Explainer - Income tax rules for NRIs who invest in stocks, mutual funds in India

 








A non-resident is liable to pay tax in India only on his Indian Income. Not all interest income earned by an NRI are tax free in India. Though the interest earned by a non-resident on NRE and FCNR account are fully tax free but other interest income like interest on NRO account are fully taxable in India. Even the interest on NRO account are subject to TDS without any threshold limit.

The dividend income as well as the capital gains earned by your son from shares listed in India and equity oriented schemes of mutual funds are subject to tax in India. Like a resident tax payer, a non-resident is also entitled to the basic exemption limit. In case income other than long term capital gains of any nature and short term capital gains on equity shares/equity mutual funds is less than the amount of basic exemption, a resident is entitled to set off such short fall against any long term capital gains and short term capital gains on equity products. The same facility to set off the short fall in basic exemption limit is not available to a non-resident. So he has to pay full tax on these capital gains even if he does not have any other income or such other income is below the taxable limits. A non resident has to pay tax at the rate of 20% and applicable surcharge and cess on his dividend income. The liability to tax on dividends will arise only if his aggregate income excluding the capital gains stated above exceeds the amount of basic exemption limit.

Though he may not have to pay any tax on dividends but he will still have to pay tax on all short term capital gains earned on Indian equity at flat rate of 15%. Long term capital gains on listed shares and equity schemes will enjoy a basic exemption of one lakhs on long term capital gains on Indian equities and beyond one lakhs he will have to pay @ 10% without any indexation benefit where on other long term capital gains he will have to pay tax at flat rate of 20%. Please note your son is not entitled to any deduction in respect of various items under Chapter VIA like life insurance premium, medical insurance, home loan repayment, NPS, ELSS etc. against dividends, short term capital gains on equity share/scheme and long term capital gains of any nature.


Download our App to get knowledge updates: https://play.google.com/store/apps/details?id=com.app.gstmitra

Join Our Telegram Channel for more updates:https://t.me/praveengst











Comments

Post a Comment

Popular posts from this blog

Centre appeals against ruling on levy of GST on maintenance charges to resident welfare associations

Image
  The Centre has preferred a writ appeal before the Madras High Court against a single judge's order that flat or villa owners paying more than ₹7,500 a month towards maintenance charges to their residents’ welfare associations must pay Goods and Services Tax (GST) at the rate of 18% only for the amount exceeding ₹7,500 and not for the entire monthly contribution. Justices T.S. Sivagnanam and Sathi Kumar Sukumara Kurup on Wednesday allowed an application filed by the Centre to dispense with production of a certified copy of the judgment passed by Justice Anita Sumanth recently and directed the Registry to list the appeal for admission in the usual course. Justice Sumanth had in July this year quashed an order passed by the Authority for Advance Ruling (AAR) on June 21, 2019 as well as a consequent circular issued by the Department of Revenue under the Union Finance Ministry on July 22, 2019 since both of them had insisted upon collecting GST for entire monthly contribution. The jud...
Read more

Seven key things to know before filing income tax return (ITR) for FY21

Image
  The last date to file income tax return for the financial year 2020-21 has been extended to September 30, 2021. Although there is more than two months left for the deadline to end, it is always recommended to complete the task as soon as possible and not to wait for the last minute. Worth mentioning here is that the income tax department last month launched a new e-filing portal (www.incometax.gov.in) to speed up the processing of tax returns. The I-T department will soon launch a mobile application, having all the features of the new portal. This year taxpayers have to take care of the following changes in the ITR filing process. 1) A new utility named JSON has been launched for filing tax return forms for FY21. At present, only three forms, ITR 1, 2 and 4 have been released. These new forms will import pre-fill data such as personal details, salary income, dividend income, interest income, capital gains and all the information available in Form 26AS. 2) Taxpayers will have the ...
Read more

Income Tax Dept detects ₹350 cr unaccounted cash receipts after raid in Rajkot

Image
  The Income Tax Department carried out a search and seizure operation on a real estate group based in Gujarat's Rajkot and found unaccounted cash receipts in various projects of approximately ₹350 crore, the Finance Ministry said on Friday. The group is among Gujarat’s prominent real estate builders and developers and is actively engaged in real estate, construction and land trading businesses in and around Rajkot. More than 40 premises were covered in the search operation. During the course of operation, many incriminating documents and digital evidences were seized indicating involvement of the group in unaccounted transactions. The IT sleuths found substantial evidence of transactions outside the regular books of accounts, unaccounted cash expenses, cash advances received and interest paid in cash. Evidence of on-money payments in real estate projects-flats, shops and land deals has also been found. Total unaccounted cash receipts in various projects of approximately ₹350 crore...
Read more