Mr. Aditya left India for the first time on 8th September, 2018 for employment in USA. He was employed in India with a company for 9 years till 6th September, 2018 . Is he a resident of India for F.Y.2018-19? Whether salary or any other Income earned in USA will be taxable in India?

For the purpose of Income tax in India, the income tax laws in India classify taxable persons as :

  1. Resident.
  2. A Resident not ordinarily resident (RNOR)
  3. A non- resident (NR).

The taxability differs for each of the above categories of taxpayers.
A taxpayer would qualify as a resident of India if he satisfies one of the following 2 conditions:

  1. Stays in India for a year (the financial year in which the individual is leaving for abroad) is 182 days or more or
  2. Stays in India :
    1. for the immediately 4 preceding years is 365 days or more and
    2. for 60 days or more in the relevant financial year

In the event an individual leaves India for employment during an FY, he will qualify as a resident of India only if he stays in India for 182 days or more. This otherwise means, condition (2) above of 60 days would not apply to him.

If an individual qualifies as a resident, the next step is to determine if he/she is a Resident Ordinarily Resident (ROR) or a Resident Not Ordinarily Resident RNOR.
He will be a ROR if he meets both of the following conditions:

  1. Has been a resident of India in at least 2 out of 10 years immediately previous years and
  2. Has stayed in India for at least 730 days in 7 immediately preceding years

Therefore, if any individual fails to satisfy even one of the above conditions, he would be an RNOR.

In the given case Mr Aditya is leaving for USA for employment. Hence only first condition will be applicable to him i.e. he should stay in India for a period of 182 days or more to be qualified as a resident.

For the financial year 2018-19, Mr Aditya has stayed in India for 162 days i.e from 1st April, 2018 to 9th September, 2018 which is less than 182 days. Hence Mr. Aditya will be considered as a Non-resident for financial year 2018-19.

Incomes which are chargeable to tax in India :

Only Income earned in India i.e Interest on bank deposits or Savings bank account , any capital gains from asset in India etc., by a non –resident is taxable in India as per Income tax laws.
Income earned abroad i.e  salary in the case of Mr Aditya earned in USA will not be taxable in India.

Hence, Salary or any other Income earned in USA will not be taxable in India.

What is meant by Senior citizen savings scheme (SCSS)?

The Senior Citizens Savings Scheme (SCSS) is primarily for the senior citizens of India. The scheme offers a regular stream of income with the highest of safety and tax saving benefits.

  1. Eligibility: The following people/groups are eligible to opt for SCSS: 
    • Senior citizens of India aged 60 years or above. 
    • Retirees who have opted for the Voluntary Retirement Scheme (VRS) or Superannuation in the age bracket 55-60. Here the investment has to be done within a one month of receiving the retirement benefits. 
    • Retired defense personnel with a minimum age of 50 years. 
    • HUFs and NRIs are not allowed to invest in this scheme.
  2. Safe and Reliable: Since its an Indian government-sponsored investment scheme and is considered to be one of the safest investment options.
  3. Good returns: At 8.6 % the return rate is very good as compared to a savings or FD account.
  4. Tax benefits: Tax deduction of up to Rs 1.5 lakh can be claimed under Section 80C of the Indian Tax Act, 1961.
  5. Flexibility: The tenure of this investment scheme is flexible with an average tenure of 5 years which can be extended up to 3 additional years.

What is Concept of Block years for getting LTA benefit?

Leave Travel Allowance (LTA) is a type of allowance which is given to an employee from his employer to cover his travel expenses when he is on leave from work. Sometimes it is also known as Leave Travel Concession (LTC). LTA is exempt from tax u/s 10(5) of Income Tax Act, 1961.

Under Rule 2B, exemption will be available in respect of 2 journeys performed in a block of 4 calendar years commencing from the calendar year 1986. Where such travel concession or assistance is not availed by the individual during any block of 4 calendar years, one such unavailed LTC will be carried forward to the immediately succeeding block of 4 calendar years and will be eligible for exemption.

Current LTC Block Year :
The current or on-going block year is 2018-2021.

I am paying medical insurance premium for a medical policy taken in my name, my wife and children and also paying premium on a medical policy taken in the name of my parents who are above 70 years. Can I claim a deduction for both premiums paid?

As per Section 80D: –

A deduction to the extent of Rs. 25,000 is allowed in respect of premium paid to effect or to keep in force an insurance on the health of self, spouse and dependent children.

A further deduction up to Rs. 50,000 is allowable to effect or to keep in force insurance on the health of Senior Citizen Parents (above 60 years) of the assessee.

Hence the assesse can claim a deduction for both premium paid.

I have received cash gift of Rs. 2,00,000 from my childhood friend. Am I required to disclose the gift in my return of income?

Cash gifts are taxable under Section 56(2)(x) if the aggregate value of such sum of money received during the year exceeds Rs. 50,000.

Gifts are taxable under the Income Tax Act, unless they fall under the category of exemption.
Hence, if the aggregate value of gifts received during the year exceeds Rs. 50,000, then aggregate value of such gifts received during the year will be charged to tax.​ The gifts should be duly disclosed in ITR and taxes should be paid on them.

Who can file ITR 2?

ITR Form 2 is for Individuals and HUF receiving income other than income from “Profits and Gains from Business or Profession”. Thus persons having income from following sources are eligible to file Form ITR 2:

  • Income Exceeding Rs 50 Lakhs.
  • Income from Salary/Pension.
  • Income from House Property(Income Can be from more than one house property).
  • Income from Capital Gains/loss (Both Short Term and Long Term).
  • Income from Other Sources (including winning from Lottery, bets on Race Horses and other legal means of gambling).
  • Foreign Assets/Foreign Income.
  • Agricultural Income more than Rs 5000.
  • Resident not ordinarily resident and a Non-resident.

What is my ‘Income from house property’ when I/my family live(s) in it?

When a Family Live in their Own house they won’t receive any Rental Income from that “House Property” , so Income from Self occupied Property is taken as Zero for Calculating total income, and no standard deduction of 30% is allowed as deduction.

Reference Section: 23(2) of Income tax Act

The Section says that when a house is occupied by owner or his family then the annual value of the House or part of Property shall be taken to be Nil.
Provisions of the section do not apply if the Owner earns any Income from the Property either directly or indirectly.

Are gifts of immovable property located abroad liable to tax?

Where any person receives, in any previous year, from any person or persons any immovable property,—

  • (A) without consideration, the stamp duty value of which exceeds 50,000, the stamp duty value of such property;
  • (B) for a consideration which is less than the stamp duty value of the property by an amount exceeding Rs 50,000, the stamp duty value of such property as exceeds such consideration:

Following item (B) shall be substituted for the existing item (B) of Section 56(2)(x)(b) by the Finance Act, 2018, w.e.f. 1-4-2019 :

  • (B) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:—
    • Rs 50,000; and
    • the amount equal to 5% of the consideration:

Therefore, gifts whether received from India or abroad will be charged to tax.

On the occasion of my marriage (March 2018), I received Rs 90,000 in cash from my mother . Will this sum be taxed?

As per Section 56(2)(x) , Any sum of money or kind received as gift from relatives or on occasion of marriage will not be taxable.
In the above given situation, the gift received by an Individual on occasion of marriage from his/her mother will not be liable to tax.

*Are there any cases in which sum of money or any property received without or inadequate consideration, received by an individual or HUF is not charged to tax? (click here)

How much deduction can I claim under the Income-tax from the Family Pension received by me?

It is taxable under the head income from other sources subject to some exemption.

  • If the pension is commuted or is a lumpsum payment then it is not taxable.
  • Uncommuted pension received by a family member is exempt to a certain extent i.e.  Rs 15,000 or 1/3rd of the uncommuted pension received -whichever is less is exempt from tax.

Family pension to the family of armed forces personnel including para military forces is not taxable where the death of such person has occurred in the course of operational duties.