Wealth tax implications on NRI
Returning India
Wealth
tax shall be levied @ 1% of net worth exceeding INR 30 Lakh on 31st March (previous
year ending called valuation date) on every individual assessee on the basis of
his nationality and residential status in previous year ending on March 31.
Net
worth for wealth tax purposes means aggregate
value all the assets(Eligible assets), wherever located, belonging to the
assessee on the March 31 (valuation date) less
aggregate value of all the debts owed by the assessee on the valuation
date incurred in relation to the said assets.
The
scope of net wealth in case of Indian
National is determined as below:
Residential status
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Assets
|
Debts
|
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Assets
located in India
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Assets
located outside India
|
Debts
located in India
|
Debts
located outside India
|
|
Resident
and ordinarily resident in India
|
Included
|
Included
|
Included
|
Included
|
Resident
but not ordinarily resident in India
|
Included
|
Not
included
|
Included
|
Not
included unless incurred in relation to
asset located in India
|
Non
resident
|
Included
|
Not
included
|
Included
|
Not
included unless incurred in relation to
asset located in India
|
Residential
status shall be determined as per criteria set out in Income Tax Act, 1961.
Wealth tax exemption
for returning Indian
Wealth
tax exemption is provided to Indian citizen or a person of Indian origin ,who
was ordinarily residing in a foreign
country and returning India
with the intension of permanently residing in India.
Exemption is provided
subject to the following conditions:
1. Individual should be a citizen of
India or a person of Indian origin;
2. He was ordinarily residing in a foreign country;
3. He, on leaving such country, has returned to India with the intention of permanently residing in
India.
Clarification on 'ordinarily
residing in a foreign country' and' intention of permanently residing in
India'
Mad-HC V.E. Periannan
V/s.CWT 1999
Section 5(1)(xxxiii)
of the Wealth-tax Act, 1957){Earlier provision, now renumbering Section
5(1)(v)}, is a provision meant to encourage persons of Indian origin or
citizens of India who have lived abroad for a long time and acquired assets there
and who decide ultimately to settle down in India permanently. Such persons
have been granted exemption under the Wealth-tax Act in respect of the assets
brought by them to India and reinvested in India.
Section 5(1)(xxxiii)uses
the words ordinarily resident in a foreign country with reference to
the persons who are eligible to claim the benefit under the section and the
further qualification required to be met by them is couched in language which
leaves no doubt about the intention of the Legislature.
The second
qualification required for such persons is that they should return to India
with the intention of permanently residing therein.
Those words employed
in the section clearly indicate that it
was not a provision made to benefit persons who ordinarily reside in India
who choose to go abroad for a short time and return to their original
permanent home. Such persons are not those contemplated by the Legislature when
this provision was incorporated.
Though the word
ordinarily is not defined under the section or elsewhere in the Act, the true
scope of that word does not pose any major problem of interpretation as that
word has to be understood in the light of the other words used in the
section. Ordinarily resident in a
foreign country must be read along with the other words which require an
intention to permanently reside in India after return. Ordinarily
in this context refers to residence of long duration outside the country.
The
duration being long enough for the person to regard himself as being
ordinarily resident in the country outside India and not to regard India as
his permanent place of residence. A person who normally resides in India and for whom India is a
permanent residence cannot claim the benefit of the section merely by travelling
abroad and residing abroad for a period of one year and thereafter returning
to his own country. [240 ITR 723]
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Assets which are exempt if the above
conditions are satisfied:
1. Moneys and
the value of assets brought by him into India; and
2. The value
of the assets acquired by him out of such moneys within one year immediately
preceding the date of his return and at any time thereafter.
Period of
exemption:
The exemption in this case is
available for a period of seven successive assessment years commencing with the
assessment year next following the date on which such person returned to India.
Moneys
standing in Non-resident (External) Account:
Moneys standing in a Non-resident
(External) Account on the date of his return to India shall be deemed to
be moneys brought by him into India on that date;
Extract of
Section 5(1)(v) for reference
Exemptions
in respect of certain assets.
5. [[***] Wealth-tax shall not be payable by an assessee
in respect of the following assets], and such assets shall not be included in
the net wealth of the assessee—
10[11[(v)] in the case of an assessee, being a person of Indian
origin [or a citizen of India (hereafter in this clause
referred to as such person)] who was ordinarily residing in a foreign country
and who, on leaving such country, has returned to India with the intention of
permanently residing therein, moneys and the value of assets brought by him
into India and the value of the assets acquired by him out of such moneys [within one year immediately preceding the date of
his return and at any time thereafter] :
Provided that this exemption shall apply only
for a period of seven successive assessment years commencing with the
assessment year next following the date on which such person returned to India.
Explanation [1].—A person shall be deemed to be of Indian
origin if he, or either of his parents or any of his grand-parents, was born in
undivided India.]
[Explanation 2.—For the removal of doubts, it is
hereby declared that moneys standing to the credit of such person in a
Non-resident (External) Account in any bank in India in accordance with the
Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made
thereunder, on the date of his return to India, shall be deemed to be moneys
brought by him into India on that date;]
Regards,
Bipul Kumar
Cell: 9560084833
bkumarca80@gmail.com
