Personal Tax Simplified...

Summary

The speaker discusses personal taxation and wealth management in a series of sessions, covering topics from real estate to family businesses, insurance, and estate planning. They delve into the complexities of individual taxation, capital gains, and the differences between various tax regimes. The presentation also addresses NRI taxation, foreign remittances, and the implications of the PIC regulations on mutual funds. The talk concludes with insights on succession planning and the benefits of investing through GIFT City, providing a comprehensive guide for navigating personal finance and tax strategies.

Takeaways

• 📅 The speaker is continuing a series on wealth management and personal finance, with a focus on tax planning for individuals.
• 🚫 The speaker clarifies that they are not covering topics like transfer pricing, TDS provisions, angel or startup taxation, and taxation related to companies, LLPs, trusts, or partnership firms in this session.
• 📝 The speaker emphasizes the importance of consulting a tax advisor before taking any action based on the information shared and acknowledges they are a chartered accountant but not a practicing tax expert.
• 🏦 The script discusses different types of taxation categories such as individuals, HUFs, companies, LLPs, partnership firms, and artificial judicial persons, highlighting the various entities that are subject to taxation.
• 💼 The presentation covers various heads of income under taxation, including salaries, house property, business or profession, capital gains, and other sources like interest and dividends.
• 📉 The script explains the difference between the old and new tax regimes in India, and how they affect individuals based on their age categories: below 60 years, senior citizens (60-80 years), and super senior citizens (above 80 years).
• 📑 The speaker details the different ITR forms applicable to various categories of taxpayers and the specific conditions under which each form is used.
• 🏠 The script provides an in-depth look at capital gains taxation, distinguishing between short-term and long-term capital gains, and the tax implications for different asset classes like equities, real estate, fixed income, and hybrid funds.
• 🌐 The presentation touches on the taxation of Non-Resident Indians (NRIs), explaining the conditions for being classified as an NRI, the types of income subject to tax in India, and the benefits of Double Taxation Avoidance Agreements (DTAAs).
• 💡 The script introduces the concept of the Liberalized Remittance Scheme (LRS) and the annual limit for foreign remittances, as well as the recent introduction of TCS on foreign remittances from India.
• 🏦 The speaker discusses the different types of bank accounts available to NRIs, such as NRE and NRO accounts, and the implications of each for tax purposes and repatriation of funds.

Q & A

What is the main focus of the wealth management series mentioned in the script?

The main focus of the wealth management series is personal finance and taxation, covering topics such as real estate, co-working spaces, insurance, legal estate planning, and personal taxation.

What is the disclaimer provided by the speaker regarding their expertise in tax matters?

The speaker clarifies that they are not a practicing tax expert, although they are a chartered accountant. They advise the audience to consult a tax advisor before taking any action based on the information shared.

Can you explain the difference between an 'assessment year' and a 'previous year' in the context of taxation?

The 'assessment year' is the year in which your income is assessed by tax authorities, while the 'previous year' refers to the financial year immediately preceding the assessment year. For example, income earned during the financial year 2023-2024 would be assessed in the assessment year 2024-2025.

What are the three categories for individual taxation under the old and new regimes?

The three categories for individual taxation are: individuals below 60 years of age, senior citizens between 60 and 80 years of age, and super senior citizens above 80 years of age, each with different taxation rates.

What is the difference between ITR1 and ITR2 forms for filing tax returns in India?

ITR1 is applicable for resident individuals with a gross income of less than 50 lakhs from sources like salary or pension, with certain conditions like having only one house property and agriculture income less than 5,000 rupees. ITR2 is for individuals and HUFs who do not meet the criteria for ITR1 and have a gross income exceeding 50 lakhs, or have income from business or profession, among other sources.

How are capital gains taxed under different asset classes in India?

Capital gains are divided into short-term and long-term, with different tax rates depending on the asset class. For example, equities held for more than a year are taxed at 10% for gains above 1 lakh rupees, while real estate has a long-term capital gain threshold of 2 years with a tax rate of 20% with indexation benefits.

What is the tax implication for an employee who exercises stock options granted under an ESOP?

When an employee exercises stock options, they must pay tax on the difference between the fair market value at the time of exercise and the option's strike price. This amount is treated as a perquisite and taxed at the employee's marginal tax rate.

What is the purpose of the 26AS statement and how does it help in tax compliance?

The 26AS statement provides a consolidated view of an individual's financial transactions, including TDS, TCS, advance tax payments, income tax refunds, and high-value transactions. It helps in facilitating voluntary compliance by allowing taxpayers to verify the accuracy of the information reported by various entities and their own income.

What is the definition of a Non-Resident Indian (NRI) for taxation purposes?

An individual is classified as an NRI if they are outside India for more than 182 days in the previous year or the financial year, or if they satisfy certain other conditions related to the number of days stayed in India over a period of years.

How do Double Tax Avoidance Agreements (DTAA) benefit NRIs investing in India?

DTAA prevents double taxation on the same income by allowing NRIs to claim tax benefits in one country based on the tax paid in another. It provides clarity and certainty on the tax liability, encourages investment and trade, and improves tax cooperation between countries.

What are the main differences between NRE and NRO accounts for NRIs?

NRE accounts allow interest earned to be tax-free and are freely repatriable, meaning the money can be easily transferred back to the NRI's foreign country. NRO accounts, on the other hand, are subject to TDS, and there is a limit on the amount that can be repatriated in a financial year, which requires proof of tax payment on that income.

Outlines

00:00

📈 Wealth Management and Personal Taxation Overview

The speaker introduces the session as part of a series on wealth management and personal finance, focusing on personal taxation. They clarify that the session will only cover aspects of personal taxation and not broader topics like transfer pricing or company taxation. The speaker, a chartered accountant, advises consulting a tax expert before taking action and apologizes for potential inability to answer all questions due to the complexity of tax laws. The session is divided into two parts: individual taxation and more complex topics, with an emphasis on understanding the difference between assessment year and previous year for tax purposes.

05:00

🏛 Taxation Categories and ITR Forms

This paragraph delves into the categorization of taxpayers into individuals, HUFs, companies, LLPs, and others for taxation purposes. It outlines the basic heads of income under which individuals are taxed, such as salary, house property, business or profession, capital gains, and other sources. The speaker also discusses the two separate tax regimes, old and new, and the different ITR forms applicable to various categories of individuals, including ITR-1 for resident individuals with specific income sources, ITR-2 for those not eligible for ITR-1 with broader income sources, ITR-3 for business and profession income, and ITR-4 for presumptive income from business or profession. Additionally, ITR forms for firms, LLPs, companies, and trusts are mentioned.

10:02

💼 Capital Gains Taxation and Tax Payment Compliance

The speaker explains the complexities of capital gains taxation, differentiating between equity shares, equity mutual funds, real estate, fixed income investments, and hybrid funds. They detail the tax rates and conditions for long-term and short-term capital gains for these asset classes. The paragraph also touches on ESOP taxation from an employee's perspective, emphasizing the tax implications at the time of exercise and sale of options. Furthermore, it discusses tax payment compliance, including Advance Tax, TCS, TDS, and the importance of Challan 280 and 281 for tax payments and compliance reporting.

15:02

🌐 NRIs and Taxation on Foreign Remittances

This section focuses on the taxation of Non-Resident Indians (NRIs), defining who qualifies as an NRI and the different categories of residents for tax purposes. It explains the types of income for which NRIs are liable to pay taxes in India, such as salary, rental income, capital gains, and interest. The paragraph also discusses Double Tax Avoidance Agreements (DTAAs) and the challenges of obtaining a Tax Residency Certificate (TRC). Additionally, it covers the types of bank accounts NRIs can hold, such as NRE and NRO accounts, and the differences between them, including tax implications and repatriation rules.

20:03

🏦 NRIs' Investment Accounts and Tax Implications

The speaker elaborates on the types of investment accounts available to NRIs, such as NRI accounts, NRO accounts, and FCNR accounts, discussing the advantages and disadvantages of each. They also explain the distinction between Portfolio Investment Scheme (PIS) and non-PIS accounts, including the types of investments allowed, the responsibility for TDS, and the impact on foreign investment limits in Indian companies. Furthermore, the paragraph addresses the differences between inheritance and estate tax from the perspective of US NRIs, highlighting the tax implications and the states that levy these taxes.

25:07

🌐 Foreign Remittances and NRIs' Taxation in India

This paragraph discusses the Liberalized Remittance Scheme (LRS) of the RBI, which allows individuals to remit up to $250,000 per year overseas. It mentions the recent introduction of TCS at 20% on foreign remittances from India. The speaker also addresses the taxation of NRIs investing in India from different countries, highlighting the tax treaties that prevent double taxation and the conditions required to claim these benefits. Additionally, the paragraph touches on succession planning for NRIs, detailing the steps involved in the probate process and the requirements for tax clearance certificates.

30:08

🏛️ GIFT City and Its Impact on Taxation

The speaker introduces the concept of GIFT City, an International Financial Services Centre in India, and its implications for taxation. They explain the benefits of investing through GIFT City, such as the long-term capital gains tax of 20% with indexation benefits for foreign securities held for over two years. The paragraph also discusses the taxation of NRIs investing in GIFT City, stating that they are not taxed in India, and the differences in taxation for inbound and outbound investments through GIFT City. Additionally, the speaker outlines the structure and benefits of Family Investment Funds, which are self-managed funds that can consolidate resources from single or multiple family members.

35:11

🤑 PIC Regulations and Their Impact on Investors

This section addresses the Passive Foreign Investment Company (PFIC) regulations and their impact on US and Canadian citizens investing in mutual funds. The speaker explains the conditions that classify a company as a PFIC and the three tax options available to investors, including the default option, the MTM (Mark-to-Market) option, and the Qualifying Election Fund. They emphasize the importance of making an informed choice to avoid retrospective taxation and penalties.

40:12

📊 Taxation and Investment Strategies in GIFT City

The speaker concludes the session by discussing the taxation advantages of investing in GIFT City for both resident and non-resident investors. They compare the tax rates for long-term and short-term capital gains, dividend income, and interest income for investments made through GIFT City versus outside of it. The paragraph also addresses the confusion surrounding the application of TDS on NRO accounts and the implications for mutual funds, as well as the impact of changes in the composition of hybrid funds on taxation.

45:14

📈 Value Investing Principles and PPFAS Mutual Fund

In the final paragraph, the speaker shifts focus to the philosophy of value investing and the principles followed by PPFAS Mutual Fund. They emphasize the importance of investing in the right businesses at reasonable prices for the long term. The speaker uses a metaphor about the character of a man and a business, highlighting the need to remain steadfast during volatility and to avoid shortcuts for quick profits. The paragraph concludes with a reminder that mutual fund investments are subject to market risks and advises investors to read all scheme-related documents carefully.

Keywords

💡Wealth Management

Wealth management refers to a broad set of financial services that help individuals manage, grow, and protect their assets. In the video's context, it is the overarching theme, with the speaker discussing various aspects of personal finance and taxation strategies as part of wealth management practices.

💡Tax Planning

Tax planning is the strategic placement of one's financial affairs to minimize tax liability. The script mentions tax planning in relation to personal taxation, suggesting that the speaker will cover specific strategies that can help individuals manage their taxes more effectively as part of their wealth management.

💡Capital Gains

Capital gains are the profits made from the sale of an asset, such as stocks or real estate. In the script, the speaker discusses different tax rates and regulations for capital gains, distinguishing between short-term and long-term gains, which is crucial for understanding personal taxation implications.

💡Assessment Year

The assessment year is the period during which the income tax liability is determined by the tax authority. The script explains the concept by giving an example, emphasizing its importance in the context of personal taxation and the timing of tax payments.

💡ITR Forms

ITR (Income Tax Return) forms are used by taxpayers in India to report their income, deductions, and tax payable. The script mentions different ITR forms applicable to various categories of taxpayers, which is essential for understanding how individuals declare their income for taxation purposes.

💡Non-Resident Indian (NRI)

A Non-Resident Indian is someone who holds Indian citizenship but resides outside India. The script discusses the tax implications for NRIs, including how they are classified for tax purposes and the types of income they need to declare to Indian tax authorities.

💡Double Tax Avoidance Agreements (DTAA)

DTAA are treaties between countries to prevent double taxation of the same income. The script highlights the importance of DTAA for NRIs to claim tax benefits and avoid being taxed twice on the same income in different countries.

💡Tax Residency Certificate (TRC)

A Tax Residency Certificate is a document that certifies the tax residency status of an individual for a particular country. The script mentions TRC as a requirement for claiming benefits under DTAA, indicating its importance for tax planning and compliance.

💡Foreign Remittances

Foreign remittances refer to the money sent by migrants or foreign workers to their home country. The script discusses the Liberalized Remittance Scheme (LRS) of the RBI, which allows individuals to remit a certain amount overseas, and the implications of tax on such remittances.

💡Passive Foreign Investment Company (PFIC)

A PFIC is a foreign corporation that meets certain criteria relating to passive income and assets. The script touches on PFIC regulations, which impact how US and Canadian citizens invest in mutual funds and the tax implications of such investments.

💡Gift City

Gift City is an international financial services center in India designed to attract foreign investment and businesses. The script explains the tax advantages and regulations for investments made through Gift City, both for outbound investments by residents and inbound investments by non-residents.

Highlights

Introduction to the continuation of the wealth management and personal finance series.

Emphasis on the disclaimer that the speaker is not a practicing tax expert and advises consultation with a tax advisor.

Explanation of the distinction between assessment year and previous year in taxation.

Overview of different legal statuses for taxation purposes, including individuals, companies, LLPs, and more.

Description of the basic heads of income under taxation, such as salaries, house property, business or profession, and capital gains.

Discussion on the two separate tax regimes in India: old and new, and their implications for individuals.

Details on various ITR forms applicable to different categories of taxpayers.

Complexities involved in capital gain taxation, including different asset classes and their respective tax rates.

Information on ESOP taxation from an employee's perspective, including tax implications at the time of exercise and sale.

Clarification on the types of challans for tax payments, specifically Challan 280 for Advance Tax and Challan 281 for TDS and TCS.

Introduction of the 26AS form, which provides a consolidated picture of all earnings and tax-related transactions.

Explanation of the Annual Information Statement, which offers a detailed bifurcation of income sources and facilitates voluntary compliance.

Differentiation between resident, non-resident, and ordinary residents for NRI taxation purposes.

Eligibility and benefits of Double Tax Avoidance Agreements (DTAA) for NRIs and the challenges of obtaining a Tax Residency Certificate.

Comparison between NRE and NRO accounts for NRIs, including tax implications and repatriation options.

Discussion on the differences between inheritance and estate tax, particularly from the perspective of US-based NRIs.

Insights into the taxation of foreign remittances under the Liberalized Remittance Scheme (LRS) and recent changes involving TCS.

Overview of the Passive Foreign Investment Company (PFIC) regulations and their impact on US and Canadian citizens investing in mutual funds.

Details on the benefits and practical implications of the Gift City investment platform for both outbound and inbound investments.

Introduction to the Family Investment Fund as an alternative to setting up family offices in foreign countries.

Final remarks and applause, indicating the end of the presentation.

Transcripts

good evening everyone uh so hope you

have noted the next two fof

dates uh so those who have not realized

uh this is a continuation of the wealth

management series that we are doing uh

wealth management stroke personal

finance Series so where uh we we had two

sessions on real estate one on the real

estate sector where we had a guest

speaker and second one specifically on

the co-working spaces one we did on the

wealth management industry and then a

couple of sessions from Raji where he

spoke about what to do once you are rich

and about the family businesses then

over the past two months we have had two

sessions one on insurance and one on the

legal side Estate Planning and now uh

today we'll be yeah so today's topic is

tax uh though tax is a very very broad

topic so I'll be covering specific

aspects of personal taxation only and uh

some of it is not directly related to

taxation but it can help in tax planning

uh for some of

you uh just a disclaimer I am not a

practicing tax expert though I am a

chartered accountant uh consult your Tax

Advisor uh before you take any action

and pardon me if I am not able to answer

any questions in the Q&A

ass so uh instead of telling what I am

covering today uh what I'm not covering

today is uh transfer pricing TDS

Provisions angel or startup taxation uh

anything related to companies LLP trusts

partnership firms Etc because this

related to only personal finance and

personal taxation uh nothing related to

deductions exemptions GST indirect

ization

Etc uh tax is a very very vast topic and

our respected Finance ministers Give us

new and new material every year to study

and they make it more complicated so

that Chartered Accountants like me uh

survive in this

world so just like our finance minister

divides her budget speech into two parts

Part A and Part B we we will also have

two parts Part A is individual Taxation

and uh just like in the budget speech no

one is interested in part A here also

most of you would be aware of what is

there in the part a uh we'll move on to

the clo uh complex topics in Part

B so uh just two concepts of assessment

year and uh previous year uh so year in

which your income is assessed and the

year in which you pay your taxes is

called the assessment year and previous

year is basically the financial year

before the assessment year so just to

give you an example any income earned in

the financial year 2324 will be assessed

in the next assessment year which is

called assessment year

2425 uh coming to the legal status of uh

different uh you know categories for

taxation purposes uh individuals HFS uh

companies llps uh partnership forms

Association of persons or body of

individuals so this would include your

uh clubs uh this would include your uh

Cooperative societies uh local

authorities would include your Municipal

corporations and artificial judicial p

uh persons are basically uh uh you know

uh sorry just there's some disturbance

here yeah artificial judicial uh person

is basically uh public corporation

established under a special act or

legislation uh coming to the basic heads

of income where you taxed under

different heads one is salaries where uh

your form 16 takes care of it under that

you have your basic salary H all your

allowances and then you get a standard

deduction then you have under house

property whatever rental income that you

are earning that is taxed and from that

you get a standard 30% deduction for all

the expenses that you have on your house

properties under business or profession

any businesses that you have any

business income be it uh income from

partnership forms or uh be it income

from proprietorship forms or uh

derivatives income all that is comes

under business or profession capital

gains is divided into short-term and

long-term capital gains again we'll

discuss that in the future slides in

detail and other sources would include

your income from interest dividend Etc

so all of you would be aware that over

the past 2 three years we have had two

separate regimes old regime and new

regime uh we don't know how for how long

the old regime will continue given uh by

how the things are going very soon we'll

see only new regimes

surviving uh for taxation purposes uh

individuals are categorized into three

categories one is below 60 years second

is uh senior citizens between 60 and 80

years and third one is super senior

citizens which is above 80 years so

there are different taxation rates for

three categories and under old regime

and new

regime uh coming to the different uh ITR

forms that are there uh right now so

itr1 is applicable for the resident

individuals where the gross income is

less than 50 lakhs and you have sources

from like uh salary or pension you have

only one house property if you have two

House properties then this form is not

applicable to you uh where the

agriculture income is less than 5,000

rupees and then you have interest from

saving accounts deposits it refunds

Etc it2 is uh basically for individuals

and H who are not eligible to uh uh you

know file itr1 and where say gross

income is more than 50 lakhs where you

do not have income from business or

profession uh you are holding

directorship in some companies or you

have you have some unlisted shares of

company where your sources of income

include more than one house property

capital gains foreign assets agriculture

income is more than 5,000 rupees and you

have winnings from lotteries or horse

races it3 is for individuals and hufs

who have income from business and

profession uh this can be in the form of

uh Partners remuneration or profits from

a partnership firm or profits from a

proprietorship firm Etc and every income

source which was there in ITA to plus

this income from business or

profession coming to the last form which

is it4 uh this is for Resident

individuals and hos where the gross

income is again less than 50 lakhs where

you have one house property but one

additional thing here is you have uh

presumptive in income from business or

profession where uh there are some

Provisions where you can just say that

you if you are earning 10 lakhs from a

business you can say 5 lakhs is tax

taxable if say 50% is the presumptive

taxation

rate uh then uh agriculture income is

less than 5,000 rupees and then the

normal interest income that you

want it 5 six and seven are there but

five is applicable for firms llps aop

Boi six is applicable for companies be

it private or public and seven is for

trusts uh and companies having uh income

from charitable

purposes now uh coming to capital gain

specifically uh it's a little

complicated so let's go asset class wise

where say equity in under equities you

have Equity shares and Equity MFS uh

both of which uh will be classified as

ltcg if you hold it for one year

less than one year is taxed at 15% more

than one year is taxed at 10% for gains

above 1 lakh

rupees real estate uh threshold for ltcg

is 2 years uh where if you sell it

before two years it will be tax at your

tax labs and if you sell it after 2

years you get 20% tax rate with

indexation

Benefits under fixed income uh in the

last budget we have had some changes

where uh debt mutual funds are taxed at

your tax lab irrespective of the Horizon

that you have uh listed bonds uh more

than one year if you hold you get 10%

Taxation and less than one year it's

taxable at your tax lab unlisted bonds

the period increases to 3 years from one

year and uh long-term capital gains of

uh 20% with

indexation coming to hybrid funds again

this uh has come because of the uh

taxation change which happened in the

last budget where if you in the hybrid

fund where the equity is less than 35%

it's at par with your debt funds and it

will be taxed at your tax laabs whereas

if you have a hybrid fund between 35 and

65% you get indexation benefits and

long-term capital gains after 3 years of

20% obviously if the hybrid fund is

holding more than 65% in equities it

will be at par with the equity mutual

funds uh which is the second

row again this is as of now uh this will

probably change in July whenever the

budget

happens uh just one thing so for ESOP

taxation this is applicable from an

employee point of view not from an

employer point of view uh so just uh

take an example of an employee who has

been granted options on 1st of April

2024 at 100 rupees per share and the

Westing period is uh 2 years uh with a

exercise period of one year from that 2E

period so Westing starts on 1st of April

2026 and he has time till 1st April 2027

to exercise the options say uh the fair

market value on 1st of April 2026 is 300

Rupees at that time so until and unless

the uh you know uh it is exercised you

don't pay any tax when you exercise say

the employee exercises the options on

1st June of 2026 and the fair market

value at that time was 350 Rupees at

that time whatever is the difference

between the fair market value and the

uh sh value of the share that was given

at the time of Grant of options you have

to pay tax and it will be added as a

perquisite in your salary so basically

350 minus 100 into the marginal tax rate

that is applicable to that employee will

be paid as a perquisite tax and uh the

employer is responsible to deduct this

tax from the employees

salary now what happens uh at the time

of sale of options say on first June of

2029 the employee sells the options at

800 rupees so here the employee will

have to pay difference between 800 and

350 which was the fair market value at

the time of exercise of options and into

the tax rate depending on whether it's

long-term capital gains or short-term

capital gains and whether it's unlisted

unlisted unlisted or listed depending on

that the tax rate will be

applicable uh for tax payments there are

two types of challeng mainly now we have

more challeng especially for TCS on

immovable properties as well uh but

chall 280 is for your Advanced Tax sa

tax tax on regular assessments Etc

whereas chall number 281 is for TDS and

TCS uh 26 es has become much more robust

now than what it was uh when it was

launched it will give you a Consolidated

picture of all your earnings uh and with

your pan number it's linked to your pan

number it can be easily downloaded from

the uh traces website uh you just need

to log in uh with your income tax uh

profile credentials and you'll be able

to download

this uh so what all it contains is TDS

details TCS details all your Advanced

tax payments s tax payments income tax

refunds that you have re received during

the year any high value transactions

that you have gone through be it mutual

funds be it sale of immovable properties

Etc and it also now gives you details of

turnover reported under your GST return

so now they are trying to link both both

indirect and direct taxation where if

the turnover reported under GST is x

amount they will check whether you

report the same in your income tax

return as well or

not one more statement which they have

started recently is the annual

information statement again uh it's a

more detailed version of the 26s where

they give you item wise uh bifurcation

so if you have dividend income interest

income they'll give you from dividend

from XY Z company ABC company interest

from this bank that bank etc

etc and the good thing about this is

that in case of any errors you can give

feedback to them and then in the annual

information statement itself you can see

whatever is reported by the entities be

it Banks companies who give dividends

Etc and whatever is reported by you so

you can see the difference between what

is reported and what is actually your

income

so this helps in facilitating voluntary

compliance where uh given that say uh

interest income from uh

unreported uh field is there but now you

have to report it because it's there in

the AIS statement then uh it eliminates

Under reporting by the uh taxpayers it

enables pre-filling of income tax

returns to a large extent because you

can just prefill all the information

that is there in that that and it DET

deters non-compliance at the end of

taxpayers so let's move on to Part B uh

which will be uh more interesting to a

few of you where uh we'll be looking at

NRI taxation foreign remittances gift

City uh etc

etc so who is classified as a

non-resident Indian in order to classify

as a non-resident Indian you need to be

out of outside of India in the previous

year or the financial year for more than

182 days if that condition is satisfied

then you become a

sorry this is if you stay for more than

182 days in the uh country which is

India then you become a resident if you

don't stay for more than 182 days in IND

then you become a non-resident but

there's a condition here if you stay for

more than 60 days in the previous year

and you have stayed more than 365 days

in the previous four years then

automatically you can classify as a

non-resident even if you don't stay for

more than 182 days and then there are

other conditions where if you are a

non-resident in 9 out of previous 10

years and present in India for more than

for less than 729 days in the previous 7

years then you are classified as

resident but not ordinary again taxation

differs for three categories resident

and ordinary resident resident and

non-ordinary resident and a

non-resident so what all sources of

income do the nris need to pay taxes in

India for so any salary which is

received in India any salary received

for services rendered in India any

rental income which is uh received from

a property situated in India any capital

gains arising from transfer of property

or assets which is in India any income

from deposits in India or any interest

received on the savings bank

accounts DTA or the uh double tax

avoidance Agreements are life saavor for

nris given that so it's basically DTA is

a tax treaty signed between two

countries where if a particular source

of income is getting taxed in one

country they uh can claim that benefit

and they have to play only the

differential in the other country so

this avoids double taxation on the

income that happens and uh while it was

very easy to obtain this benefit before

2012 the finance act 2012 introduced a

tax residency certificate requirement

for all the non-residents where if they

don't have this TRC it's very difficult

to claim any benefits under DTA

and another form which was introduced

was form 10f where if the tax resistency

certificate doesn't include all the

necessary information you need to obtain

this form 10f

ASL obtaining a tax residency

certificate is very very difficult again

it's uh valid for only one year so you

have to renew every year and at the same

time the cost is also very very

high so what are the benefits of uh DT

one is obviously that uh you know your

income is not liable to taxation twice

second is uh the taxpayer get clarity

and certainty uh of where the income

will be taxed and how much it will be

taxed so this uh saves costs on the

litigation side third is increased

investment and trade between two

countries uh given the agreements that

are there between two countries and last

is improved tax cooperation where

exchange of information between those

countries happen

seamlessly so uh nris can open uh two

types of accounts one is a NRI account

and second is a nro account so we'll

look at the differences that are there

between these two accounts and what

practical uh implications are there uh

both the accounts are denominated in in

Indian currencies so there's no foreign

currency risk here uh all the interest

that you earn on your NRE accounts is

taxfree there's no tax on your n

deposits on nro account uh you are

subject to TDs and taxes deductible at

source uh in terms of repatriable or uh

taking back money to your foreign

country NRE account is freely

repatriable where you can withdraw your

money easily whereas nro account there's

a limit of 1 million $1 million in a

financial Year and that to uh you have

to prove that you have paid your taxes

on that income and then you are

repatriating it in terms of joint

holding uh for NRI account you can open

with another NRI or any close relative

who is an

Indian n account can be opened with

anyone uh with NRI as well as a Indian

resident the third type of account which

I have not covered is a fcnr account or

a foreign currency uh account where the

the denomination is in us dollarss uh

But there again you can only invest in

deposits uh

there so for uh investments into uh

financial markets nris need to have uh

PS accounts again I have uh divided uh

and differentiated between pis account

and nonp account pis stands for

portfolio investment scheme uh portfolio

investment scheme account uh uh you know

enables you to invest in a broad range

of Securities be it stocks bonds mutual

funds real estate Etc whereas non-ps

account has a restrict set of Securities

mainly stocks and mutual funds

Investments can be done from both NRE

and N under the P pis account whereas

here only nro accounts are

supported in the pis account you need to

open an account with a partner Bank of

the broker so for example if you open an

account with uh zero as a broker zeroda

may have tie ups with only two Banks

then you need to open account with that

partner Bank

only for non pis account uh n account

can be with any Bank uh for pis account

a pis permission letter from RBI has to

be obtained via the bank that is

registered with your broker whereas here

you don't need any permission letter

from the

rbaa uh in the pis account the bank has

the responsibility to deduct TDS for

short-term long-term capital gains

whereas in a nonp account the broker is

responsible for deducting

taxes uh for pis accounts uh the global

restrictions which are there on maximum

foreign investment or uh INRI

shareholding in a company they are

applicable so for example if HDFC bank

has a cap of Maximum foreign share

holding then no new pis account holder

can in invest in that whereas in nonp

account there are no such

restrictions here you can investment in

direct mutual funds whereas year direct

mutual funds uh sorry here you cannot

invest in direct mutual funds whereas in

a non-ps account direct mutual funds are

allowed uh in the PS account funds need

to be transferred from your bank account

to your pis first and then the bank will

convey the information to the broker

that the uh money has be transferred

whereas in a non-ps account fund for

investing has to be transferred from

your nro bank account to your trading

account using your net banking which

happens with our resident trading

accounts as well and in both the cases

uh btst which is buy today sell tomorrow

is not allowed at

all now coming to uh difference between

inheritance and estate T and this mainly

is from uh us nr's uh point of view so

uh estate tax is leved on the estate of

the deceased whereas an inheritance tax

is levied on the individuals who are

receiving the uh inheritance from the

deceased uh when the state taxes apply

any estate tax which is paid uh you know

to the state in which the disease

resided whereas inheritance tax is paid

to the state where the recipient of the

inheritance decided so this is the

difference between the two in estate tax

you you have a federal tax that is there

in us and then you have a state tax also

for 12 states that are mentioned uh and

the tax rate varies from 0 to 16% over

there whereas inheritance tax there's no

federal tax there's only a state tax and

currently about six states uh have that

uh state tax uh in estate tax uh 13

million is something which is defined

for this current year again they keep

revising these limits but anything about

13.61%

so as I said inheritance tax is

basically a state levy on the assets

that an individual receives as a part of

the inheritance and that depends on

three conditions one is your

relationship with the deceased second is

the value of the asset which is

transferred and third is the state of

the deceased uh uh where where they

resided at the time of the death so if

most of the states exempt spouses from

this inheritance tax so that benefit is

given so if someone dies their spouses

are not taxed on The

Inheritance uh currently Six States

which I have mentioned uh impose an

inheritance tax Loa Kentucky Maryland

Nebraska New Jersey and Pennsylvania laa

is something which is eliminating this

tax from next year

onwards uh inheritance tax is payable

only if the transferer or you know the

deceased is a citizen or a resident or a

green card holder of

us if the US citizen is inheriting

property from a person who is not a uh

resident of us or who is not a Green

Card old then this inheritance tax is

not

applicable now coming to uh pic

regulations or a passive foreign

Investment Company regulations so uh

this has hurt um US and Canada citizens

from investing in mutual funds

especially uh so the conditions there

are that at least 75% of the corporation

or the passive foreign Investment

Company incomes should be passive that

is dividends and interest received uh

from your Investments and at least 50%

of the company's assets are investments

so most of the foreign mutual funds and

the pooled vehicles come under this

category and hence they come under the

pic

regulations so uh this uh regulations

came back in 1986 and they were designed

to you know close a loophole where

people were using uh these kind of

structures offsh structur for uh saving

taxes so there are three tax options

that are available first one is the

default option that is there if you

don't do anything about it this first

option will be applicable where uh you

are taxed when you exempt exit your

investment but whatever gains you have

made they will be proportionately

allocated for your holding period and

for the years in which you have not paid

taxes you will be levied fines and

penalties

so this is the

most punishing kind of Taxation that is

there if and if you don't choose

anything then this is the tax that you

will be liable to second option is the

MTM which most of the uh investors now

opt for where any unrealized gains or

losses from your Investments are taxed

on an annual basis so for example if you

invest $1,000 in a mutual fund in India

and that grows to $2,000 at the end of

the year you have to pay taxes on that

,000 irrespective of whether you sell or

not sell even on your unrealized gains

you have to pay your taxes and third and

the last option is a qualifying election

fund where uh most of the pic

Investments are not eligible and they

must comply with some of the basic

regulations but broadly first two

options are the most common ones where

if an investor is educated he will

always take the second option

now coming to foreign remittances uh as

you would all be aware that under the

liberalized remittance scheme or the lrs

scheme of RBI every individual is

allowed to remit

$250,000 per

year and uh this limit is per year per

person uh this limit gets revised every

year and you can do transactions uh n

number of times so you can do 50,000

today 50,000 tomorrow Etc but the total

should not exceed $250,000

uh and as in my previous slide I said

that nris can repatriate a maximum of $1

million from their nro accounts without

paying any tax on money transfers from

India to us uh but again uh this is

something uh which has come in where TCS

is applicable at 20% on your foreign

remittances from 1st of October 2023

uh just one slide uh again succession

planning was covered in the previous

presentation but uh just to expand a

little bit on it uh just as an example

if a couple is staying in India and they

have children abroad what happens if the

parents living here uh die and how the

succession planning happens so they have

to go through this process where they

will not be liable to the children will

not be liable to any inheritance tax or

estate tax tax in us so one first

condition is that the will must be Pro

probated in

India second condition is you must have

a lawyer or a legal presentation in

India and he should have a POA to act on

your behalf that is the children should

appoint a lawyer in India and the lawyer

will be acting on their behalf third is

adequate documentation should be there

where they have their passports address

proofs tax identification numbers Etc

all the documents are in place fourth is

they have to the beneficiary or the

children in uh us they have to file

their tax returns in India and comply

with the Indian tax laws and they have

to obtain a tax clearance certificate

which is a form 30 from the IT

department in India fifth is after this

probate is completed the transfer of

assets happen and the sixth step is

remittance of funds to USA so the

beneficiary must obtain a certificate of

inheritance from the Indian code and

then the money can be transferred and

the last point is compliance with the US

tax loss this is very very important so

where the beneficiary must report these

inheritance inherited Assets in their us

tax return and they should file their

annual return to report transactions

with foreign trusts and Estates if this

is

applicable so coming to the VAR ious

treaties that India has uh with

different countries and how nris is

investing in India are taxed from

different countries so in most of the

countries for uh investors holding

shares of Indian compy all of them are

taxed in India only whereas for units of

India uh units of Indian mutual funds

and derivatives it differs so uh there

are three countries uh if the nris are

based out of those three countries the

local country doesn't uh you know charge

any tax so macius Singapore and UAE but

these comes with riders one is you need

to have a tax residency certificate you

need to prove that you are uh a resident

of that and then you need to get a

clearance from the IT department saying

that you have a tax residency

certificate and you don't need to pay

tax over there in Singapore there is an

additional condition where you have to

repatriate the gains that you have made

and then only it will be tax

exempt uh one exception for the uh

investors holding Equity shares is Korea

where uh if a Korean is holding uh

shares of Indian company they are taxed

in Korea they're not taxed in India

except if he holds more than 5% in a

comp

uh so as I said uh they need to get a

form which is called form 10f from the

it authorities and after that clearance

only they can you know claim these DTA

benefits again as I said getting a tax

residency certificate is not only

difficult but also expensive and you

need to renew it

annually now coming to gift City uh so

we'll talk about both outbound and

inbound and I'll explain what I mean by

outbound and inbound so if you are using

a gift City vehicle for outbound

investment so residents in India

investing in foreign Securities then the

investment manager needs to have a gift

City branch with a requisite employee

strength and qualifications so those are

very well defined uh in the regulations

that are there where you need to have a

minimum of two employees with requisite

qualifications and you need to have a

physical presence in gift city as well

uh regulator for this is uh

International finances Services Center

Authority or they which is called and

this was formed under the act of

2019 uh for this the lrs limit of

$250,000 is applicable so you cannot

remit more than 2 $250,000 for an

individual but if you have any company

that can liit 50% of your net worth uh

through the OPI route or the overseas

portfolio investment route so most of

the promoters uh would have say private

companies they would be using this route

to remit uh dollars abroad and then

invested

abroad the uh minimum ticket size is uh

$150,000 so again here I am mentioned

for an accredited investor is 25,000 but

most of the cases this is not applicable

uh $150,000 is something which is the

minimum ticket size for an investment

through the gift City and in terms of

Taxation for any foreign security which

is held for more than 2 years you get uh

long-term capital gains tax of 20% with

indexation Benefits through the gift

City whereas if you are investing

directly in foreign Securities from say

Mumbai then you will be tax at your tax

lab so this is a tax advantage which has

been given to the vehicles that are

based out of gift City

for nris that are investing in this kind

of a vehicle for outbound they are not

taxed in the gift City or India whereas

they would be taxed in in their own

country now uh coming to inbound or

non-resident investors investing in in

India so there are two columns here one

is through a aif based in gift City

whereas the other column is aif which is

in in India outside of gift City so here

you can clearly see that the long-term

capital gain and short-term capital gain

rates are almost the same uh for

derivatives an exemption has been given

in terms of aifs based in gift City

where uh there's no tax applicable on

derivatives uh again in terms of

dividend income for AF in Cas City it's

taxes only 10% compared to 20% for the

other uh aifs interest income is the

amounts in Brackets are the ones with uh

SS and surcharges whereas amounts on the

left are uh without SS and

such now coming to the last structure

which is there uh family investment fund

so uh this is an answer to hni family

setting up family offices in foreign

countries so instead of that uh uh the

government wants them to set up in gift

City uh a family investment fund is a

self-management manage fund which can

pull resources from either a single

family or uh various family members or

companies which are owned by the family

members uh where they have a substantial

economic interest which is 90% which is

defined they should own more than 90% in

those companies or llps or

firms and fif will be considered as an

Indian resident for all tax purposes and

overseas resident or offshore un from a

femma perspective so there's

differentiation between income tax and

femma uh Investments can be made in a

family investment fund through the

familyowned entities uh again through

the OPI route which is 50% of their

Network and this can save you know in

individual family members LS limit of 2

$50,000 so if you are remitting through

this that limit can be used for

something

else uh you get a tax break for 10 years

there's no GST and a minimum threshold

for this is $10

million uh this has been there for about

2 2 3 years now only one family office

has been granted up in principal

approval again they have not set up the

fund yet but they have got in principal

approval uh don't know how much time

will it take to get the ball rolling

here that's it thank you any

[Applause]

questions can you can you go to the pfic

slide sorry you know that the three

options that you spoke of and within

that the first option

yeah you know very often I have seen

that people actually like to go with the

first option and verus I think you said

correct me if I'm wrong you said the

second option was a much better thing

that uh you know the notional income so

if you could just once again illustrate

the difference and because I have some

people who are actually doing the first

one to my understanding in the first one

uh it's very akin to retrospective

taxation where you know you don't pay

taxes till you exit but the income is

allocated to all your previous years of

the holding Fe

and then you have to pay taxes on that

and since you are paying taxes late you

are leved fines and penalties on it so

actually you are paying much more taxes

on

it that the default option whereas in

the second option every year you are

paying on your uh unrealized G so there

you are not paying any interest or

penal that it is

here

correct no more

most of the investors that we have uh

take the second option

yeah thanks Raj for the presentation I

had one question on the indexation

benefit what has been the typical

average rate or the benefit you get with

indexation roughly in the range of 3 to

5% depending on year to year but 3 to 5%

you can say so the net tax comes down to

15 16% kind

of you had a slide on the pis can we go

to that SL yes

yeah yeah now in P earlier what we were

dealing with on a practical basis all

the NRA accounts were automatically

covered under p nro accounts were never

covered under P all of a sudden all the

Brokers and banks have woken up to

deduct TDS on the nro sales and the

broker say we don't have the where

withth all so now you open a p account

for nro can you clarify what is the

confusion and whether this will also at

some point come into mutual fund don't

know much about the Practical

implications this is what I have read

that this pis account can be with NRE or

nro whereas this only can be nro I don't

know what practical implications have

been of this or what practical

difficulties the Brokers have faced I'm

not too sure on that is TDS applicable

on the nro account when he s yes it is

applic it

is no no it is applicable the only

difference is in pis account the bank

deducts TDS whereas in a non pis account

the broker did TDS so that's the only

difference any possibility of PS coming

nothing in the news at least this lrs

scheme let's say you are transferring x

amount overseas now you're not

accountable for that money that money is

over out of the Indian tax de so once

it's gone of sure you are not liable to

bring it back you can keep it upo it's

not liable to any Indian tax authorities

no it's over if you can gift it to what

the whatever only thing is there's uh

exchange of information between

governments now so they would know where

that is invested but if you have gifted

it to some

nothing as you spoke about uh the hybrid

fund now you said the moment hybrid fund

invest greater than

65% you automatically qualify for 10%

yes okay but will I know

that my fund I mean what was the what is

the year Bas year that I suppose I when

I put my money into iil fund it is less

than 65 years and suddenly after 2 years

I realize it has gone up to 65% how will

as an individual I will come to know

whether the AMC

is so most of the fund houses don't

change this so whether if it's above 65

they will try to keep it above 65 again

this limit is on a uh 12 month average

average basis so if in a particular

month is goes above 65 or below 65 it's

fine but on a 12 Monon average basis if

it's above a certain limit then it's

fine okay thank

[Applause]

you whenever things got

rough I always remember what my father

used to

say running a business does test to man

my son there are ups and downs glorious

eyes and sometimes a low that leaves you

feeling

defeated the character of a man and the

character of a business are not very

different are they

yes but when the chips are down we must

stand

up dust ourselves off and M

[Music]

wrong

volatility it's a funny

thing it makes you question yourself and

wonder if you've made all the right

decisions sure you can question some of

your decisions but stay steadfast on

your calls dad always said there are no

shot cuts and no quick profits there are

no free lunches are there there is only

one right

way at ppfas we think like Rahul and his

father

that volatility is a fact of running a

business and buying Equity shares is

like owning a part of that business we

use value investing principles to manage

your money this means we invest in the

right businesses at reasonable prices

and for a longer term ppfas mutual fund

there's only one right way mutual fund

Investments are subject to Market risks

read all scheme related documents

carefully