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NRIs can’t open new PPF, but can service existing one

The amount deposited in your PPF account by a relative on your behalf will be considered as a gift.

Q. I am a non-resident Indian (NRI) staying in Singapore since 2010 and work for a multinational company. What will be the Indian income-tax implications or Reserve Bank of India (RBI) compliances on purchase of an immovable property in India with MONEY lying in my non-resident ordinary (NRO) account and sale of the above property within the same year and receipt of the sales proceeds back into the NRO account?

Expert Comment: An NRI can INVEST in an immovable property in India other than agricultural land, plantation property or farmhouse. At present, there are no RBI compliances to be made for purchase or sale of immovable property by NRIs.

There are no tax implications on purchase of immovable property. The FINANCE Bill 2013 has proposed to introduce a provision for withholding tax at source on behalf of the seller at 1% if the property is acquired from an Indian resident for a value exceeding Rs.50 lakh. This provision is proposed to come into effect from 1 June 2013. However, the same has not yet been enacted.

When you sell your immovable property, the capital gains will be computed as follows: sales proceeds minus cost of acquisition and expenses incurred in connection with transfer such as brokerage and legal fees. You will be liable to pay income-tax on short-term capital gains. At present, the marginal rate of tax on short-term capital gains is 30%.

However, if you do not have other income in India or have lower income, you will get the benefit of the threshold exemption and lower tax rates. There is no tax on income up to Rs.2 lakh; for income between Rs.2 lakh and Rs.5 lakh, the tax is 10% of the amount exceeding Rs.2 lakh; for income between Rs.5 lakh and Rs.10 lakh, the tax is Rs.30,000 plus 20% of the amount exceeding Rs.5 lakh; and for income above Rs.10 lakh, the tax to be paid is Rs.1.3 lakh plus 30% of the amount exceeding Rs.10 lakh. The income-tax computed above will be increased by a cess of 3% if the income is up to Rs.1 crore and a surcharge of 10% of tax and cess of 3% (of tax and surcharge) if the total income exceeds Rs.1 crore.

Q. I will be leaving for a job abroad this month. I plan to open a Public Provident FUND (PPF) account before leaving. Can my father (who is a resident) deposit MONEY in my PPF account? What will be the tax treatment?

A non-resident Indian (NRI) can’t open a new PPF account. However, as a resident Indian you can open a PPF account and continue contributing even after you become an NRI.

So your father can deposit money in your PPF account and claim deduction. The amount of money deposited by your father will be considered as a gift. There is no tax liability in India in respect of the said amount received in your PPF account; do check the tax implication on the gift in the country where you become a tax resident.

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