India

Tax residency

Resident if one of the following is true

  • present in India for: 182 days or more in a fiscal year
  • 60 days or more in a fiscal year and 365 days or more during the preceding 4 fiscal years; the 60 days may be extended to 182 days in certain cases.

Income tax

  • Non-Residents are taxed on India income only.
  • Residents are taxed on worldwide income (subject to DTAA(Double Taxation Avoidance Agreement) with the foreign countries.).

Advance payments

As the year progresses, one is expected to pay tax. Paying at the end of the year will attract interest.

Advance tax schedule: here.

Capital gains

Sec. 195

  • 10% LTCG on unlisted securities, and eq. share / EOF units that have been subjected to STT tax
  • 20%: Other LTCG (indexing benefit available)
  • 15%: STCG on equity share / EOF unit that have been subjected to STT

Acquisition cost computation

Grandfathering Clause in Section 112A 2018 - for equities acquired before Jan 31 2018, use price on that day as acquisition cost. (Reason: Earlier there was no tax on capital gains.)

Inflation index

Cost Inflation Indiex (CII) can be applied in many cases.

The below likely refers to 10% LTCG cases -

the benefit of inflation indexation of the cost of acquisition will not be available for the purpose of calculating LTCG on equity shares or equity-oriented funds. Source: TW Source: TW

In the case of unlisted equity shares, you have the option to take indexation benefits or not. You can calculate your tax liability both with indexation at 20% and without indexation at 10% and choose whichever is more beneficial. Source: TW 2023

The amendment to the Finance Bill 2023 scrapped the availability of indexation benefits on debt mutual funds.

Property sale: India

  • If you sell your land / house / property within 36 months (3 years) of acquiring it, it’s considered to be a short term capital gain. Else it is long term gain.
  • Long term Capital Gains on sale of real estate are taxed at 20%, plus a cess of 3%, if the sale fulfils certain conditions.

Postpone via CGAS

  • But what would happen if you are unable to invest your entire long-term capital gains in a residential property before the time to file income tax return for the fiscal year approaches? You need to convince the tax department that you intend to invest the capital gains, but need some more time to do so. To achieve this, you can open a Capital Gains Account Scheme (CGAS) with any scheduled bank. The amount you put in this can be withdrawn at any time to buy or construct a house and save long-term capital gains tax.
  • If you do this, you have 3 years in which to get your ducks in a row and get your property construction started. If not, the capital gain amount will be taxed as a long term capital gain (at 20% plus a 3% cess).

Reinvestment in real estate

  • Tax is avoided if one reinvests in another long term property. (under Section 54 of the Income Tax Act, 1961)

Reinvestment in financial assets

  • Section 54EC of the Income Tax Act, 1961. To do this, you must invest in notified bonds within 6 months of its transfer.
  • The eligible bonds under Section 54EC are REC (Rural Electrification Corporation Ltd), PFC (Power Finance Corporation Ltd) and NHAI (National Highways Authority of India) and IRFC (Indian Railways Finance Corporation Limited).
  • The maximum limit for investing in 54EC bonds is ₹50 lakh per financial year, whereas minimum investment is capped at ₹20,000 and ₹10,000 respectively in REC and NHAI bonds. These bonds come with a lock-in period of 5 years (effective from April 2018) and are non-transferable. Both REC and NHAI bonds offer an interest rate of 5.75% per annum, payable annually. Interest earned from 54EC bonds is taxable; however, no TDS is deducted on interest.

Foreign investments

  • Income earned through investments and receipts in India is taxable in India.
  • Issues concerning distributions from US retirement funds - see usa page.

In case an investor chooses a growth option, dividend payout does not exist; rather such dividend amount is re-invested in the mutual fund plan. Hence, no tax on such dividends would be required to be paid by the investor as the re-invested amount ultimately forms part of the capital gains taxation. Source: TW

Wealth tax

Reference: it.gov doc.

Abolished in 2015

Inheritance /Estate Tax

None as of 2019.

Customs duty

The non residents returning also have to pay Customs Duties for goods brought into India in person. Transfer of Residence Rules provide for a clearance up to Rs 75,000 (US $ 1125). These should include used personal and personal effects.

Gift tax

Recipient is taxed.
Gift from relatives (spouse, brother or sister, brother or sister of the spouse, brother or sister of either of the parents, lineal ascendant or descendant, lineal ascendant or descendant of the spouse and spouse of the aforementioned persons) is not taxable.