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The Rediff Money Channel presents everything you wanted to know about tax issues, but didn't know whom to ask. Chartered Accountants from Ganesh Jagadeesh & Co are here to remove all your doubts.

Readers' Note: Please keep your questions short.

There are some rules that govern the amount of money in cash and cheques that a person can take with him/her in and out of the country. It is $2,500 (cash) or $10,000 (bank instruments). Can you clarify what these limits apply to and if it is exceeded what is required to be done? For a person coming from US to India, if these amounts are exceeded, does it have to be reported both to US as well as Indian tax authorities?

— Mohammed Jaleel

The exchange regulation laws of India restrict the import of foreign exchange into India. However by later notifications to the earlier Foreign Exchange Regulation Act, 1973, the government of India has permitted any person to bring into India from any place outside India unlimited foreign exchange. Such permission is allowed only if he makes, on arrival in India, a declaration to the customs authorities in such form as may specified by the RBI in this behalf. Further, such declaration would not be necessary where the aggregate value of the foreign exchange brought in by such person in the form of currency notes, bank notes or traveller's cheques at any one time does not exceed US $10,000 or it's equivalent.

I am a software professional working in the US. How much, in cash and in kind, can I bring into India without inviting tax? Is there a limit? Will my earnings in the US be taxed in India?

— Rohit Singh

Taxability of income is basically dependant on your residential status. An NRI is not taxed on the income earned by him outside India. Whereas, a resident is taxed on his global income. Hence in your case the taxability would be related to your residential status.

You can remit money into India without limit into your NRE a/c through regular banking channel. However, the notifications to the earlier Foreign Exchange Act, 1973, the government of India has permitted any person to bring into India from any place outside India foreign exchange without limit.
Such permission is allowed to persons only if he makes, on arrival in India, a declaration to the Customs authorities in such form as may specified by the RBI in this behalf. Further, such declaration would not be necessary where the aggregate value of the foreign exchange brought in by such person in the form of currency notes, bank notes or traveller's cheques at any one time does not exceed US $ 10,000 or it's equivalent.

I am an NRI living in Australia since 1994. I have cash in India which are savings from money earned in India for which income tax has been paid. is there any way these can be brought here legitimately?

— Geeta and Kumar

You would need to take the permission of RBI for repatriating money earned in India to a place outside India.

I have been in the US for more than two years. After a year I will be returning to India. On returning, can I hold stocks in the US? Can I buy new shares too?

— Subrata Pradhan

As per the latest Foreign Exchange Management Act, 1999, a person resident in India may hold, own, transfer or invest in foreign currency, security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India. Hence accordingly you may invest in security using funds accumulated when you were resident outside India.

Taxability of income is dependent on your residential status. If at the time of sale you are resident in India as defined under the Income Tax Act, 1961, then regardless of the time or place of acquisition of the asset, you will be liable to capital gains tax (if any) in India. Of-course it may be possible that such income may also be subject to tax in the country of sale. In order to avoid such double taxation of the same, India has double taxation avoidance treaties with various countries, whereby income once taxed would be exempt from tax for the second time.

I would like to sell my property which I purchased in 1982. I left India in 1986. If I sell it to an NRI, can the deal be worked out in foreign currency? What is the tax implication if I sell it to a resident Indian? Then, can I transfer the sale proceeds abroad?

— A K Pal

The earlier FERA imposed restriction on acquisition and sale of immovable property by foreign citizens in order to curb flight of precious foreign exchange. Hence if you are intending to sell the property to NRI and repatriate the money outside India, you would be required to obtain the permission of RBI. In case you were to sell the property locally and deposit the sale consideration into NRO a/c then you would not be required to obtain the permission of RBI.
You will be liable to income tax on any capital gains made by you. As in your case the capital gain is long term in nature you would be liable to tax at the rate of 20 per cent of the gains.
Income Tax clearance certificate would be required at the time of sale of property located in Mumbai if the value of such property exceeds Rs 7.5 million.

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