Do NRIs have to pay advance tax: Expert answers your taxation questions

I took voluntary retirement from service and have received some money. How will it be taxed?  

The amount received under Voluntary Retirement Scheme (VRS) is taxable in your hands as salary income under the head 'income from salary'. It is taxed at the normal slab rate applicable to you. However, while computing the tax liability on VRS amount, you may claim an exemption under Section 10(10C) of the Income-tax Act, 1961 ("Act") up to Rs 5 lakh against the lump sum received. However, the VRS scheme needs to comply with the norms as prescribed under Rule 2BA of the Income Tax Rules, 1962 ("Rules"). These are as follows: One, the scheme is applicable to employees who have completed 10 years of service or 40 years of age (except for public sector employees). Two, VRS scheme should have resulted in reduction of employee strength. Three, vacancy created by VRS is not to be filled up. Four, the employee opting for VRS does not take up employment with another company under the same management. This exemption is available once only. 

How do I claim tax deduction on a loan that was taken before the construction of the property was complete?

Until the construction of a property is completed, you cannot claim deduction on either interest or principal repayment. Once it is completed, from that year onwards you can claim deduction of the accumulated interest amount under Section 24 of the Act under 'pre-construction interest' over five years. This can be claimed in equal instalments starting from the year in which construction is completed. The total deduction under Section 24 for a particular tax year (current year's interest plus one-fifth of pre-construction interest) cannot exceed Rs 200,000 (for self-occupied property). However, if you have rented out the house property or the property is chargeable to tax on notional basis, the entire interest (current year's interest plus one-fifth of pre-construction interest) is deductible from the rental income. Where the net result after adjusting interest is a loss, it can be adjusted against other sources up to Rs 200,000. The remaining unadjusted loss can be carried forward up to eight years to be adjusted against future income from house property. For principal repayment, you can claim deduction under Section 80C up to a maximum amount of Rs 150,000 per year. 

Is a non-resident Indian (NRI) liable to pay advance tax?

Yes, an individual whose total tax liability for a tax year exceeds Rs 10,000 per annum is required to pay advance tax. Only senior citizens (resident individuals of age 60 years or more) are not required to pay advance tax. There is no separate provision for NRIs in this regard and hence they are required to pay tax in the prescribed four instalments: 15 per cent of total tax by June 15; 45 per cent by September 15; 75 per cent by December 15; and 100 per cent by March 15. Failure to pay advance tax results in levy of penal interest. 

Is my interest income from fixed deposit (FD) exempt under Section 80TTB?

It is exempt if you are a senior citizen in the relevant tax year. If you are a resident of age 60 years or more, you can claim a deduction with respect to your taxable FD interest up to an amount of Rs 50,000 per annum. Even the interest income from savings bank account, post office deposits, or any other deposit with a bank or cooperative society, etc. is covered within this limit of Rs 50,000 under Section 80TTB.

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The writer is partner and leader, personal tax, PwC India. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in



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