Budget extends tax on NRIs for receiving gifts from resident Indians
The expensive gift that you kept for your overseas cousin or friend may attract tax from this year with the Budget 2019-20 proposing to impose withholding tax all such transfers, plugging an earlier loophole that allowed its tax- free treatment.
The Finance Bill 2019 has imposed tax on any sum of money paid or any property situated in India, transferred by a person resident in India to a person outside India, as it would be deemed to accrue or arise in India. The changes will be applied for all such transfers made on or after July 5, 2019.
Currently gifts given by Indian residents to non-resident Indians - apart from the specified list of relatives - would be claimed as non-taxable. This is because the earlier tax put the onus on the recipient of the gift to make the disclosure and pay tax. As a gift to NRIs means that income is accrued abroad, it remained outside the tax net.
But now, all gifts to NRIs will be income accruing in India and would be taxed as per the normal slab rates applicable to resident Indians. This means that the origin of the gift becomes important for tax purpose, instead of the destination of the gift abroad.
The onus will be on the recipient (the NRI in this case) of the gift to disclose such gifts received if they originate in India and then pay a tax on it. 
So, if the value of the gift is above Rs 10 lakh, the recipient will have to pay 30 per cent tax. The tax rate would get higher if the value of the gift, be it payment for studies or a house abroad, is more than Rs 2 crore or Rs 5 crore. In such cases, the highest tax rate for super rich, i.e. 35.7 and 42.7 per cent respectively would apply.
For the purpose, gift will constitute shares, property, vouchers, cash etc exceeding Rs 50,000 made to anyone, apart from the specified relatives or blood relations.
While making gifts to NRIs taxable, the Budget has proposed that in a treaty situation, the relevant article of applicable DTAA (double taxation avoidance treaty) shall continue to apply for such gifts as well.
This amendment will take effect from April 1, 2020 and will, apply in relation to the assessment year 2020-21 and subsequent assessment years.
The specified relatives list in terms of Section 56 of the Income Tax Act is fairly wide. It includes brothers and sisters, and their spouses. Gifts to this category will not attract any tax. But acquaintances, friends, and other close family relations would come under the purview of the tax.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Budget 2019-20: No Changes in Income Tax (I-T) except for Taxpayers with Income of Rs2 Crore and above
    Contrary to expectations, especially those of middle-class tax payers, Union finance minister Nirmala Sitharaman made no changes in the income tax (I-T) slabs while increasing the taxes for those with taxable income of over Rs2 crore. 
    Some tinkering with securities transaction tax (STT) and a relief on purchase of electric vehicles and affordable homes is more or less the only relief for middle-class Indians. This has triggered several memes and jokes on social media by disappointed taxpayers, who were expecting the finance minister to do something more than merely thank them for their contribution. 
    Those with taxable income of Rs2 crore and Rs5 crore have been dealt a blow with a hike in surcharge, increasing their effective tax rate by about 3% and 7%, respectively. 
    “In view of rising income levels, those in the highest income bracket need to contribute more to the Nation’s development,” the finance minister said, while thanking taxpayers for playing a major role in nation building. 
    Referring to several measures taken in the past to alleviate the tax burden on small and medium income earners, Ms Sitharaman said, “Those having annual income of up to Rs5 lakh are not required to pay any income tax.” 
    This includes self-employed as well as small traders, salary earners, and senior citizens, she added.
    Relief in Levy of Securities Transaction Tax
    In her speech, the finance minister proposed a relief in levy of STT by restricting it only to the difference between settlement and strike price in case of exercise of options. However, since the budget was widely expected to scrap the STT, this meagre relief has disappointed investors. 
    Additional Deduction of Interest for Affordable Housing
    In order to provide a further impetus to affordable housing, Ms Sitharaman decided to allow an additional deduction of up to Rs1.50 lakh for interest paid on loans borrowed up to 31 March 2020 for buying an affordable house valued up to Rs45 lakh. 
    This means, a person purchasing an affordable house will now get an enhanced interest deduction up to Rs3.5 lakh. This will translate into a benefit of around Rs7 lakh to the middle-class home-buyers over their loan repayment tenure of 15 years.
    For realisation of the goal of ‘housing for all’ and affordable housing, a tax holiday has already been provided on the profits earned by developers of affordable housing. Also, interest paid on housing loans is allowed as a deduction to the extent of Rs2 lakh in respect of self-occupied property.
    I-T Deductions for Buying Electric Vehicles
    To encourage the switch to electric vehicles and to make them more affordable to consumers, the government will provide additional income tax deduction of Rs1.5 lakh on the interest paid on loans taken to purchase electric vehicles. 
    This amounts to a benefit of around Rs2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicle. 
    Considering India’s large consumer base, the finance minister stated, “We aim to leapfrog and envision India as a global hub of manufacturing of electric vehicles. Inclusion of solar storage batteries and charging infrastructure in the above scheme will boost our efforts.” 
    The government has already moved goods and services tax (GST) council to reduce GST rate on electric vehicles to 5% from 12%, she added.
    Mandatory Filing of Return on Spending Rs2 Lakh on Foreign Travel, Rs1 Lakh on Electricity 
    Budget 2019-20 proposes to make it mandatory to file tax returns by persons, who have deposited more than Rs1 crore in a current account in a given year, or who have spent more than Rs2 lakh on foreign travel, or more than Rs1 lakh on their electricity bill in a year in order to trap possible tax-evaders.
    It is also proposed that a person whose income drops to lower than maximum amount not chargeable to tax due, shall also be required to furnish a return to claim of rollover benefit of capital gains.
    Level Playing Field for Non-Banking Financial Companies (NBFCs)
    Recognising the increasingly important role of NBFCs in India’s financial system and to provide a level playing field, the finance minister has proposed to tax interest on bad or doubtful debts in the year in which it is actually received. 
    Presently, this is allowed for scheduled banks, public financial institutions, state financial corporations, state industrial investment corporations, cooperative banks and certain public companies like housing finance companies.


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    P M Ravindran

    11 months ago

    I was hoping that citizens having only salary incomes would be exempted from paying income tax. It is actually a waste of effort, for both employers and tax payers to first pay the employee and then recover part of it as tax. Also in the matter of interest income, it would have been better if the tax was only for the inflation adjusted interest income, rather than a flat rate.


    11 months ago

    India is doomed. There are no fundamental changes but only cosmetic more of the same and the Modi (Nehru 3.0) Sarkar of the Bharathiya Jhumla Party has continued to dig India into the grave it has been digging for itself since 1947.



    In Reply to SuchindranathAiyerS 11 months ago

    1 billion plus people have to eat, dress, get entertained, travel and sleep under a roof. That itself will keep Indian economy moving. Government role is either to increase the movement or slow it down.

    FM announces excise duty hike, petrol, diesel to go up
    Petrol and diesel prices are set to increase from Friday midnight as Finance Minister Nirmala Sitharaman announced an additional special excise duty (SAED) of Re 1 and a road and infrastructure cess of Re 1 per litre on both the transport fuel while presenting the Union Budget 2019-20.
    Currently, an SAED of Rs 7 per litre is charged on both branded and un-branded petrol and Re 1 per litre on diesel. Also, road and infrastructure cess of Rs 8 per litre is being charged on both the fuel. 
    The previous Budget of 2018-19 had cut basic excise duty on petrol and diesel by Rs 2 per litre. However, the move was offset by an additional levy of Rs 8 per litre under the levy of road and infrastructure cess on both petrol and diesel. 
    Domestic fuel prices vary in tandem with global crude and product prices on a daily basis. Last year, fuel prices surged to record levels and the Centre and states faced severe criticism over high excise duty and state levies.
    In October, the government had cut excise duty to moderate the effect of rising oil prices. But this cut came after the government had raised excise duty on petrol and diesel on nine occasions, almost doubling its revenue from the oil sector.
    On Friday, petrol and diesel prices in the national capital are currently Rs 70.51 and Rs 64.33 per litre, respectively.
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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