A N Shanbhag, investment guru, and his son Sandeep Shanbhag, answer your questions on NRI investment.
I am an NRI and will acquire United States citizenship. I wish to know if I buy insurance and later acquire US citizenship will I still be eligible to hold my investment and the insured amount? At the time of maturity, will I have a problem? Madhumita
NRIs are eligible to purchase insurance in India. You will have to fill an additional form (NRI Questionnaire-Annexure II) while buying the insurance policy to convey the fact that you are an NRI. Your insurance advisor should be able to provide you with this form. Acquiring US citizenship does not in any way alter the above process. You will be able to continue your insurance investment in India and be eligible for the sum assured under the policy. Under current tax laws, at the time of maturity, the money is tax-free and fully repatriable.
I am an NRI living in the US. A flat was booked in March 2009 in a project just opened. The old flat was sold in September 2009. The agreement for the new flat was made in November 2009. Possession will be given in December 2011. Between March 2009 and February 2010 almost the entire amount of capital gain has been invested in the new project. Will I get capital gain tax benefit in this transaction and which of the two dates is relevant booking or the agreement? Neetu
For saving capital gains tax on sale of property, the amount of capital gain has to be invested in another property. This has to be done within two years of date of sale. You have sold your old property in September 2009. By February 2010 you have invested the entire capital gain proceeds in new property. Hence, you would not be liable to pay capital gains tax. The booking date, etc is not relevant, the time within which the money is invested in new property is what is relevant.
My son is in the United Kingdom since 2004 and presently on a permanent resident visa. Now, he intends to acquire UK citizenship. Please advise me on the following:
1. He purchased a house in Mohali (Punjab) in 2006 on installments. All the installments with interest were made through his NRE account. He has also taken the possession of the house. Now, if he disposes off the said plot before/after acquiring the UK citizenship, how will the sale proceeds be sent back to the UK? Will this be taken as a long-term capital gain? Also, if the name of his wife is added to the ownership and then the house is disposed off, will that affect the capital gains tax allowance?
2. I have a double-storied house in Mohali. The ground floor was built in 1979 and the first floor was built in 2003-2004 and necessary renovation was also made to the ground floor. I intend to transfer this house to my son. If he sells the house after the transfer then what will be the position in terms of the condition mentioned in the above point. I am a retired government officer, so do I have to take permission from the Income Tax Department to sell the house and send money to my son? J C Gulati
If the house that your son purchased through his NRE account was held by him for three years or more after taking possession, it will qualify as a long-term asset and selling it will lead to long-term capital gains. It doesn't matter whether he acquires UK citizenship or not. Similarly, it does not matter whether his wife's name is added to the house before disposing it off, though we do not understand the reason for doing so if the intention is to anyway sell the house. Note that even though his wife's name is added as a second holder to the property, since he has exclusively paid for it, the tax liability will be exclusively his.
Your second question is a bit confusing since it is not clear whether you intend to gift your double-storied house to your son or whether you intend to sell it to him. If you gift the property to your son, there will be no tax liability on either of you. However, when he eventually sells the property, your cost would be taken as his cost for the purpose of computing capital gains. Even if you intend to sell the property to him or to anyone else, you do not need to take permission of the tax department.
Are NRIs allowed to invest in Post Office MIS with their NRI income or domestic income? Are NRIs allowed to invest in Post Office NSC or in ELSS funds (tax-saving mutual funds) from their NRE Account for saving tax? Ramani
All post office investments, whether MIS or any other, can be continued, but not renewed. In other words, if the investment has been started before the person became an NRI, then the same may be continued till its maturity even though the person may have become an NRI during the interim. However, after having become NRI, such a person cannot start a fresh post office investment neither can the old ones be renewed. Tax-saving funds (ELSS) on the other hand are mutual funds and NRIs can freely invest in the same on a repatriable basis.
