Alimony is not liable to tax

dubai - Several high courts have taken the view that such amount is in the nature of a capital receipt

Q: I have filed my income-tax return for the assessment year 2016-17 by the due date as I had made some profit on share and security transactions. What are the chances that my return will be accepted and that no scrutiny notice will be issued to me?
- B.K. Luthra, Sharjah
A: Generally, 98 per cent of the returns are accepted. Hence, in case your return is accepted, you will receive an intimation under section 143(1) of the Income-tax Act. The last date for receiving the intimation for the assessment year 2016-17 is March 31, 2018. The norms for taking up the scrutiny assessment have been revised. In case where an addition of Rs2.5 million or more was made to your returned income in the preceding years, the current year's income would also be scrutinised. Further, under the computer-aided scrutiny selection scheme, if any high-value transactions have been undertaken, a limited scrutiny would be made in respect of those transactions.
A scrutiny assessment can only be made if a notice is issued under section 143(2). Such notice cannot be served on an assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in your case, if you do not receive the notice under section 143(2) of the Act by September 30, 2017, it would indicate that your return as filed has been accepted by the tax department.

Q: Can a non-resident Indian maintain his non-resident status for Fema by continuing to stay outside India for more than 183 days after his retirement?  The person will be staying outside India on the basis of a tourist/visit visa; his intention is to spend time with his children, relatives and friends outside India for more than six months every year.
- Sriram, Abu Dhabi
A: Under the Foreign Exchange Management Act (Fema), a person will be treated as being resident outside India if he is abroad for more than 182 days. It is only if he returns to India for taking up employment or starting a business or profession in India, that he would be treated as being resident in India. If a person intends to reside in India on a permanent basis, he would be deemed to be a person resident in India. In such a case, he would not be eligible to retain his non resident (external) account or foreign currency non resident account with a bank.
In your case, since your intention is to reside outside India for more than six months in every financial year, and spend time with children and family members outside India, you will be eligible to retain your non-resident status under Fema as well as under the Income-tax Act. Hence, you will be entitled to continue with your non resident (external) bank account and foreign currency non resident account. Further, income earned outside India and/or interest on these bank deposits would not be taxable in India during the financial years in which you are non-resident.

Q: I have divorced my husband. The court, by a decree, has granted a lumpsum alimony which my ex-husband is required to pay. As he did not have the money to do so, he sold his land to pay me alimony. Will I be required to pay tax in India on this amount? When I invest the money, will I be liable to pay tax on the income earned and will such income be treated as the income of my ex-husband?
- P.S. Gupta, Bahrain
A: The alimony awarded to you, which is part of a court decree, cannot be treated as income. Several high courts have taken the view that such amount is in the nature of a capital receipt. A capital receipt is not liable to tax under the Income-tax Act, unless a capital sum is deemed to be income under section 2(24) of the Act. Alimony received at the time of divorce is not treated as income under section 2(24).
When interest is earned on the amount you invested, such interest will be taxed as your income. The total income earned from all sources is exempt up to Rs250,000. Thereafter, tax would be payable at the appropriate rate. Such income cannot be clubbed with the income of your ex-husband because the provisions of clubbing under section 64 are applicable only where the marital relationship exists between the individual and the spouse. Upon divorce, this relationship comes to an end and, thereafter, the provisions of section 64 cannot be applied.

Q: My wife who is working in India has been advised to invest a part of her income in the National Pension Scheme. I want to know whether she can continue to invest in the scheme even after she retires. If she nominates my son under the scheme, will he be liable to pay tax on the amount received by him upon the death of my wife?
- R.C. Bindra, Sharjah
A: If your wife has taxable income in India, she would be entitled to claim a deduction under section 80-CCD of the Income-tax Act upto Rs50,000 in every financial year in addition to the deduction of Rs150,000 under section 80-C if she has contributed to provident fund or paid life insurance premium. Even after retirement, she can continue to contribute to the National Pension Scheme. This can be done up to the age of 70 years.
In order to do so, your wife will have to write to the National Pension Scheme Trust or any intermediary through whom she has subscribed at least 15 days before turning 60 or before retiring. She will have to pay the usual charges to the central record keeping agency and the trustee bank.  Withdrawals from the NPS on maturity are tax-free up to 40 per cent of the total corpus accumulated. When the amount is received by your son as nominee after the death of your wife, such amount will not be treated as income taxable in his hands. Therefore, the question of your son paying any tax will not arise.

The writer is a practising lawyer specialising in tax and exchange management laws of India. Views expressed are his own and do not reflect the newspaper's policies.

• India