Q. My parents worked for 24 years in the Gulf and now plan to return to India for retirement. Since they had NRI, NRE accounts, they did not have to pay taxes. But now, they may have to. What are the tax rates? Any way to reduce them?
Abina
A. On returning to India after retirement, your parents first lose their Non-Resident status (in case they are in India for 182 days or more in a particular assessment year). However, they shall be considered Resident but not Ordinarily Resident (RNOR) if they fulfil the following conditions, they are non-residents in 9 out of 10 immediately preceding years and have been in India for 729 days or less in the preceding 7 years.
The benefit of RNOR is that they will be taxed only for incomes being received or accrued in India only and not any other global income. However, once NRE accounts are converted to regular savings accounts, the incomes arising out of such accounts are taxable as per the slab rates only (NRO accounts are always taxable irrespective of the status of the residency). The slabs vary for senior, super-senior and non-senior citizens. Also the assessee is given an option to choose from new or old regime where the tax rates, slabs and deductions/exemptions vary. You may look into investing in investment modes as prescribed in Section 80C such as ELSS mutual funds, tax-saving FDs, NSC, senior citizen saving schemes to avail deductions of up to ₹1,50,000 from the total income. You are advised to look into each of these options and understand the applicability and conditions prior to making the investment. However, it is to be noted that if new regime is chosen, deductions under Section 80C cannot be availed.
Q. I had invested ₹5 lakh in an NCD of Hedge equities in October 2016 for five years. In October 2021, I got ₹8,61,196 (Principal +Interest). What is the tax liability?
SatheeshBabu R.
A. It is assumed you subscribed to the Non-Convertible Debentures (NCDs) during the issue and held it till maturity, leading to redemption of principal and interest accrued. As you have held the NCDs until maturity, the entire principal invested is redeemed whereby there is no gain/loss in the principal redeemed amount as against the principal invested amount. Only the interest element of the NCD is taxable under the head ‘Income from Other Sources’ and is to be included in your total taxable income.
Q. I had contributed to my EPF account only for 3 years from 2012 to 2015. I quit in 2015. I have not made any withdrawals from my EPF account till date. I plan to withdraw money from my account this financial year. I have the following tax- related queries :
Is my contribution to EPF during 2012-2015 taxable? I claimed deductions in my Income Tax under Sec 80C then. Is the interest accrued till date for my contribution taxable? Is the employer’s contribution towards EPF during 2012-2015 taxable? Is the interest accrued till date for the employer’s contribution taxable? Is the employer’s contribution towards the EPF Pension Scheme taxable?
Raghu
A. As you were not in employment for 5 years of continuous service, EPF withdrawal is taxable in the following manner (point-wise reply) :
1) As deduction under Section 80C was availed, contribution to EPF is taxable under the head “Income from Salary.”
2) Interest accrued on your contribution is taxable under the head “Income from Other Sources.”
3) Employer’s contribution is taxable under the head “Income from Salary.”
4) Interest accrued on employer’s contribution is taxable under the head “Income from Other Sources”
5) Employer’s contribution towards Employee Pension Scheme is taxable.
(The writer is a partner, GSS and Associates, Chartered Accountants, Chennai)
