NON RESIDENT INDIAN AND TAX IMPLICATIONS

Q.1) I was staying outside India for 230 days during the financial year 2013-14, with my children abroad. In other words, my physical stay in India is only 135 days during the financial year 2013-14, which is less than 182 days. In the past I never remained out of Indian for more than 60 days in any fi nancial year. Would I be treated as a Non Resident under the Income tax Act for the financial year 2013-14?  -  Nandlal Mishra

 Under the Income Tax Act, a person may be considered as Non Resident if he is not a resident of India within the Provision of Section 6(1) of the Income Tax Act. The relevant provision read as under:

 A) An individual is in India in relevant previous year amounting to 182 or more;

 OR

 (B) An individual is in India in previous year for 60 days or more and been in India for 365 days or more in 4 preceding previous years.

 Although you stayed in India in the financial year 2013-14 for less than 182 days but you still continue to be Resident in India in view of clause (c) mentioned above, particularly when your stay outside India during financial year 2013-14 is not on account of any employment. Thus, your Jayesh Dadia B Com (Hons.), FCA status for financial year 2013-14 relevant to assessment 2014-15 would be resident and accordingly your global income is taxable.

Q2) I stay in a tenanted premises measuring 400 Sq. Ft. The said premise is going for redevelopment. The builder has agreed to give in return 500 Sq.Ft fl at with the ownership right and lumpsum corpus. In addition to this, the builder is also giving monthly rent for substitute accommodation. What will be tax the implications? - Bholanath Tiwary

(i) Conversion of tenancy right into ownership right does not attract any capital gain tax as there is no transfer. Such conversion amounts to improvement of the right / title. As such there is no tax implication.

(ii) Even the additional area which you will get on completion of the redevelopment is not subject to any tax as there is no transfer. Right in additional area is a capital receipt. However, when you sell the ownership fl at, the sale consideration of the entire ownership fl at would be taxed as capital gain as there is no cost of acquiring the ownership fl at. However, the period of holding the ownership fl at shall be DS considered from the date when you got the tenancy right.

(iii) Any lump sum amount of corpus received on redevelopment from the builder will not be subject to income tax as the corpus received by you, in your hand is a capital receipt. Generally, the corpus is paid for specific purpose. The corpus fund is being paid to you by the developer for the inconvenience caused. The Bombay Tribunal in the case Lohtse Co-op. Housing Society (51 ITD 608) has held similar views.

(iv) During the period of redevelopment if you get a specific sum as rent for your alternate accommodation and if you actually spent the amount towards rent of alternate accommodation, then the rent received is not taxable. However, if you pay less rent than what you received from the builder, the surplus will be then taxed as income from other sources.

Jayesh Dadia
B Com (Hons.), FCA