Your questions – Income tax: NRIs can claim benefits under tax treaties

By Chirag Nangia

I have been working in Zambia since 2000 and send my salary to my NRE account in India. Is it taxable in India? If it is taxable, in which section should I indicate it when filing the computerized declaration?

It has been held in various court decisions that the mere collection of salary by NRI into his Indian NRE account for services performed outside India is not taxable in India. Additionally, interest earned by NRIs on these NRE accounts is also tax-free. NRIs earning income in the form of salary and interest, exceeding Rs 2,50,000 are required to provide income tax return in ITR-2 form. However, NRIs can claim benefits under tax treaties and claim refunds if TDS is deducted from their income. For this, you must reconcile the TDS credit and the withholding tax as indicated in the 26AS form.

I bought a dwelling house in 1982 for Rs 55,000. I spent Rs 4 lakh in 1991 to remodel and build the first floor. I sold the house for Rs 70,87,000 on 27th November 2021. How can I claim long term capital gains tax relief. I paid Rs 70,870 as transaction tax. I invested the money in an apartment under construction.
—Mr Hanumantha Rao

For the calculation of the capital gain on the sale of a property, since you purchased the property, the acquisition cost must be the greater of the actual cost or the FMV on April 1, 2001, which is indexed to take into account inflation and any improvement costs incurred before April 1, 2001 are ignored. In addition, if the net consideration resulting from the sale is invested for the purchase of a residential house (one year before or within 2 years from the date of the transfer) or for the construction of a residential dwelling (in 3 years from the date of the transfer), then proportionately the capital gains are exempt under section 54F. This exemption is permitted if an assessee does not own more than one dwelling house on the date of the transfer. The LTCG thus calculated is taxable at 20%, plus a deductible of 4%. Additionally, the tax you pay is TDS pursuant to IA Section 194, which requires tax @ 1% to be deducted by the purchaser of the property at the time of payment of the consideration for the sale.

The screenwriter is the director, Nangia Andersen LLP. Send your questions to [email protected]

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