Published: Mon 24 Feb 2014, 12:46 PM

Last updated: Fri 3 Apr 2015, 5:27 PM

After I return to India and bring all my funds, would I be able to take the money out in future for making investments in foreign countries? If so, what is the time limit during which I can use the funds outside India?
Y C Bhat, Dubai

After you return to India for good, you can bring your funds to India and deposit them either in a rupee account or a Resident Foreign Currency account. The funds lying in the RFC account can be utilised at any time in future for making foreign remittances or overseas investments. This account can be retained by you during your lifetime.

Funds lying in the rupee account can be remitted outside India for any purpose under the liberalised remittance scheme which is applicable to all resident Indians. Currently, under this scheme, you can remit upto USD 75,000 in each financial year. The remittance can only be made from a bank account in India which has been maintained by you for a minimum period of one year prior to the remittance. You will also have to state your permanent account number and fulfill all the Know Your Customer requirements.

The funds which are remitted in foreign exchange under this scheme can be used for acquiring shares, debt instruments or any other assets outside India without prior approval of the Reserve Bank of India. However, the income earned from your foreign assets will be taxable in India in addition to your Indian income.

My father who is resident in India had purchased agricultural land in October 2005. The sale deed was registered in the same month. The land was sold in January 2008 at a substantial profit as the land was converted to non-agricultural. He invested the money in purchasing a residential property and claimed exemption under section 54-F. The Assessing Officer has not allowed this exemption and the capital gains have been made liable to tax. What recourse does my father have?

T Narasimha, Doha

Your father has no recourse but to pay the tax on the full capital gains made by him. The tax would be at the normal rates applicable to an individual because the agricultural land would be treated as being a short-term capital asset. The reason is that the agricultural land was held by your father for less than three years because he sold it before October 2008.

The benefit of section 54-F is available only in respect of a long-term capital asset. Capital gains made on sale of a long-term capital asset are eligible for exemption under section 54-F if the other conditions of this provision are satisfied. However, the first condition of selling a long-term capital asset has not been fulfilled by your father. The Assessing Officer is, therefore, justified in denying the exemption. Hence, your father will have to pay the full tax as he would not succeed even if he goes in appeal against the assessment order.

My brother-in-law approached the Settlement Commission for voluntarily declaring taxable income which was not earlier shown in his tax return. The tax department has objected to his application on the ground that at the initial stage of filing the application he has not made full and true disclosure. Is this stand correct?

P K Mohammed, Sharjah

The Supreme Court of India has held that when an application is made to the Settlement Commission, one of the important conditions to be satisfied is that the tax payer should voluntarily make a full and true disclosure of his taxable income. However, this issue would be examined by the Settlement Commission and can be decided at any stage of the proceedings before the order is passed under section 245-D(4) of the Income-tax Act, 1961. It is not necessary that this issue has to be determined at the very threshold of the proceedings initiated by the applicant.

Therefore, the Commissioner cannot object at the initial stage. Hence, your brother-in-law is free to convince the Settlement Commission that he has made full and true disclosure of taxable income at any stage of the proceedings before the final order is passed.

The writer is a practising lawyer, specialising in tax and exchange management laws of India.

By H. P. Ranina

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