Nris Face Tax Burden When They Sell Assets In India

(MENAFN- Khaleej Times) Question: Will the budget proposals introduced last week have any impact on non-resident Indians? I believe some amendments have been made to the capital gains tax structure.

ANSWER: No specific provisions have been made in the Finance (No.2) Bill, 2024 for non-resident Indians. However, The customs duty on Gold has been reduced. This will encourage NRIs who visit India to bring gold as permitted by law. Taxation of capital gains has been rationalised and therefore non-resident Indians would be impacted when they sell assets in India.

Short-term capital gains on specified financial assets which currently attract tax at the rate of 15 per cent will hereafter be taxed at the rate of 20 per cent. Other financial assets and assets like immovable properties, gold, jewellery, etc. will continue to be taxed at the normal rates applicable to individuals if they are sold within a period of two years.

For long-term capital gains, the tax rate has been fixed at 12.5 per cent which will apply to both financial and non-financial assets. Long-term capital gains upto Rs125,000 per annum arising from certain financial assets listed on a stock exchange will be exempt from tax. It may be noted that financial assets listed on a stock exchange are classified as long-term if they are held for more than one year.

However, unlisted financial assets and all non-financial assets will have to be held for at least two years in order to be treated as being long-term in nature. Further, when any immovable property is sold, the benefit of indexation of the cost of acquisition will now not be allowed.

Question: My friends and I regularly trade in shares and securities on stock exchanges. Brokers through whom we operate charge us fees which we are not sure are genuine. Is there any institutional guideline in this regard?

ANSWER: With a view to protect the interest of retail investors and other market players, the Securities & Exchange Board of India (Sebi) has directed market entities, like stock exchanges, clearing corporations and depositories (MIIs), to ensure that fees which are charged to brokers are uniform and not linked to volumes. Such fees which are charged to brokers are in turn recovered from investors. This new guideline will come into effect from October 1, 2024. Sebi has emphasised that the MII charges which are to be recovered by brokers from the end client should be 'true to label'. It has further been stipulated that the new charge structure should consider the current per-unit charges to ensure that investors benefit from any reduction in costs. This directive will protect investors because, at present, brokers are collecting more money from clients on a daily basis and passing the money on, once a month, to the MIIs, resulting in the clients being charged more than what the brokers are paying to MIIs.

Question: My son is a techie working in India with a full time job. He also does part time consultancy after office hours with the permission of his employer. Is he liable to pay tax on the additional income which he earns and how should he go about doing so?

ANSWER: As far as salary from his job is concerned, tax would be deducted at source every month by the company paying the salary. At the end of the year, a tax deduction certificate would be issued which will need to be filed with the return of income. The consultancy fees which he earns from moonlighting will have to be fully accounted for and shown in the return of income as profits and gains of a profession. All legitimate professional expenses incurred by him in the course of carrying on the part time profession can be claimed as a deduction from such income. Tax on the net income would be payable by him as advance tax during the financial year in which he has earned the income. If this is not done, the actual tax on the professional income would be payable, alongwith the interest on the advance tax instalments not paid, before the return is filed. The return would need to be filed before 31st July, failing which a penalty of Rs.5,000 would need to be paid.

H. P. Ranina is a practising lawyer, specializing in corporate and tax laws of India.

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