NRIs can subscribe National Pension Scheme

I had sold my residential house in Hubli and half the amount of sale proceeds has been given to a builder who is about to launch a project. The remaining amount is proposed to be used by me to acquire a property in Dubai. I want to know whether I can save tax on the capital gains made on sale of my large house in Hubli and whether I can use half the sale proceeds to purchase a house in Dubai.
R.K, Kamath, Dubai
Exemption from capital gains tax can be obtained under section 54 of the Income-tax Act on sale of a residential property, which has been held in India for more than three years, provided certain conditions are fulfilled. The first condition is that the capital gains should be utilised for purchasing a property within two years or constructing a property within three years from the date of sale of the old property. The CBDT (Central Board Of Direct Taxation) has issued a circular to state that when a property is being developed by a cooperative society or by an institution similar to the Delhi Development Authority, the three year period would apply. Since you have booked your flat with a builder and the construction is not to be undertaken by any housing development authority, the period of two years would apply and, therefore, you have to acquire the completed residential property within such period, failing which the exemption would be denied.
The benefit of section 54 is available only in respect of one residential house which is purchased. Since you are going to use part of the capital gains for purchasing a property in Dubai, the exemption will be restricted to the capital gains utilised for buying the residential house in India. In any case, the capital gains tax exemption is specifically denied where the capital gains are invested in a residential house outside India. Under the Foreign Exchange Management Act, a non-resident Indian is permitted to remit up to $1 million in every financial year out of funds lying in the Non-Resident (Ordinary) Account.
I have been working in the Gulf for the past twenty years and will retire in the next seven years. I want to know whether I can avail of the pension scheme of the government which has been in operation during the last few years in India. I have some taxable income in India and I want to know whether I can claim the benefit of any tax deduction.
P.S, Wasan, Doha
The Reserve Bank of India (RBI) has permitted non-resident Indians to subscribe to the National Pension Scheme. A general permission has been given under the Foreign Exchange Management Act. The subscription should be made by an inward remittance through normal banking channels. Funds lying in the Non-Resident (external) Account, Foreign Currency Non-Resident Account and Non-Resident (ordinary) Account can also be utilised for the subscription.
The RBI has further clarified that there would be no restriction on repatriation of the pension or annuity. If you have taxable income in India, you will be entitled to claim a deduction under section 80-CCD of the Income-tax Act up to a maximum of Rs50,000. If your gross total income is less than Rs2.5 lakhs, the question of claiming the deduction will not arise because, in any case, this amount is exempt from tax. Therefore, the full benefit of deduction up to Rs.50,000 can be claimed by a person who has taxable income of more than Rs3 lakhs.
Some Indian companies have issued rupee-denominated bonds outside India. I am considering subscribing to these bonds, but I would like to know the tax implications.
C.R, Luthra, Muscat
Capital gains made on sale of rupee-denominated bonds which are issued by Indian companies outside India will not attract capital gains tax. The legislation in this respect will be made through the Finance Bill 2016. However, the CBDT has stated recently that profits in respect of the rupee-denominated bonds made by foreign investors would not be liable to tax in India.
The interest earned from these offshore bonds by non-resident investors would, however, be subject to a five per cent withholding tax. No further tax would be payable irrespective of the quantum of interest earned. These bonds are being issued by Indian companies subject to the guidelines laid down by the RBI.
I am a practicing doctor and I am planning to return to India shortly. I will set up my practice in India upon my return. If I need to go abroad thereafter for medical treatment, will I be entitled to utilise my rupee funds for the same? Will I be able to claim a deduction for the expenses on such medical treatment from my Indian taxable income?
Dr K. Nair, Manama
When you set up your practice in India, you will have to file a tax return in respect of your net income from your profession as well as income from investments. All expenses incurred in the course of your profession would be deductible. However, medical expenses incurred on yourself are not allowed as a deduction as they are of a personal nature. Courts have taken a view that personal medical expenses cannot be claimed as a deduction as they are not incurred wholly and exclusively for the purposes of carrying on a profession. Therefore, if you incur expenditure on medical treatment in or outside India, such amount cannot be reduced from your taxable income.
Under RBI regulations, you are free to remit an amount from your rupee account to meet the cost of foreign medical expenses. This is covered under the liberalised remittance scheme which permits remittances up to a maximum of $250,000 per financial year.
The writer is a practising lawyer specialising in tax and exchange management laws of India.

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