Treating tax liability on savings from abroad

I have been working in London since five years. I will be shifting to Delhi in the mid of March with my wife after taking “redundancy” package from my employer. My wife is an Australian citizen but she has got the PIO card issued by the Indian High Commission in London by virtue of being an Indian citizen’s wife. If I transfer all my savings in London to India, which has been taxed in the UK, would I have to pay tax in India on the transferred amount?

Prior to our marriage, my wife was working in Hong Kong where all her salary was deposited. Her salary was not taxed in Hong Kong. Can she transfer her money from Hong Kong to Delhi without any tax liability and buy an immovable property? — I.L. Bhatia

You will have to examine if you and your wife are residents of India in accordance with section 6 of the Income Tax Act. If your wife was not a resident of India in accordance with section 6 of the Income Tax Act, the salary earned by her in Hong Kong will not be taxable in India when it is brought into the country. This would be irrespective of the salary being taxed in Hong Kong.

The same would be the tax treatment even if she was a resident but not ordinarily resident in India under section 6 of the Income Tax Act.

On the other hand, if she is a resident and an ordinarily resident in India under section 6 of the Income Tax Act, the salary will be taxable in India irrespective of being taxed in Hong Kong.

In any case, the taxable event will not be the bringing into India of such amounts but will be the year in which the income was earned and the residential status will also have to be determined with reference to that year to determine the taxability.

As far as your income is concerned, the tax treatment under the Income Tax Act would be the same as stated with reference to your wife.

Given that you have stated that you have been in London for the last five years, it is likely that you are a non-resident for all the years under section 6 of the Income Tax Act and in which case the income would not be taxable in India.

One difference, however, could be that if the income is taxable in India in any of the years, you will have to examine if any benefit can be claimed under the Double Taxation Avoidance Agreement between India and the UK in respect of the income earned by you.

The benefit may be available in the UK or in India depending on your place of residence as determined by Article 4 of the Double Taxation Avoidance Agreement between India and the UK.

You may note that section 90(2) specifically provides that you can choose to follow the Income Tax Act or the Double Taxation Avoidance Agreement whichever is more beneficial to you.

I own an immovable property. I wish to gift my daughter the right to lease the property and earn from the lease of that property. Would the income by way of lease be taxable in the hands of my daughter or in my hands? — S.R. Srivatsan

The income by way of rent earned by your daughter will be taxable in your hands. This would be so as section 60 of the Income Tax Act provides that where there is a transfer of income without transfer of assets from which such income arises, the same will be clubbed and chargeable in the hands of the transferor.

In your case, as the immovable property from which the rent is derived continues to be owned by you and as only the right to lease the same is gifted to your daughter, the provisions of section 60 would be attracted and such rental income would be taxable in your hands.

I am a non-resident Indian living abroad for the past 10 years. Last month I gifted Rs 4,00,000 to my sister on her birthday. Is the gift taxable in the hands of my sister? — Pankaj Malik

There will be no tax liability on the gift made by you in the hands of your sister. Though a gift is taxable under the head income from other sources by virtue of section 56, the said section provides for certain exclusions when a gift is received by an individual from a relative. The term relative is defined by the section and includes siblings.