Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

DTC TREATS NRIs AS ‘NOT REQUIRED INDIANS’

Harsh Taxing Provisions & Tinkering with Residential Status

under the Code are bound to irk the Global Indian Community!

Amrish Amin, a Non Resident Indian (NRI) settled in U.K. earns interest income of Rs.3 lakhs on his Non Resident Ordinary (NRO) Account Bank Deposit in India in the current FY 2010-11. Enjoying his personal exemption limit of Rs.1,60,000 and the eligible deduction of Rs.1,00,000 under Section 80C, Amin is comfortable paying income-tax of Rs.4,000 in the first slab of 10% on his effective taxable income of Rs.40,000.

A huge shock awaits Amin and some millions of NRIs, in regard to taxation of their interest and income from non-Equity Oriented Funds earned in India, proposed to be treated under the draft Direct Tax Code as ‘income from special sources.’

In 2012-13, on the same interest income of Rs.3 lakhs, Amin will be required to pay a hefty tax of Rs.60,000 at the flat rate of 20%, without being eligible to claim any basic exemption or other deduction, as provided under Part III of the First Schedule to the Code.

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STAR INVESTMENT FOR SENIORS

Senior Citizens Savings Scheme Scores High On Tests Of Security, Return, Tax Saving & Liquidity

A secured investment, offering a reasonable return of 9% per annum (payable on quarterly basis), assuring premature encashment in case of need and enjoying the added benefit of deduction under Section 80C, have made the Senior Citizens Savings Scheme (SCSS) a popular choice of the elderly for catering to their regular income needs.

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EMPLOYEE OR CONSULTANT? MAKE YOUR SMART CHOICE!

Opting to be a Consultant gives the Privilege of claiming

Many Deductions not available from Employee Remuneration!

 

Anand Roy is offered a marketing work assignment by a company with an annual package of Rs.8,80,000 during FY 2010-11 and he is given the choice to either join the company as an employee or offer his services as a consultant. Weighing the income-tax implications in respect of the same, he is wondering what should be his best choice.

If Anand decides to accept the status of an employee, he needs to be aware of the fact that he would have a comparatively limited choice of exemptions that he can claim from his taxable salary income of Rs.8,80,000. These could possibly be structured in the form of Transport Allowance of Rs.9,600, Children’s Education Allowance of Rs.2,400, Reimbursement of Medical Expenses of Rs.15,000, Attire Allowance of Rs.18,000 and Food Coupons for a value of Rs.15,000, in all amounting to Rs.60,000. This would still leave his taxable salary at Rs.8,20,000 and even after deducting Rs.1,20,000 as the eligible deduction under Section 80C and 80CCF, income-tax of Rs.76,220 would be deducted at source by his employer on his Total Income of Rs.7,00,000.

However, if Anand goes for the choice of becoming a consultant to the company and accepts the consideration of Rs.8,80,000 as professional fees, he would enjoy distinct tax advantages as explained hereinafter.

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