A.K.Agrawal (Investments & Finance) (132 Points)
23 October 2010If a resident has only interest income out of its Rs. capital investment in India for many years, turns NR but does not change its status in bank a/cs & IT returns though pays tax as a resident for 4 years, then what are the faults on its part & consequenses ? Further how its representative could send hisIndian Rs. capital to its foreign bank a/c ?
K.Sivakumar
(Chartered Accountant)
(60 Points)
Replied 25 October 2010
Dear Mr.Agarwal,
I feel there are two, three issues that we need to look at.
1. The returns are filed with wrong information. i.e. his status has been shown as resident instead of Non-resident for couple of years.
2. So in the initial year, he would become "Resident but not Ordinarily resident" and then "Non-Resident". In these cases, Income earned out of India, need not be taxed. But you need to look at what happened to his first year of travel. i.e. when he went out of India. For that year, there can be a possibility, he would been resident (if he has left in the 2nd half of the year) (more than 181 days in India). If he can be resident, then world wide income has to be taxed in India (but necessary credits can be taken for the taxes paid abroad)
3. But the issue can be sorted out for couple of years by revising the return, if the returns are filed with in the due date and if it is not time barred as per Sec 139 (5).
4. As for as remittance out of India is concerned, it is governed by the RBI regulations, which prescribes the limits and permission requirement based on the purpose of remittance whether it is Current or Capital Account Transaction.
I hope the above helps.
Sivakumar.K
A.K.Agrawal
(Investments & Finance)
(132 Points)
Replied 30 October 2010
Your gratitude as you are the only one, took interest to reply, out of so many. The case is-
A resident , by going abroad, firstly for study, then part time job for his survival & after completing his stydies, got full time job hence turns non-resident. Since then no remittance from abroad to India. His Rs. fund in India is taken care by his representative thru investments, banking, A/Cing & taxation as usual without any change, then -
1. How to operate in future to act in line of present laws ?
2. Any hurdle to remit his total INR fund to his foreign place bank ?
K.Sivakumar
(Chartered Accountant)
(60 Points)
Replied 30 October 2010
Dear Mr.Agarwal,
As a non-resident (at present), he need not tax any income which is earned out of India. But since the interest income is earned in India, he need to pay tax only on the interest income, based on the slab he falls in. That too, if his interest income is more than the taxable limits.
For your 2nd question, it would be worth to look at the purpose for which the remittance is happening. As you might be aware, the RBI has specific guidlines for current & capital account transactions. Based on the purpose you can go ahead and remit to his bank account in foreign country (taking into account any requirement for prior permission or not)
Thanks
Sivakumar.K
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