NRI Tax Info

A N Shanbhag, the highly respected investment guru, and his son Sandeep, answer your questions on NRI investment.

A Rediff India Abroad feature:

My brother is working in New York on an H-1B visa for the last eight years. His status here in India is Non-Resident Indian. His funds in the United States hardly earn 2 to 3 percent. He files his tax returns in the US. Please suggest how to invest his dollars in India.

-- Jatin Shah

Subject to the local laws of the NRI, he or she is free to invest funds in equity, mutual funds, property and insurance related products in India. Moreover, if the funds are remitted to India, full repatriability is maintained.

The interest rates in India are currently in the region of 10-11 percent p.a. Ideally, your brother should invest in a mix of mutual funds and fixed income securities.

My daughter is a green card holder in the US. In India she was employed with the state government and went to the US in February 2006. Currently, she is not working. In India she had invested in bank FDs, Post office MIS, PPF and NSC.

Total earning from the above is less than the exempted limit of Rs 150,000. As per the bank's advice, she had submitted 15G form and tax was not deducted from April 1, 2007 to March 31, 2008 on the above investments. She has also not converted her accounts to Non-Resident Ordinary accounts.

1. Is it necessary to change the present bank accounts to NRO accounts?

2. Is it possible to change to NRO accounts from back date?

3. Is it necessary to deposit 30 percent of income earned through above investments during the year 2007-2008 now as income tax and then claim this amount from IT department by filing ITR.

-- Kanhaiya Lal

Yes, it is necessary to redesignate all her resident savings accounts to NRO. An NRI cannot have and operate resident accounts. It is not possible to do so retrospectively.

If her total income is less than Rs 150,000, then no tax is due from her and hence there is no requirement of filing a tax return.

I work on a ship. My employers have their head office in Hong Kong. I earn my wages working on ships which have a foreign flag and are not registered in India. In this financial year, I have worked for two months and, due to certain reasons, will only be able to resume work in January. This means that my stay in India will be for a total of about seven months in this financial year. Since I will be considered to be a Resident, will my earnings be taxable even though my employers are not based in India and I have earned my wages while being out of India?

-- Sharukh Cama

Tax is determined based on your residential status and not that of your employer's. Secondly, for a Resident Indian, global income is taxable. Therefore, since you have been in India for over 182 days this year, your total income including that earned while being out of India will be taxable in India.

I am an NRI for the last 12 years and have a Non-Resident External savings and NRO savings and fixed deposit accounts. I have a valid PAN Card too. I have no income from India except interest earned on my NRO fixed deposits. This year I was slightly late in filing my tax return. I understand that the last date was July 31. However, I have been advised that even now I can file the return under 'Belated Return' facility. Is this true?

Also, while going through the return form, I was not able to understand the requirement of Item 24 in the form. This item is described as 'Other Information (transactions reported through Annual Information Return) (Please see instruction number-9(ii) for code).' Could you elaborate on this also please?

-- Sundar

In India, the financial year runs from April to March and tax return for income earned during this period has to be filed by July 31. If you haven't been able to do so, you may still file your tax return till the next March 31. This will be known as a belated return.

If any tax was payable originally, you would need to pay such tax and interest thereon @1% per month till the date that you finally pay the tax.

Regarding your other question, under section 285BA of the Income Tax Act, read with Rule 114E, the transactions of all persons, including NRIs, undertaking any one of the following seven specified financial transactions, equal to or over specified financial limits, are required to be reported to the IT department through Annual Information Return (AIR):

1. Cash deposits in a year in any bank SB account are of or more than Rs 10 lakh (Rs 1 million).

2. Payments in a year credit card are of or more than Rs 2 lakh (Rs 200,000).

3. Purchase of units of mutual funds of or more than Rs 2 lakh.

4. Acquisition of bonds or debentures of or more than Rs 5 lakh (Rs 500,000).

5. Purchase of shares of or more than Rs 1 lakh (Rs 100,000).

6. Purchase or sale of immovable property of or more than Rs 30 lakh (Rs 3 million).

7. Purchase of RBI bonds of or more than Rs 5 lakh.

If you do not have any of such transactions, you may write 'nil' in the space provided.

I am a marine engineer (Merchant Navy) having permanent residence in Kolkata. What will be my tax status and tax treatment? Will I be a NRI even though I sail for less than six months an year? Can I hold a normal savings account along with NRE account in India? Can I invest directly into the market as a resident individual?

-- Saurav Agarwal

If any person spends 182 days or more in India, he would get the status of Resident as per the Income Tax Act. Therefore, if you sail for less than 6 months and thereby end up staying in India for 182 days or more, you would not be termed as NRI but a Resident.

One can either be a Resident or an NRI. Accordingly, one can either have a Resident savings account or an NRE / NRO account. As a resident individual, you can directly invest in the stock market. An NRI to do the same would require the PINS permission.

 

 

Thanks

Sankar Chinnathambi

Senior Manager - Oracle Applications

Herbalife International of America Inc.

Phone: 310-410-9600 Ext. 22359

 

Parents: When to back off, when to step in

Do you speed over to your child's school, or even college, whenever something goes wrong?

Parents should try to teach their children how to handle situations themselves, experts say.

Many parents today insert themselves into even the most minute activities in their children's lives, a phenomenon that's known as "helicopter parenting."

But two child experts told CNN that parents should aim to empower their children to do things on their own.

"Parenting should be increasingly in the background as the child gets older," said Vivian Friedman, child-adolescent psychologist at the University of Alabama at Birmingham. "If you do for your child for too long, they never learn to do for themselves."

Dr. Kenneth Ginsburg, M.D., associate professor of pediatrics at the University of Pennsylvania School of Medicine and author of the book "A Parent's Guide to Building Resilience in Children and Teens," said it's important to show children you believe they are capable of handling situations themselves, but always put safety first. Read more about helicopter parents »

The "helicopter parent" trend may have arisen because the focus of marriage has shifted from the spouse to the child, Friedman said. An increase in divorce and a greater prevalence of two working spouses also contribute to parents' habits of spoiling their children.

"When [the kids] have little failures, they feel like our own failures," Ginsburg said. "What we need to understand is that our job as parents is not to finish our kids or produce perfect kids. It's to start our kids." Watch more on when helicopter parents go too far »

Here's what Friedman and Ginsburg recommended for various situations that may arise in your child's life:

1. The elementary school is putting on "Peter Pan" tomorrow. While you prepare a presentation for an important business meeting, your daughter calls and tells you she forgot her Tinkerbell costume for the dress rehearsal. "I'm the only one who's not dressed up," she tells you.

Friedman and Ginsburg agreed that it's OK to take care of it the first time she forgets the costume, but not if it becomes a habit.

"The first time: Find a housekeeper or neighbor to bring it over," Friedman said. "But if she does this routinely, she needs to suffer consequences to learn from the experience."

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"One time, two-time mistake -- it's wonderful to pick up the pieces," Ginsburg said. "If, in fact, you always end up picking up pieces, you can't expect a kid to learn the valuable lesson that they can do it themselves. Learn from failure -- failure's a great thing when you learn how to recover yourself."

2. You're at the playground reading a newspaper and suddenly your daughter runs up to you crying. "They won't let me make sand castles with them," she whines.

Friedman said this one depends on age. For a 3- or 4-year-old, it's appropriate for the parent to go over to the group as a neutral adult and help the children learn that they need to include everybody.

But for a 7-year-old, it's borderline. "You could say, 'What seems to be the problem? Do you think there's a way we could all play together?' rather than 'You can't exclude my child,' " she said.

Ginsburg, on the other hand, said you can suggest to your child what to say, or recommend that she find someone else to play with, but you shouldn't communicate that your child isn't capable of handling the situation.

"Learning how to play nice with other people in the sandbox is a great metaphor for life," he said.

3. Kids in the seventh-grade class just won't leave your son alone, not even online. Besides shoving him against the lockers once in awhile, they've also set up a MySpace page making fun of his appearance and name.

Experts agree that you should step in here and notify the school. Friedman would also notify the parents of the children involved -- "Most rational, reasonable parents would not support their child doing that," she said.

Ginsburg emphasized that safety always comes first. "You don't allow your daughter to put her hand in the oven to learn it's hot," he said. "You don't allow a kid to be bullied when there should be systems in place to prevent bullying. "

4. Your son started college a month ago, and every time you call him he has a new story about his messy, party-loving roommate who distracts him from studying and interrupts his sleep. "I wouldn't mind as much if it were my own vomit on the floor," your son tells you. He says he'll just stick it out for the rest of the year.

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Friedman and Ginsburg said they would not approach the college housing department and ask to have the young man moved, except in extreme or difficult circumstances -- such as if the child is in a special needs program and can't help himself, Friedman said.

"There's nothing wrong with asking open-ended questions to help your son figure it out," Ginsburg said. "It's OK to say 'Who can you talk to at the university to change your living situation?' What's not OK is to call the dean and say 'Move my son.' " 5. Always a technical genius, your daughter majors in electrical engineering and will surely become a pioneer of great innovations. But this semester, the last of her junior year, she failed her 18th-century literature class, which she took to fulfill the subject-area distribution requirements. This is going to look pretty bad on graduate school applications.

While the daughter can speak to the professor on her own, Friedman and Ginsburg said they would not intervene in this situation.

Special circumstances would be if the grade was truly unfair and there was real foul play involved, or if the professor was drunk -- but otherwise, Friedman said, "It's her F, it's not your F. I would do absolutely nothing."

6. Your daughter has been in the real world for a year, but she says she's not ready to keep herself afloat financially. For the third time this summer she asks for help paying the rent -- "phone bill would be extra nice," she adds. You also notice that she's got a new pair of Manolo Blahnik pumps, and an iPhone is sticking out of her purse.

Friedman said she would not allow this to come up a third time -- she would have made the daughter set up an automatic debit system early on so her child's rent comes out of the account when her paycheck is deposited. "By the third month, I would let her sink, but I'm not a helicopter parent," she said.

Ginsburg emphasized again the safety component: He would never want his daughter to become homeless. He would pay the first month's rent with clear expectations: She needs to learn how to make a budget, she can't spend money on other things until things like rent and food are taken care of, and she needs to know that this is a loan. "Seven months in a row: she needs to find a roommate," he said.

Finally, note that there are no villains here, Ginsburg said.

"The parents who we think do too much are still doing their very best," he said. "Real success involves resilience: the capacity to learn to bounce back on your own."

Picture with Sania

Spotted: Sania Mirza in the US

August 27, 2008

Reader Sankar Chinnathambi sent us this picture from the United States.

'I met Sania Mirza [Images] at a store in Carson, California, before her match with Eva Hridinova at the US Open [Images] series East West Bank Classic,' writes Sankar.

'I watched the match too; she won in straight sets --  6-3, 6-4. It was a lovely match.'

Thank you, Sankar, for sharing this picture!

If you encounter your favourite cricket/sports personalities, send us the photograph or video on sportsdesk@rediff.co.in We will feature the best images right here on Rediff Sports or Rediff Cricket.

 

 

Thanks

Sankar Chinnathambi

Senior Manager - Oracle Applications

Herbalife International of America Inc.

Phone: 310-410-9600 Ext. 22359