Q. I have opened a capital gains account with a balance of ₹20 lakh. A major part of this would go to my builder who will be handing over the possession of our apartment shortly. Please let me know if the income tax authorities will allow me to use the balance only for interior wood work, false roofing or also for electrical appliances.
SVS Mani
A. As per section 54, the proceeds of capital gains are to be used for purchase or construction of house property. Such proceeds, in your case, deposited in the capital gains scheme account are to be utilised for payment to the builder and for such other expenses to make the house habitable and not for other expenses. In casethe amount is not fully utilised, then the balance is to be treated as long-term capital gains in the year of possession of the property or at the end of three years whichever is earlier.
It is to be noted that the amount deposited in the account is to be utilised in the aforementioned manner within three years from the date of transfer of the original asset.
Q. I am an NRI and have invested ₹2 crore in mutual funds (MFs). If I become a resident Indian and opt for monthly dividend option with a return of 10%, what will be the tax amount that will be deducted from my monthly dividend income. Apart from this, is there any other tax I need to pay to the Government of India?
S. Ramanathan
A. Dividend received from registered mutual funds are exempt from income tax. However, redemption/sale of mutual fund units attract income tax in the following manner; for equity-oriented mutual funds, redemption within one year from purchase is treated as short term capital gains and tax is payable at 15% on such gains plus cess and surcharge, if applicable; in case the said nature of funds are redeemed post one year, it is treated as long-term capital gains and tax is payable at 10% on such gain plus cess and surcharge, if applicable if the quantum of such gain/s exceed ₹1 lakh.
For debt mutual funds, on redemption within two years, tax is payable as per income slabs for individuals/senior citizens/super senior citizens on such gains plus cess and surcharge, if applicable. On redemption post two years, tax is payable at 20% on such gains plus cess and surcharge, if applicable
Q. I have been an NRI for the past 28 years and returned for good over two years ago. What’s my NRI/RNOR status?
Vijayakrishnan
A. For determination of your residential status in a particular financial year, the first criterion would be to calculate the number of days you were in India in a particular year. If it exceeds 182 days in all, you become a resident for that year. The next step would be determine the type of resident, whether you qualify to be a resident but ordinarily resident (ROR). You must have been a resident of India for at least two out of ten immediately previous years and have stayed in India for at least 730 days in immediately seven preceding years. If you fail in anyone of the two conditions, then you will be resident but not ordinarily resident (RNOR).
On the taxability of income, if you are a resident/ROR, income earned by you from anywhere in the world is taxable in India subject to double taxation avoidance agreement provisions and if you are a RNOR, only those incomes earned by you which are either received or accrued in India are taxable in India
(The author is partner GSS & Associates, Chartered Accountants, Chennai)
