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"If an NRI gifts money to his relative does he have to pay Gift Tax?"

Readers' Note: Please keep your questions short.

If an NRI gifts Rs 1 lakh to a relative in India from his NRO account in India does he have to pay any Gift Tax? (The NRO account is funded from abroad in US dollars.)

-- Balasundaram Sankaran

From October 1, 1998 Gift Tax has been abolished in India.

I have an Indian passport and studied in India till Mar 1999. I started working in the UK six months ago for an UK based firm with no interests in India. I have no income in India. Am I elegible for NRI status? What are the benefits of being a NRI? Should I be filing a tax return in India (I 'll file one in the UK).

-- Vikrant Singal

The information given by you is inadequate for us to determine your residential status. Hence we are reproducing below the rule which governs the determination of one's residential status under the Income Tax Act, 1961.

Section 6 (1) of the Income Tax Act, 1961 contains the conditions whose fulfilment 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)

Previous year represents the period from April 1 to March 31 of ever year.

An NRI is not liable to any tax on the amount of income earned by him outside India. If you do not have any income accruing or arising in India, you need not file your return in India.

I am an Employee of a Company in India, sent on deputation to the UK on 15th Septemeber 99. I would like to know the following: a) when do i get the NRI status? b) My Indian salary is being credited to my account in India, and I am being paid an allowance in the UK, is the allowance received by me in UK taxable in India? c) If I change my job from the 1st of January 2000, in UK and join a local company in UK what are the tax implications?

-- Anil Gupta

a)As per the Income Tax Act 1961 an individual who leaves India for the purpose of employment attains the status of a non resident if he is out of India during the previous year for a period of more than 182 days. You will attain the status of NRI, if you continue your stay in UK till March 15, 2000.

b)According to section 9 of the Income Tax Act 1961,certain incomes are deemed to accrue or arise in India even though they may actually be received outside India. Also since you are employed with an Indian company and have been sent on deputation to UK all the payments made to you is deemed to accrue or arise in India. Hence, you are liable to pay tax on the allowance paid to you in UK as well as the salary received by you in India. You may claim a deduction under section 80RRA of the income tax Act, 1961 subject to fulfillment of certain conditions which have been reproduced by us in certain earlier anwers. You may refer to them.

c) However, if you join a local company in UK, all incomes from that company received outside India is not liable to tax if you maintain your NRI status.

I am a software professional working for an Indian company. I was deputed to US in Jan 1998. There I was paid a monthly allowance in addition to the Indian salary. I returned to India in May 99. While in the US, I opened a NRNR account with the State Bank of India and I converted all my dollars into Rupees and deposited the amount into the NRNR account. Now I want to file the income tax returns for 98-99 and I want to know if the amount that I saved during my visit to US is taxable in India or not? I was in India for three months and I removed the money from SBI and moved it to the local bank (that is somewhere in July 99). I came back to US in Sept 99.

-- Nilesh Deshmukh

It is very clear from the information given by you that you enjoy an NRI status. According to Section 9 of the Income Tax Act 1961,certain incomes are deemed to accrue or arise in India even though they may actually be received outside India. Also since you are employed with an Indian company and have been sent on deputation to UK all the payments made to you is deemed to accrue or arise in India. Hence, you are liable to pay tax on the allowance paid to you in UK as well as the salary received by you in India. You may claim a deduction under section 80RRA of the income tax Act, 1961 subject to fulfillment of certain conditions which have been reproduced by us in certain earlier anwers. You may refer to them.

The deposit of money or movement of money does not affect your taxability.

Earlier:

"Do i need an income tax clearance certificate if i go abroad for a two-year contract?"
"Will my father be taxed if I send him money to buy a flat in my name?"
"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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