FEMA -outward remittance

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 November 2009 Request if the expert panel can address below mentioned query,

1) if foreign outward remittance under Libereralised Remmitance Scheme can be made towards personal gifts to non-relative (non-resident , not an Indian citizen).

2) Tax implication on the Remitter/ Beneficiary.

3) If form 15C A/B applicable - forex transaction under Gift transfer .

4) Any other rules & regulations.

thanks

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Juzer Sadikot

Juzer Sadikot (Expert)
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23 November 2009 Dear Queriest,

Tax may be charged on such gift amount if value of total gift recieved from non relative exceeds Rs. 50000/- for F.Y. 2009-10.

The above view is based on following;

9. (1) The following incomes shall be deemed58 to accrue or arise in India :

i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or SOURCE of income in India, or through the transfer of a capital asset situate in India.

Source is a practical and not legal concept - All income accruing or arising from any source of income in India is deemed to accrue or arise in India. The word source does not mean any legal concept, but refers to that which a practical man would regard as a real source of income - Performing Right Society Ltd. v. CIT [1974] 93 ITR 44 (Cal.)

I am very conservative for ITD and hence treating it as a taxable item, If you find any other view dont be surprised, law/transaction process doesnt have much checkpoints to catch such incidents.

Section 195(6)r.w. rule 37BB requires furnishment of form 15CA/CB at the time of remittace to Non-resident. Also, via circular 4/2009, ITD has specified that this form shall be applied for all remittance other than certain personal remittance which are allowed by RBI.

Remittance under LRS is for personal remittance and Authorised dealer may not ask for form 15CA/CB. However it is advisable to get confirmation from AD.

It is advisable to prepare gift letter/affidavit substaintiating transaction of gift.

Thanks and Regards
Juzer

Querist : Anonymous

Querist : Anonymous (Querist)

24 November 2009 thanks for your response. In continuation to same, I would like to have your reply on the following:

Case study: foreign outward remittance (under LRS scheme towards Personal gift transaction) is from India (Resident)to a person (non-relative who is foreigner-not an Indian citizen staying abroad).

1)You have mentioned that the tax will be chargeable on the gift amount (from non-relative) if the amount exceeds Rs 50,000/- for the FY 09-10. Pl. confirm as who will be assessed for tax in this case i.e. Remitter or Beneficiary. Beneficiary as such has no real source of income received/accrued/arises in India. Further, Pl. inform if Gift transaction (by Remitter-Resident) qualify as a real source of Income for Beneficiary. This being not derived (received/accrued/arised) from any employment/Profession/Services/Business/Investments etc. in India by the beneficiary, it should not be treated as " real source of income" in the hands of beneficiary. Hence to be treated (transaction towards gifts under LRS) as non-taxable in the hands of Beneficiary. Pl. confirm.

2)Also, Gift tax is not levied on the donor. In view of this, Remitter(donor) normally should not be considered for tax-assessment wrt Gift transaction made under LRS scheme. Pl. confirm.

thanks

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Querist : Anonymous

Querist : Anonymous (Querist)

26 November 2009 Dear Juzer,

I request for your expert advise on above.

thanks

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Querist : Anonymous

Querist : Anonymous (Querist)

30 November 2009 Dear Juzer,

I await your & experts response on my above query.

thanks

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Juzer Sadikot

Juzer Sadikot (Expert)
Follow

06 December 2009 Dear Queriest,

Excuse me for delay, Feeds for expert section of club is not working well with me.

Taking a view that gift to non relative outside India is taxable.

Reply 1;

Remittor, person resident in India need to comply with Section 195(1), if the said person is not sure about rate of TDS, he/Non Resident can apply to AO under Section 195(2) and 195(3) r.w. section 197. To make it shorter, Resident individual is require to deduct TDS and in case he fails, Non Resident is require to settle tax liability.

Reply 2,
Now one may say that once the remittance is made and right of Revenue Authorities last no more, hw cum they can re-cover tax on said transaction, if NR is not paying any tax by ownself?

Answer to this is Section 163(1)(c), Resident individual shall be liable to pay tax and assessment on Income earned by NR in case NR fails to pay the tax.

Regards
Juzer