Is income earned abroad taxable in India?

     Print Edition: January 8, 2009

Is the income that I earn abroad taxable in India? I have lent some money to a friend and my sister. What will be the tax implications of this move?
— Devendra Bhatt
If you have lived in India for more than 182 days in a financial year, you will be considered a resident of India under the Income Tax Act. So your income, including the one earned abroad, will be taxable in India. However, you may get benefit under the Double Taxation Avoidance Agreement if the income earned abroad is taxable in that country. If there is no such agreement between India and that country, check if you can get any benefit under Section 91.

If you give money to your friend as a loan, he will not have to pay tax. But if it is given as a gift, it will be taxable in India. Under Section 56, any sum received as a gift and exceeding Rs 50,000 a year is treated as income in the hands of the recipient. It excludes sums received from a relative. So your sister will not have to pay tax on the amount.

I have misplaced my insurance receipt. Is it necessary to attach it and other documents along with the tax return?
— Ramesh Chauhan
No attachments are needed with the current ITR forms. After you submit the form, the IT Department cross-references the TDS details using the Online Tax Accounting System (Oltas). However, make sure you carry the photocopies of all the relevant documents when you submit the form at the income-tax office.

My husband is a non-resident Indian and sends me money regularly. I have been investing the money in fixed deposits. Is the interest income taxable?
— Aruna Roy
Even if the fixed deposits are in your name, you will not have to pay any tax on the interest income. However, your husband will have to pay tax on it. He will have to obtain a permanent account number (PAN) and also submit a return.

I have come back to India after 10 years and don’t have a regular income source. Will income from investments be taxed?
— Rajnikant Shah
Since you have been a non-resident for the past 10 years, the money brought by you to India will not attract tax. However, any income from savings invested in India will be taxed here. Your income will be either in the form of interest, dividend or capital gain. Dividend income is exempt from tax but interest income is taxable. The gains from the sale of shares and mutual funds are taxable in the short term, but not taxable in the long term, provided the securities transaction tax has been paid.

My Hindu Undivided Family (HUF) has earned Rs 2 lakh this year. I have deposited Rs 1.2 lakh in the PPF accounts of both my children. Do I get any tax benefit?
— Davinder Kumar
Yes, an HUF can get tax benefits under Section 80C. However, the maximum limit of investment in PPF, which qualifies for deduction, is Rs 70,000. Therefore, only Rs 70,000 out of the Rs 1.2 lakh that you have invested will be eligible for deduction.

No tax has been deducted at source on my income. Do I have to file a return?
— Rakesh Mehta
You may skip filing a return if your taxable income is below the exempt limit. However, if your gross total income exceeds the basic exemption limit, then you have to file a tax return even if no tax was deducted at source.

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