FM gives NRIs more investment options
NRIs will continue to enjoy exemption on the long-term capital gains on which securities transaction tax has been paid. Budget: Personal Tax Calculator
By TNN |
| Rajesh Gupta Executive Director PricewaterhouseCoop |
Against the backdrop of a robust economic growth rate of 8.7%, the finance minister presented his budget proposals for 2008-09.
Mindful of the impending general elections next year, it was expected that the Budget will have various populist measures and it did so.
The Budget proposals, as usual, present a mixed bag. While there have been no specific proposals for non-resident Indians (NRIs), in general, certain proposals are definitely welcome. However, some proposals will surely have adverse impact.
NRIs can cheer about the increase in the threshold limits and liberalisation of the tax slabs. Individuals will now not have to pay any tax on income up to Rs 1.5 lakh.
The new tax slabs will result in tax saving of around Rs 45,000 for individuals having an income of more than Rs 5 lakh.
An additional tax deduction of Rs 15,000 is also proposed for medical insurance cover for parents.
However, for NRIs (including other investors), the hike in the tax rate to 15% from 10% in respect of short-term gains arising from transfer (on the stock exchange) of equity shares or units of an equity oriented fund in India, is not a desirable step.
The finance minister has also mentioned that a permanent account number (PAN) will now be required for transactions in the financial market, subject to suitable threshold limits. Thus, NRIs should ensure that they obtain a PAN prior to undertaking such transactions.
NRIs will continue to enjoy exemption on the long-term capital gains on which securities transaction tax (STT) has been paid.
Further, NRIs have the option of offering their investment income and long-term capital gains income arising from specified assets to tax at beneficial rates ��� 20% for investment income and 10% for long-term capital gains.
However, the benefit of indexation or deductions under Chapter VI-A are not allowed in computing such income.
Further, where appropriate taxes have been deducted at source from these incomes, there is no requirement to file a tax return.
At present, NRIs are also allowed to maintain foreign currency (FCNR) accounts & NRE accounts in India to invest in non-resident (non-repatriable) rupee deposits and also in RBI-approved foreign currency deposits with scheduled banks and claim tax exemption on income arising there from.
These provisions remain unchanged. Further, NRIs can freely repatriate, outside India, their earnings in the form of interest, rent and dividend received in India, without any additional tax burden subject to specific conditions.
However, with the rupee appreciating, it would not be surprising if NRIs do not opt for repatriation.
The introduction of Foreign Currency Exchangeable Bond (FCEB) may also provide the NRIs with another avenue of investing in India.
The Budget provisions specifically exempt conversion of such bonds into shares from capital gains tax.
Mindful of the impending general elections next year, it was expected that the Budget will have various populist measures and it did so.
The Budget proposals, as usual, present a mixed bag. While there have been no specific proposals for non-resident Indians (NRIs), in general, certain proposals are definitely welcome. However, some proposals will surely have adverse impact.
NRIs can cheer about the increase in the threshold limits and liberalisation of the tax slabs. Individuals will now not have to pay any tax on income up to Rs 1.5 lakh.
The new tax slabs will result in tax saving of around Rs 45,000 for individuals having an income of more than Rs 5 lakh.
An additional tax deduction of Rs 15,000 is also proposed for medical insurance cover for parents.
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However, for NRIs (including other investors), the hike in the tax rate to 15% from 10% in respect of short-term gains arising from transfer (on the stock exchange) of equity shares or units of an equity oriented fund in India, is not a desirable step.
The finance minister has also mentioned that a permanent account number (PAN) will now be required for transactions in the financial market, subject to suitable threshold limits. Thus, NRIs should ensure that they obtain a PAN prior to undertaking such transactions.
NRIs will continue to enjoy exemption on the long-term capital gains on which securities transaction tax (STT) has been paid.
Further, NRIs have the option of offering their investment income and long-term capital gains income arising from specified assets to tax at beneficial rates ��� 20% for investment income and 10% for long-term capital gains.
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However, the benefit of indexation or deductions under Chapter VI-A are not allowed in computing such income.
Further, where appropriate taxes have been deducted at source from these incomes, there is no requirement to file a tax return.
ADVERTISEMENT
At present, NRIs are also allowed to maintain foreign currency (FCNR) accounts & NRE accounts in India to invest in non-resident (non-repatriable) rupee deposits and also in RBI-approved foreign currency deposits with scheduled banks and claim tax exemption on income arising there from.
These provisions remain unchanged. Further, NRIs can freely repatriate, outside India, their earnings in the form of interest, rent and dividend received in India, without any additional tax burden subject to specific conditions.
However, with the rupee appreciating, it would not be surprising if NRIs do not opt for repatriation.
The introduction of Foreign Currency Exchangeable Bond (FCEB) may also provide the NRIs with another avenue of investing in India.
The Budget provisions specifically exempt conversion of such bonds into shares from capital gains tax.
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