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Your tax queries answered

| 1/25/2012 8:28 PM Wednesday

What is the tax liability for professionals working in Ireland for a three-year contract? Will the taxes be payable to the Irish government or to the Indian government, and at what rates?
-    Swaminathan S

It is assumed that you are an Indian professional, and that you are not employed by the Central or state governments.

When a person is employed in Ireland, s/he would have to pay taxes in accordance with the laws prevalent in Ireland. However, if you are resident for any financial year, your income may be subject to tax both in India as well as in Ireland. In such a case, Double Taxation Relief is available under the provisions of Section 91 of the Income Tax Act, 1961, as there is no Double Taxation Avoidance Agreement (DTAA) between India and Ireland.

I am a central government employee. I took up a government job in March 2008. Till December 2011, 10 per cent of my salary was deducted as contribution towards the National Pension Scheme (NPS). My colleagues and I were not aware about the employees’ contribution till December 2011.

Now, our employers have uploaded our NPS data on the NSDL site and have deposited a lump sum amount towards NPS from March 2008 to November 2011 in our NPS accounts. They have informed us that they will deduct tax from the government's contribution to NPS. I want to know if this is correct.

In my opinion, if the employers had informed us about the tax deduction on the government's share of NPS, we would have invested money in tax saving instruments. Now, I have exhausted my Rs 1 lakh limit for the year (u/s 80C) by investing in LIC and ELSS. What should I do?
-    Sandesh Karwa

We do not know the circumstances in which your employer may have taken the decision, and therefore, we cannot comment on whether your employer’s approach was correct or not.

However, we feel that you will not be totally deprived of the benefit. As your employers have deposited their contribution for the period from March 2008 to November 2011, you will be entitled to a rebate under Section 89 of the Income Tax Act, 1961, read with Rule 21AA of the Income Tax Rules, 1962. The same would be available to you as an employee if you make a declaration in Form 10E. Besides, you still have three months to invest under Section 80CCF, where you can claim additional deduction of Rs 20000 even after your investment limit of Rs 100000 under Section 80C has been exhausted.

I am transfering shares worth Rs 1 lakh to my brother’s account. What is the impact on my tax liability?
-    Nitisha Walia

The shares you will transfer to your brother are presumably a gift. Since the gift is to your relative, the same is a capital receipt, and is hence, not included in the definition of ‘income’ under the Income Tax Act, 1961. In view thereof, there is no tax liability either on your part as donor, nor on the part of your brother as donee.


KEY POINTS
  • For Indian professionals working in a foreign country for a financial year, Double Taxation Relief may be available under the provisions of Section 91 of the Income Tax Act, 1961, where there is no Double Taxation Avoidance Agreement (DTAA) between India and another country.
  • In case of contributions to the National Pension Scheme (NPS), where employers have deposited their contribution, employees are entitled to a tax rebate under Section 89 of the Income Tax Act, 1961 read with Rule 21AA of the Income Tax Rules, 1962.
  • Employees can claim deduction of Rs 20000 for investments made under Section 80CCF in addition to the deduction for investments upto Rs 100000 made under Section 80C.

 

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