NRIs CORNER- WEALTH TAX

The most common fallacy amongst NRIs is that they are exempt from almost all taxes in India and particularly not Wealth Tax liability as regards their assets in India. NRIs are to pay Wealth Tax on chargeable assets in India i.e. immovable properties, jewellery and vehicles. The subject is discussed at length under the following chapters :

Taxable Assets in India Wealth Tax Exemptions Wealth Tax Rates

Many NRIs believe that they are not liable to Wealth Tax at all. This is not true. Like Residents, NRIs are also liable to pay Wealth Tax in India. The assets chargeable to tax are : immovable property (other than one residential house, or plot of land having area 500 square meters or less), jewellery , cash exceeding Rs 50,000 and propelled vehicles i.e. cars etc. All other assets are free from Wealth Tax.

NRIs CORNER - TAXABLE ASSETS IN INDIA TAXABLE ASSETS FOR RESIDENTS AS ALSO FOR NRIS ARE : 1. Buildings or land appurtenant thereto and includes a farm house if it is situated within 25 kilometers from the local limits of any municipality (whether known as municipality, municipal corporation or by any other name) or a cantonment board,but does not include one house or part of a house or a plot of land having area of 500 square meters or less. 2. Value of personalvehiclesi.e. motor cars, yachts, boats and air crafts. 3. Jewellery, bullion, furniture, utensils, etc., made of precious metal i.e. ornaments made of gold, silver, platinum, or any other precious metal and bullion including utensils and furniture made of gold, silver precious metal or any alloy containing one or more of such precious precious metal.

4. Cash in hand in excess of Rs.50,000/-. 5. Urban land. 1) that is land situated i) Within the Jurisdiction of Municipality having population of 10,000 and more or ii) in any area within 8 kilometers from the local limits of municipality.

HOWEVER THIS DOES NOT INCLUDE : 1. A house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than five lakh rupees; 2. Any house for residential or commercial purposes which forms part of stock-in-trade; 3. Any house which the assessee may occupy for the purposes of any business or profession carried on by him; 4. Any residential property that has been let-out for a minimum period of three hundred days in the previous year; 5. Any property in the nature of commercial establishments or complexes; 6. Motor cars used by the assessee in the business of running them on hire or as stock in trade. 7. Jewellery, bullion, furniture, utensils or any other article used by the assessee as stock in trade. 8. Yachts, boats and aircrafts used by the assessee for commercial purpose. 9. Urban Land will not be chargeable to tax. if ..... i) Construction of building is not permissible ii) Construction of building is made with approval of appropriate authority. iii) Unused land held for industrial purpose for a period of 2 years from the date of acquisition. iv) Land is held as stock in trade for a period of 10 years from the date of acquisition. Non-resident Indian 1. "Non-resident Indian" as per FEMA is different than "Non-resident Indian" as per the Income Tax Act,1961. DEEMED ASSETS 1. Assets required to be included, though this may belong to others (Deemed Assets) i) Assets transferred to spouse directly or indirectly otherwise than for adequate consideration or in connection with an agreement to live apart. ii) Assets held by a minor child except the following: a.) Assets held by a minor child suffering from any disability of the nature specified. (i.e. permanent physical disability (including blindness) or mental retardation.) of the Income-Tax Act, b.) Assets held by a minor married daughter. c.) Assets acquired by a minor child out of the following income:

Income from manual work done by him; Income from activity involving application of his skill, talent or specialised knowledge or experience. iii) Assets transferred to a person or Association of Person for the benefit of individual, his/her spouse directly or indirectly otherwise than for adequate consideration for the immediate or deferred benefit of the individual himself, his or her spouse. iv) Assets transferred to a person or association of person under revocable transfer. v) Assets transferred to son's wife directly or indirectly on or after 1-6-1973 otherwise than for adequate consideration. vi) Assets transferred to person or association of person for the benefit of son's wife directly or indirectly on or after 1-6-1973 otherwise than for adequate consideration for the immediate or deferred benefit of the son's wife of such individual or both. vii) Converted property by an individual, who is a member of a Hindu Undivided Family, converts his individual property after 31-12-1969 into the property belonging to the family through the act of such impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family or makes gift of separate property or transfers property otherwise than for adequate consideration, such property known as converted property shall be included in the net wealth of such individual. viii) Holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate. Deemed assets which are included in computing the net wealth of any of the three categories of assessee viz., individual, HUF, and company: 1. Interest in a firm or association of persons: In case of an assessee who is a partner in a firm or a member of an association of persons (not being a co-operative housing society), there shall be included the value of his interest in the assets of the firm or association. 2. Gift made by means of book-entries where money has not been actually delivered to the other person: Where a gift of money from one person to another is made by means of entries in the books of accounts maintained by one or more of the following persons: a.) the donor; or b.) an individual or a Hindu Undivided Family or firm or an association of persons or body of individuals with which the donor has business or other relationship, the value of such gift shall be included in the net wealth of the donor. 3. Membership under a house building scheme: Where the assessee is a member of a co-operative society, company or other association of person and a building or a part there of is allotted or leased to him under a house building scheme of the society, company or association, the assessee shall be deemed to be the owner of such building or part. In determining the value of such building or part, the value of any outstanding installment of the amount payable under such scheme by the assessee to the society, company or

i.) ii)

association towards the cost of such building or part and the land appurtenant thereto shall, be deducted as a debt owed by him in relation to such building or part. 4. Building/right in building acquired in special cases: a.) A person, who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 shall be deemed to be the owner of such asset and the value of such building or part shall be included in computing the net wealth of such person. A person, who acquires any right (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof by virtue of any such transaction as is referred to in clause (f) of section 269UA of the Income-tax Act, 1961 (i.e. lease for not less than 12 years) shall be deemed to be owner of such asset and value of such building or part shall be included in computing the net wealth of such person.

b.)

IMPORTANT- IMPORT OF GOLD & SILVER : NRIs being granted concessional import duty and permission to import gold & silver often import large quantity of gold / silver. If the market value of such gold / silver exceeds Rs.30 lakhs & the same is held in India as at 31st March, the NRI is liable to pay wealth tax @ 1% on such value together with value of other taxable assets & file wealth tax return. WEALTH TAX RATES 1. In case of NRIs, Wealth Tax is leviable at par with resident. 2. The Tax rate are 1% of net wealth subject to basic exemption of Rs.30,00,000/- (Rupees Thirty Lakhs). WEALTH (Rs.) 0 TO 30,00,000 30,00,001 AND ABOVE TAX NIL 1%

NRIs CORNER- WEALTH TAX EXEMPTIONS NON-RESIDENT INDIAN The concessions are available to a Non Resident Indian i.e. a non-resident as defined under the Income Tax Act, 1961 being distinct from an NRI (person resident outside India) as defined under FEMA, 1999 In case of NRIs having any of the following assets, the same are not taxable in the hands of NRI. 01. One house property or part of a house property, 02. One plot of land provided area is less than 500 square meters or less. In Case of NRIs, being a person of Indian origin or a citizen of India who was ordinarily residing in a foreign country and who, on leaving such country, has returned to India for permanent residence, the following assets are not taxable in the hands of NRI for seven successive

assessment year commencing with the assessment year next following the date on which such person returned to India: 01. Money and the value of the assets brought by him into India 02. Value of the assets acquired by him out of such money within one year immediately preceding the date of his return and at any time thereafter 03. Money standing to the credit of NRE A/c in any bank in India. EXAMPLE X an Indian citizen has been residing in USA for several years, returned to India on 21.10.2009 with an intension of permanently residing here. Discuss his wealth-tax liability in the following cases: 1. He brought Rs.25,00,000 along with him and purchased a Mercedez Car. 2. He had sent Rs.40,00,000 to India on 5.11.2008. This money was utilised for purchase of gold on 28.11.2008. 3. He sent Rs.20,00,000 on 5.08.2008 and purchased a residential plot of land in Delhi on 16.08.2008. 4. On his return he brought with him diamond jewellery worth Rs.22,00,000. 5. He had sent Rs.31,00,000 on 04.11.2008 which was deposited in his Non-Resident Indian account with a Bank. Out of this Rs.20,00,000 was withdrawn from the Bank for purchase of urban land but he could not purchase the same till 31.03.2010. 1. 2. Although car is an asset but in his case it will be exempt for 7 years. In this case, the value of gold as on 31.03.2009 will be included in his net wealth for assessment year 2009-10, but from assessment year 2010-11 to 2016-17 it will be exempt u/s 5(v). 3. In this case the value of land will be included in his net wealth not only for assessment year 2009-10 but also for subsequent years. No exemption is available as the asset was purchased more than 1 year prior to the date of return. 4. This shall be exempt for 7 assessment years commencing from assessment year 2010-11. 5. On 31.03.2010 he holds more than Rs.50,000 in cash, but the same will be exempt as cash is also an asset and the exemption u/s 5(v) is also available for 7 years. In addition to the above, OVERSEAS ASSETS held by NRI is also exempt.

Similarly debt owed in respect of such asset, whether located in India or outside India are not deductible.