Income Tax And Tax Returns

As per the Income Tax Act, 1961, income received in India is taxable in the country, regardless of where it is earned. However note that, filing of IT returns is not necessary if there is no taxable income.

KEY POINTS

The basis of charge of income tax is the residential status of a person and where the income is received.

• Filing of IT returns is not mandatory if a person has no taxable income, even if the said person holds a PAN card.
• HRA can be claimed only in respect of a rented residential house in the city one is working in, subject to the limits specified in Section 10(13A) of the Income Tax Act, 1961, and only for such a period during which the said house is occupied by the claimant.

Q 1. I am working for Weatherford as an employee on international assignments. At present, my work is scheduled for two months in Indonesia and one month in India. However, I do not work in India, as after every two months’ work in Indonesia, I get a month’s leave in India. I get paid from the US office, and the company pays for our local taxes abroad. The salary is deposited in an Indian bank account by our US-based employer.

Please let me know whether I have to pay income tax in India too for the money earned abroad.

-    Divesh

Answer:

The basis of charge of income tax is the residential status of a person. Residential status depends on the physical presence in India. In your case, you have not stated whether you are Resident & Ordinarily a Resident (R&OR), a Resident but Not Ordinarily a Resident (RNOR) or a Non-Resident (NR).

Further, if the income is received in India then it is taxable here, irrespective of where it is earned. Thus, the salary credited to the said Indian bank account is taxable in India.

As regards the tax paid in USA, you will be able to claim Double Taxation Relief under the applicable provisions of the Income Tax Act, 1961 or the Double Taxation Avoidance Treaty/Agreement with USA.

Q 2. I am a student and hold a PAN card since the past three years. I also have a savings account and a demat account, though I have not yet started trading. I get pocket money of about Rs 3000 per month and have purchased a washing machine by paying in installments. How should I file Income Tax returns, and what factors should I consider? Would be obliged if you could provide detailed information.

-    Pranesh Jayram

Answer:

You have acquired a PAN card three years ago, but based on the information you have provided, it does not appear that you have any taxable income. Hence, you are not required to file IT returns unless you receive any communication from the Income Tax department in this regard. However, you may inform the Assessing Officer that you do not have any taxable income.

The monthly pocket money that you receive is not deemed as income, and is not taxable. Other than that, you have mentioned only your Savings Bank account. Do you have any other savings such as fixed deposits or other investments that may have been purchased by your parents from the gifts you have received over time? The demat account is not in operation, and hence, there is no income. The washing machine that you have purchased is a personal expense, and hence, there is no income therefrom either.

In case you desire to file IT returns, you are advised to take a help of the tax preparer appointed by the IT department or a professional tax consultant.

Q 3. I am taking two houses on rent in two different cities. Can I claim HRA benefit if I show that I am paying rent for both the houses?

-    P Nandy

Answer:

The purpose of taking two houses on rent in two different cities is not known. You will be entitled to claim HRA only in respect of a rented residential house in the city in which you are working, subject to the limits specified in Section 10(13A) of the Income Tax Act, 1961, and only for such a period during which you are in occupation of the said house.