Cyriac & Associates Chartered Accountants

Cyriac & Associates Chartered Accountants A Professional Accounting firm spread over two locations in Kerala and in Bangalore established by a

Branches:

Neenu Sara Cyriac A.C.A
Partner

302 Yashila Appartments
1/1, 1st Main Road
Koramangala-8th Block
Bangalore 560095
E-mail: [email protected]
Web: www.cyriacassociates.com


Jim Cyriac A.C.A
Partner

TC 14/191(7), Tangoos Plaza
Anayara P.O. Trivandrum 29
Phone : +91 471 2446855
Mobile : +91 9947445870
E-mail: [email protected]
Web: www.cyriacassociates.com


Manoj T G A.

C.A
Partner

Vima Vihar,
Maradu P.O. Kochi 682304
Phone : +91 484 2705728
Mobile: +91 9400705728
E-mail: [email protected]
Web: www.cyriacassociates.com

The Investment MotivatorSection 80C of Income Tax Act What is Section 80CIn order to encourage savings, the government g...
30/01/2014

The Investment Motivator

Section 80C of Income Tax Act

What is Section 80C
In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:
Provident Fund & Voluntary Provident Fund
Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free.
Public Provident Fund
An account can be opened with a nationalized bank or Post office. The current rate of interest is 8%, which is tax-free and the maturity period is 15 years. The minimum amount of contribution is Rs 500 and the maximum is Rs 70,000.
National Savings Certificate
These are 6-year small-savings instrument, where the rate of interest is 8% and is compounded half-yearly. The interest accrued every year is liable to tax but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.
Equity-Linked Savings Scheme
Mutual funds offer you specially-created tax saving funds called ELSS. These schemes invest your money in equities and hence, return is not guaranteed. Money invested here is locked for a period of three years.
Life Insurance Premiums
Any amount that you pay towards life insurance premium for yourself, your spouse or your children can be included in section 80C deduction. If you are paying premium for more than one insurance policy, all the premiums can be included. Besides this, investments in unit-linked insurance plans (ULIPs) that offer life insurance with benefits of equity investments are also eligible for deduction under Section 80C.
Home Loan Principal Repayment
Your EMI consists of two components, namely principal and interest. The principal component of the EMI qualifies for deduction under Section 80C.
Stamp Duty and Registration Charges For Home
The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house can be claimed as deduction under section 80C. However, this can be done only in the year in the year of purchase of the house.
Five-Year Bank fixed deposits
Tax-saving fixed deposits (FDs) of scheduled banks with a tenure of five years are also entitled for section 80C deduction.
Others
Apart from the above, things like children's education expenses that can be claimed as deductions under Section 80C. However, you need receipts to claim the same.
Remember: The limit for maximum deduction available under Sections 80C, 80CCC and 80CCD (combined together) is Rs. 1,00,000/- (Rs. one lac only).
Sum paid under contract for deferred annuity for an individual on the life of the assesse, spouse or any child.
Sum deducted from salary payable to Govt. Servant for securing deferred annuity for self-spouse or child Payment limited to 20% of salary.
Sum deposited in 10/15 year account of Post Office Saving Bank
Subscription to deposit scheme of a public sector, company engaged in providing housing finance.
Subscription to equity shares/ debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions.
Tuition fees paid to any school, college, university or other educational institution situated within India for the purpose of full time education of any two children.

Section 80CCC: Deduction in respect of Premium Paid for Annuity Plan of LIC or Other Insurer
Payment of premium for annuity plan of LIC or any other insurer Deduction is available upto a maximum of Rs. 100,000/-. (This limit has been increased from Rs. 10,000/- to Rs. 1,00,000/- w.e.f. 01.04.2007).
The premium must be deposited to keep in force a contract for an annuity plan of the LIC or any other insurer for receiving pension from the fund.

Section 80CCD: Deduction in respect of Contribution to Pension Account
Deductions to the extent of 10% of one's salary are available on deposits made by a Central government servant in one's pension account. If the Central Government makes any contribution to the pension account, deduction of such contribution to the extent of 10% of salary shall be allowed. Further, in any year where any amount is received from the pension account such amount shall be charged to tax as income of that previous year.

Tax Liability on Purchase of Flats or Villa’sService Tax and VAT on construction services have created lots of buzz amon...
29/01/2014

Tax Liability on Purchase of Flats or Villa’s
Service Tax and VAT on construction services have created lots of buzz among the property buyers and become an extra burden on the prospective buyers. These kind of levy’s discourages people towards one of their fundamental and basic requirement and one has to have it even though various taxes are levied which may be a significant amount when it is calculated on price of House/ Flat.
Also, most of the buyers as well as builders are not clear what exactly the computation is, for the purpose of service tax and collecting amount from the buyers with a considerable amount of margin so that they do not fall short of their liability.
Anyways, we will provide you a little clarity on the said subject. Of course my views are not final authority. Also readers are advised to consult their CA or Advocate before challenging your builder yet the article shall help to give you the insight on ST and VAT on under construction property and one put this strongly before builder.
SERVICE TAX:
In the Finance Act, 2010 the definition of Commercial or Industrial Construction Service [Sec. 65 (25b) read with Sec. 65 (105) (zzq)] and construction of Residential Complex [Sec. 65 (30a) read with Sec. 65 (zzzh)] amended by the Central Government. Since this is central act this applies to all.
The scope is expanded to cover sale of flats/units under construction.
Builders/developers are held responsible to pay service tax on payment towards sale consideration received before the grant of completion certificate by the competent authorities for such flats/units. In other words if a builder/ developer receives the Entire Sale consideration after Issue of Completion Certificate then his NOT liable to pay ST since it will be as sale of product and there is no service provided by the builder to the buyer.
Relaxation on Rate of Service Tax:
The general rate of service tax is 12.36% which becomes significant amount when calculated on price of flat/ house hence it was decided to grant relaxation in the rate of service tax on under construction flat/ unit. The relaxation available for construction of industrial or commercial complex extended to residential complex.
The relaxation is offered to the tune of 75% of the applicable rate. This means the tax incidence will be the rate of service tax applied on 25 % of gross value of commercial or residential complex or unit, broadly representing the service component in the construction, subject to conditions (Refer Notification 29/2010-Service Tax, dated 22nd June 2010). It is pertinent to note that 75% abatement will be applicable only if the gross value of commercial or residential complex or unit includes cost of land. Otherwise the existing rate of abatement of 67% would continue to apply.
For e.g: If the agreement value of the flat sold under construction is Rs. 50,00,000 then the Service Tax @ 12.36% comes to 6,18,000 but payable is @ 25% which is Rs 1,54,500 or in other words 25% of 12.36% which comes to 3.09%.
But if the Residential property is having a carpet area of more 2000 sq ft. and the value (inclusive of the the undivided property cost) is more than Rs 1 Crore, Service tax is payable on 30% of the value of transaction. i.e. service tax shall be payable at 3.708% instead of 3.09%
VAT on purchase of Flat in Kerala:
Kerala government passed a notification wherein they have imposed VAT on sale of under construction property along with land or interest in land all the residential property purchased. Since this notification is brought by state government it applies to all the transaction executed and registered in the state of Kerala. The rate of VATax is 3% but the amount of land can be deducted. The cost of land includes divided as well as undivided land.
Most of the builders they will charge the 3% of the total price of the flat or Villa from the customers while VAT liability is only in the works contract alone and not to be charged from the cost of the divided or undivided land allocated to each unit.
To continue with our example the amount of VAT, on a flat which has registered value of Rs.50,00,000 and share of undivided property of 1 cent worth 5 lakhs VAT is payable only on Rs. 45 Lakhs at the rate of 3% which is Rs. 1.35 Lakhs and not on the whole of the consideration paid for the unit.

Labour Welfare fund
Owners of residential and non-residential buildings and apartments are liable to pay building cess under the Construction Workers Welfare Fund Act. The cess is levied on all buildings with a construction cost of over Rs. 10 lakh at the rate of one percent.

Stamp Duty
Stamp Duty and land registration in Kerala The following are the main land registration expenses which need to be incurred by a buyer of land. a) Stamp Duty b) Registration Fees c) Document Writers Fees d) Legal Fees The stamp duties varies from place to place and depends on the cost of the land which is fixed by Government of Kerala based on its assessment, location of the properties, types of the land, road accesses etc. Stamp duty details of each location are available in the respective registrar office. Also, these details are published in the official website of Kerala Registration Department. The stamp duty is varies from Municipality to Corporation to Panchayat. In Panchayat the stamp duty will be 7% of the cost of the land whereas in Municipality it is 8% and in Corporation 9% and Two ( 2% ) percentage of the cost of the land will be charged as the registration fees. Document writer’s fee also depends on the cost of the property and varies to a maximum of Rs. 7,000.00. There is a percentage prescribed by the government as Document writer's fee. It will take minimum 10-15 days to get the registered documents from the Registrar Office The maximum stamp duty applicable for family property partition is Rs. 1,000.00, but still 2% of the land value needs to be paid to government as registration charges
Note: The above mentioned stamp duty, registration charges are subject to change.

04/12/2013

Should you invest in NTPC –HUDCO TAX FREE BONDS ?
Tax Free Bonds Issue by NTPC is open for subscription today . The interest from these bonds are fully exempted from Income Tax ,Wealth Tax and TDS. So you should at least give a look to the issue and take decision about investment in NTPC Tax Free Bonds after going through Pro and cons of the Issue.
Company Profile: NTPC Limited (NTPC) is a Government company, which was conferred ‘Navaratna’ status by the GoI in 1997 and upgraded to ‘Maharatna’ status in 2010. It is the largest power producer in India in terms of both installed capacity and generation, core business of the firm is generation and sale of electricity in India. The company has come out with Tax Free Secured Redeemable Non-Convertible Bonds.
Issue Opens
3rd December 2013
Issue Closes
16th December 2013

10/11/2013

Advance tax payment by salaried employees

The heading of this article may surprise many tax payers, particularly; all those tax payers who are salaried employees. Generally speaking, the salaried employees are of the view that whatever salary income they are deriving, tax on the same is deducted month after month by their employer. Hence, they have no obligation, nor liability, nor responsibility to make payment of any advance tax. This is true but only as far as salary income is concerned. There may be a situation when a salaried employee may have income from various other sources other than the salary income. The advance tax is definitely payable even by salaried employees on their other income. Before proceeding further, let us understand very briefly, the provisions of the income tax law concerning payment of advance tax. A simple understanding of these provisions will make the salaried employee intelligent enough to decide whether there is a liability with reference to payment of advance tax. Under the Income-tax law as per the provisions contained in section 208 of the Income-tax Act, 1961, it is an obligation cast on every tax payer to make payment of advance tax during the financial year. Thus, in respect of the financial year 2011-2012 even the salaried employees would be required to make payment of advance tax on their other income. We know very well that in respect of the salary income, the tax has already been deducted at source by the by the employer, but the question which is relevant right now is with reference to other income of the salaried employee on which tax has to be paid but has not been paid by the employee. Such tax on the other income of employee is required to be paid by way of advance tax in three installments viz., the estimated amount of advance tax has to be paid even by the salaried employee by 15 September of an amount equal to 30% of the total advance tax payable. Similarly, the next installment of advance tax is payable by 15 December which is equivalent to total 60% of the advance tax so payable and finally comes the last date of advance tax payment viz., on or before the 15th of March by which the balance advance tax as reduced by the advance tax already paid by the salaried employees has to be paid. By reading these provisions relating to tax the salaried employees may get little worried or tensed. Now, the happy news is that there is no liability to making payment of advance tax in case the advance tax amount is less than Rs.10,000/-. Thus, it implies that if the total tax payable by the salaried employee during the financial year 2011-2012 on his other than the salary income is less that Rs 10,000/- then such salaried employee may not make payment of advance tax and can make payment of the tax so due while filing the income tax return. Now, I think majority of the salaried employees will have sigh of relief because they might not come within the clutches of the advance tax payment. However, if the salaried employee has got income let us say by way of rental income or interest income or short term capital gain or business income and the total estimated tax on these other incomes for the financial year 2011-2012 exceeds the sum of Rs.10,000/- in that situation, advance tax liability will definitely arise on the employee and he must ensure that such advance tax is paid in time. It may also be noted here that in case advance tax payments are not paid in time as per the time schedule mentioned above in that situation the consequences for non-payment of advance tax would mean extra liability by way of penal interest. Hence, to avoid payment of penal interest, it is strongly recommended that even the salaried employees should make payment of advance tax, more particularly, if their total tax liability on all income other than the salary income exceeds Rs.10,000/- during the year. For salaried employees it is possible that on their other income other than the salary income they can ask their employer to deduct tax in respect of their other income. This is a very good provision whereby the salaried employee can do away with hassles connected with payment of advance tax and payment of income tax of their own. In view of the provisions contained in the Income-tax Act, 1961, the salaried employees can prepare a chart or a statement of his expected other income during the financial year and submit the details of which other income to the employer and now request the employer to deduct tax at source on his other income also. It may be noted here that the employer is under no obligation to enquire form the employee the details of his other income.. However, it is the personal choice of the employee that if he desires he can intimate to his employer the details of his other income under different heads of income and request the employer to deduct tax at source while making payment of the salary. I personally feel that for the salaried employees more particularly for the top business executives, it makes sense to inform the employer the details of their projected other income during the year so that the tax is deducted by the employer without the employee being required to handle such situation of payment of advance tax and payment of income tax at the time of filing the income tax return. While you calculate payment of advance tax for the current financial year 2011-2012, please also take into account the tax deducted on your other income to enable you to calculate the net amount of advance tax payable by you. For example, let us take the case of an executive having taxable rental income of Rs.4 lakhs per annum. Assuming this is he only income other than his salary income, then the executive would be required to make payment of income tax @30% of this amount which come to Rs.1,20,000/-. This amount should have been paid by the employee by way of advance tax payment. Now before making the payment of advance tax, the executive should deduct from this amount of Rs.1,20,000 being the tax payable the amount representing the tax deducted at source. Let us presume in this case a sum of Rs.40,000/- has been deducted by way of tax at source by the tenant. Now after deducting this quantum of tax deducted on rental income the net amount of tax payable comes to Rs.80,000/- If the employee desires, he can ask the employer to deduct income tax on his rental income to the extent of Rs.80,000/-. In that situation, the executive will have no hassles of making payment of advance tax. Reversely, if the executive is not interested to inform his employer about the details of his rental income, in that situation, the employee himself should have made payment of advance tax on the rental income. As we have seen the tax liability by way of advance tax comes to Rs.1,20,000/-, so the advance tax liability would be this figure of Rs.1,20,000 minus tax deducted at source viz., Rs.40,000/-, thus Rs.80,000/- will have to be payable by way of advance tax. Supposing this executive would not have advance tax then at the time of filing his return tax was required to be paid but with some extra amount by way of penal interest for non making payment of the advance tax. When tax is deducted at source on your other income, be it rental income or be it interest income or be it any other income then in such situation. If you want to verify the total and the correct amount of tax deducted at source, then the tax payer including salaried employee sitting at home itself can go to the website of the Income Tax Department and take out details of the tax deducted at source as also advance tax paid by that employee by viewing the details of their tax payment inform No.26AS. This is simple easy affair which helps the tax payer to know about the correct details of all tax payment and all tax deducted at source during the financial year. Finally, the salaried employee should carefully take into consideration all the aspects connected with payment of the advance tax so that once the advance tax is paid in time there are no tensions of making payment of penal interest. However, most important point which all salaried employees should remember is that the liability to payment of advance tax will arise in a situation where your tax payable on all income including salaried income during the financial year is in excess of Rs.10,000/-. Thus if you have got other income on which tax payable is much below Rs.10,000/- then you need not worry at all about the hassles, problem, tensions and procedure connected with advance tax. For example, a manager of a company has invested Rs.2 lakhs in a bank fixed deposit and receives a sum of Rs.15,000/- by way of bank interest. Assuming that he comes within the income tax slab of 20% then definitely the total tax liability on his interest income is much below Rs.10,000/- hence this middle level executive need not make any advance tax payment. However, whatever the tax payable on his bank fixed deposit interest can be paid by him before filing his income tax return. Likewise, this executive can also ask his employer to deduct tax at source on his interest income of Rs.15,000/. To conclude, please do remember to comply with your tax obligations for payment of your advance tax and before jumping to the conclusion whether or not your are liable to pay advance tax, please work out tax liability on your other income, other than salaried income but relax and enjoy if your other tax payable is less than Rs.10,000/- per annum because then you need not understand the ABCD of advance tax at all.

Courtesy: Moneycontrol and Mr. Subhash Lakhotia

07/11/2013

Tax Matters of Self Employed
Being self-employed has the great advantage of deducting expenses for running the business while computing income tax liability.
e-filing of taxes: It is mandatory for every individual whose total income exceeds Rs 5 lakhs to file income tax returns. Those whose income exceeds Rs 10 lakhs must mandatorily file it online. Different forms are applicable for different assessees depending on their sources of income. The form applicable for a self employed individual for tax e-filing is ITR-4 for income from proprietary business/profession, which can be downloaded from the website of the Directorate of Income Tax.
Permissible deductions
• Rent, rates, taxes, repairs and insurance of premises utilized for the profession.
• Repairs, depreciation and insurance of machinery, plant and furniture utilized for the profession.
• Expenditure in respect of scientific research, like in-house research, contribution to an approved university, college, or association, etc.
• Premium in respect of insurance against risk of damage or destruction of stock and stores used for profession.
• Premium in respect of health insurance of the employees.
• Bonus and commission to employees.
• Interest on capital borrowed for profession.
• Contribution to a recognized provident fund or an approved gratuity fund.
• Bad debts related to the profession. - Bad debts have to be written off as 'unable to recover' in the books by the assessee in the previous year.
• Banking cash transaction tax, securities transaction tax and commodities transaction tax are allowed as deductions.
• Any expenditure (not capital and personal) incurred wholly and exclusively for the profession and within the legal rules.
Expenses not allowed as deduction
• Expenditure on advertisement in any souvenir, etc. of a political party.
• Any interest, salary, royalty, fees for technical services or other sum payable outside India from which TDS as not been deducted.
• Any tax calculated on the basis of profits or gains of profession, e.g. income tax, wealth tax.
• Expenses exceeding Rs 20,000, e.g.: X pays Rs 6,000 Rs 20,000 and Rs 20,500 by account payee cheques. Hence, it is best to pay amounts exceeding Rs 20,000 by cheque.
Book-keeping requirements
If the gross receipts are less that Rs 1.50 lakh (Rs 150,000), the assessee has to maintain his accounts which enables the Income Tax official to compute the taxable Income. If the gross receipts exceed Rs 1.50 lakh, the assessee has to maintain books of accounting like the cash book, journal, ledger, copies of bills exceeding Rs 25. Accounts should be maintained either on mercantile basis or cash basis.
In case of professional income, accounts have to be audited if gross receipts exceed Rs 10 lakh (Rs 1 million). This audit report should be submitted along with the income tax return, before September 30.
Advance tax
Since a professional earns his own income, there is no TDS. Hence, he is liable to pay advance tax as he earns income. Thus, advance tax is payable on the basis of estimated income of the current financial year. Advance tax is payable only in cases where tax payable is in excess of Rs 5,000.
Advance tax can be paid in the following schedule.
• 30% on or before September 15
• 30% on or before December 15
• Remaining 40% on or before March 15
If there was shortfall in earlier installment, it should be made up in subsequent installment.
Due dates for filing returns
Assessee having income from profession but who do not have to get the accounts audited under Income Tax or any other law has to file returns by 31st July. Assessee who gets his accounts audited has to file returns by September 30.
Tips for being tax-efficient
To avoid tax-time surprises, periodically review your taxes throughout the year. Don't forget to make necessary quarterly tax payments to avoid under-withholding penalties. Complete all of your paperwork on-time, particularly if you are billing clients or customers. Many companies will take several weeks to process invoices. Keep copies of all receipts for tax time.
Under the tax laws, the income of a self-employed person (freelance writer/journalist, independent consultant, and businessman, professional) would fall under the head of income from business or profession.
A self-employed person can have income that is more tax efficient by at least 15% as against similar salary income.
1. Business expenses
All expenses related to the business can be claimed as business expenses. Vouchers/bills would be required to support expenses and hence book keeping is important for this category. Other expenses including rent or home office expense, travel costs, communication costs (telephone, internet), business meetings, supplies and utilities can be claimed as expenses. For being deductible, expenses must be both ordinary (common and accepted) and necessary (appropriate and helpful) in your work/business. If such expenses are incurred partly for work purposes and partly for personal purposes, you can deduct only the work related expense.
If the business/ work employs assets like laptops/computers, furniture, UPS and vehicles, depreciation can be claimed on them. Make it a point to maintain bills of capital expenditures. Bad business debts may also be written off. Business losses can be carried forward for 8 years.
2. Avail usual deductions
Section 80C allows investments in PPF (Public Provident Fund), insurance /unit linked insurance plans, pension plans, ELSS (equity linked savings scheme), NSC (National Savings Certificate), infrastructure bonds, FDs (fixed deposits) apart from home loan principal repayment.
Tuition fees for your child's education can also be claimed. The overall limit of this section is Rs 1 lakh. Section 80D provides deduction for medical insurance premiums of oneself and family up to Rs 15,000. An additional Rs 15,000 can be claimed towards medical premiums of parents. If you are staying in a rented home you can claim the rent paid as deduction u/s 80GG, up to Rs 24,000, based on certain conditions. If you buy a house, you can claim a deduction of up to Rs 1.5 lakh on interest paid.
3. Insurance benefits
Avail a family floater policy with reasonable cover to protect your family from any major medical costs that might arise. The premiums paid towards life and health policies will provide for tax breaks u/s 80C and 80D. It is important to have appropriate life insurance cover to offer protection for family, especially since there would be no benefits from the company (if one were salaried) that would have accumulated.
4. Distribute your income
If you have family members who can help in various aspects of your business, it makes sense to employ them (legitimately) and offer an appropriate remuneration. By hiring a family member to work, you will effectively shift a part of your income to your relative.
Your business can take a deduction for reasonable compensation paid to an employee, which in turn reduces the amount of taxable business income that flows through to you. One can also form a Hindu Undivided Family (HUF) as a separate entity, which helps to further distribute income to this entity as well.

07/11/2013

Indian tax laws and NRIs
There has been a continuous effort in the past decade to make the income tax laws simpler, consistent and taxpayer-friendly. The effort has resulted in faster processing of refunds and improving compliance. However, no steps have been taken to reduce the discriminatory treatment meted out to the non-resident Indians (NRIs). They are not only charged a higher tax rate, but also deprived of many deductions or exemptions that resident Indians enjoy. Here are some of the changes in income tax laws that can help attract NRIs.

Lower basic exemption
Resident senior citizens (above 60 years) and super senior citizens (above 80 years) have a basic tax exemption of Rs 2.5 lakh and Rs 5 lakh, respectively. However, for senior citizens and super senior NRIs, this limit is much lower at Rs 2 lakh only.

Besides, NRIs cannot adjust the taxable capital gains against the basic exemption limit. If an NRI earns Rs 2 lakh capital gains and no other income, the full amount is taxed at the applicable rate. Unlike a resident Indian, he cannot adjust this income against the basic exemption limit of Rs 2 lakh.

Not eligible for deductions
NRIs are not eligible for certain deductions enjoyed by resident Indians. These include:

Equity investments
The government's stated intention is to attract investments from NRIs, but they have been denied the benefit of investing in the Rajiv Gandhi Equity Saving Scheme. The newly introduced deduction under Section 80CCG for first-time investors in equity can be availed of only by resident Indians.

Disability
NRIs don't get any tax benefit if they suffer from a disability. Under Section 80U, a resident Indian can claim deduction of up to Rs 50,000 if he suffers from a disability. The deduction is Rs 1 lakh if the disability is severe. They are also not eligible for the deduction if they have a disabled dependant. Under Section 80DD, resident taxpayers can claim a deduction of Rs 50,000 for the treatment of a disabled dependant. Again, the deduction is higher at Rs 1 lakh in case of severe disability. However, these benefits are not extended to NRI taxpayers.

Medical treatment
The discrimination extends to medical treatment as well. Under Section 80DDB, resident taxpayers can claim a deduction of up to Rs 40,000 for the treatment of dependants with specified diseases. The deduction is higher at Rs 60,000 in case of senior citizens. However, NRIs are again not eligible for this tax benefit. They may be paying for the treatment of their dependants, but won't get any tax deduction.

Royalty income
Even writers have not been spared. While resident Indian authors of non-textbooks can claim a deduction for royalty income of up to Rs 3 lakh from their taxable income, this benefit is not extended to the author if he is an NRI.

Problems of TDS
NRIs are also subjected to a higher TDS (tax deducted at source) rate and have fewer options to avoid it.

Property deals
This year's budget has changed the TDS laws relating to property transactions. When a resident Indian purchases a property valued at over Rs 50 lakh, he has to deduct 1% TDS and deposit it with the government. However, if the property belongs to an NRI, the TDS is 20% even if the property is worth less than Rs 50 lakh. This makes it doubly difficult for NRIs to sell real estate.

Bank interest
Resident Indians can avoid the TDS on bank interest by submitting the Form 15G or 15H. However, NRIs are not permitted to submit Form 15G for their NRO deposits in banks, and TDS is mandatory. The problem doesn't end here. The TDS rate for NRO deposits is 30.9% compared with 10.3% for fixed deposits for resident Indians.

The TDS is applicable for a resident Indian if the interest exceeds Rs 10,000 in a year per bank branch. However, this threshold limit does not apply to NRO deposits. Even Rs 1,000 is subjected to TDS at the rate of 30.9%. The interest earned on all other investments, such as corporate deposits and bonds, is subject to a 20.6% TDS, whereas the rate for resident Indians is only 10.3%

Capital gains
No TDS is applicable on shortterm or long-term capital gains earned by resident Indians when they sell mutual funds or stocks. However, for NRIs, there is a 15% TDS (plus 3% cess) on short-term capital gains from shares and mutual funds if the securities transaction tax (STT) has been paid. If no STT has been paid, the TDS rate is higher at 30.9%. They are even subjected to a 10% TDS on long-term gains from shares and mutual funds.

Rental and other income
While resident Indians are liable to pay TDS at the rate of 10% on rental income obtained from land and buildings, this rate is higher at 30%, along with a cess of 3%, for the nonresident Indians. All other taxable incomes of an NRI are also subject to a 30% TDS, besides the cess.

More restrictions:

Concessions
If an NRI opts for the concessional tax treatment, he is taxed at a flat rate. However, in such a case, he cannot avail of any deduction of expenditure or allowance under any provisions or claim benefit of cost indexation for capital gains.

Investments
Apart from the higher taxes, NRIs are not allowed to invest in certain instruments, such as the Public Provident Fund. Certain scrips specified by the RBI are also out of their reach.

NRIs constitute an important segment of the investing population. If the government wants this section to bring in more investment, it should take steps to remove these glaring anamolies in the tax structure. This is especially important in the current situation, when the rupee has seen a drastic fall against the dollar. If NRIs are given the same tax treatment that resident Indians enjoy, it will encourage this large segment of overseas population to start investing in their home country.

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195 C Sree Chithra Nagar B Lane Kowdiar (near KWA Office Pipeline Road)
Thiruvananthapuram
695003

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+91 9947445870

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