Tax treaties govern taxation for NRIs
QI am a Central government employee. I took a home loan of ` 30 lakh from SBI. But I did not take the required permission before the house construction from my authorities. So I want to get my tax relief from I- T department. Please advise me regarding the procedure to claim the refund if any. SIVA KUMAR Via email
A) You shall be eligible to claim deduction for interest and repayment of loan on the said property. You can file a revised return of income before March 31, 2019.
QI own an ancestral residential property, which was bought by my grandfather. I sold it in May 2018 for a consideration of ` 1.5 crore. Please clarify how much tax I need to pay on capital gains, if any. If I have to invest in bonds or in property, do I need to invest only the gain amount or the entire sale proceeds to avoid capital gains? If yes, then what is the time period within which I have to do so? SASHIDHAR Via email
A) If the residential property in question was acquired by your grandfather before April 1, 2001, the option of substituting the Fair Market Value ( FMV) as on April 1, 2001, for the actual cost is available.
The capital gains tax will be arrived after applying the cost inflation index to the cost of acquisition on April 1, 2001. Capital gains computation is not possible in the absence of complete information.
Tax on long- term capital gains ( LTCG) can be saved if the LTCG is invested in the purchase of residential house within one year before or two years after the sale of property or construction of a residential house within three years after the sale of the property. The LTCG invested in specified capital gain bonds shall qualify for exemption under Section 54EC of I- T Act.
QMy daughter is a permanent resident in the United States. She is in highest tax bracket. I was told that India has a tax treaty with the US. How can she save tax either by investing or by postponing tax liability? Please kindly advise me. RAVESH RAO Via email
A) Since India and the United States are governed by the bilateral tax treaty, the income received by your daughter will be taxed as per the existing tax laws in the United States. The investment of funds, which you are contemplating to make in India, is the post- tax saving funds.
The income generated out of funds invested in India will be taxed as per the Indian incometax laws.
In my opinion, she may not be able to derive any tax benefit in USA by making investments in India.
Further, the income generated in India also shall be liable to tax in the US as her residential status in that country shall be that of a resident. Any taxes paid by them on their income in India will also be eligible for set off against the taxes paid in the US.