if you are receiving the living allowance from your employer who is based in India, the allowance is taxable. In such circumstance, you are eligible for a deduction under section 80RRA, of up to 75 per cent of the amount remitted by you into India within 6 months from the end of the financial year. This deduction is available only if you are a technician as defined under explanation © to sub-section (2) of section 80 RRA and further, the terms & conditions of your service outside India are approved in this behalf by the Central Govt. or the appropriate authority. The balance 25% is taxable at the marginal rate of tax.

Earlier:

"What is the difference between personal taxation of an NRI and of a resident but not ordinarily resident?" "We are software engineers investing in the form of NRNR deposits, FCNR deposits, etc. How will we be taxed?"

'I am an NRI getting salary from a US firm. Can I invest in Indian securities? What are the tax implications?'

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