The Asian Age

Get credit for tax paid in US

- Kamal Rathi (The writer is a Hyderabad-based chartered accountant. Please send your queries to info@rathiandma­lani.com)

Q I returned to India in 2014 after staying in the United States for 15 years. During my stay in the US, I had invested in mutual funds out of my income earned in dollars. These investment­s in mutual funds were made in the US which I am holding even now. What will be the implicatio­ns if I sell these units now and repatriate this money into India? I had also taken an insurance policy in the US, which is likely to mature shortly. What will be tax implicatio­ns if the maturity proceeds are also repatriate­d? SMITHA NAIR

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A) Your status as per Section 6 of Income-Tax Act will be that of a “resident and ordinarily resident” (R & OR) in India. Accordingl­y, your gain, if any, from the sale of units of mutual fund held in the United States will be taxable in India.

However, you will be eligible to take credit for any taxes paid in the US on such gain, for computing your tax payable in India. The credit that could be taken will be the lower of the tax payable on such income in the US or in India.

As regards the maturity proceeds of life insurance policy, generally it will be exempt under Section 10 (10D) of the Income-Tax Act, subject to certain exceptions provided in the section.

You will be eligible to take credit for any taxes paid in the US on such gain, for computing your tax payable in India. The credit that could be taken will be the lower of the tax payable on such income

Q My grandmothe­r purchased an agricultur­al land in the year 1954. After her demise on March 10, 2015, being legal heir, my name came on record of rights in the year 2015 itself. In case of capital gain tax, which will be the date of counting index value of land? That is 1981 or the date of our acquisitio­n which would be 2015. The above mentioned land was agricultur­al in 1981 but NA land in 2015. KAPIL SIDVANI

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A) Where the capital asset became the property of the assessee, by succession, inheritanc­e or devolution, the cost of acquisitio­n of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvemen­t of the assets incurred or borne by the previous owner or the assessee, as the case may be. However ,as the property was acquired by your grandmothe­r before April 1, 2001, you have the option of substituti­ng the fair market value (FMV) as on April 1, 2001, to the cost of acquisitio­n of the property in 1954.

As per the definition of indexation under clause (iii) of explanatio­n below Section 48, indexation benefit will be available only from the previous year in which the asset was held by the assessee or for the year beginning on the 1st day of April 2001,whichever is later. However, indexation is done from the year in which the previous owner has acquired the asset and not from the first year in which the assessee has held the asset. However in your case, as the cut off date can be substitute­d by the FMV as on April 1, 2001, the indexation benefit can be availed by the substitute­d FMV as on April 1, 2001.

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