Iam a NRI and receiving rent from properties in my name in my Indian bank savings/demat account. Iam sending money from abroad to this saving account for buying property etc. Iam paying tax on the rental income accrued in this account and capital gains from share transactions. I have 2 questions 1. Can I continue to use this account for buying/selling of shares or any other property transactions as i am doing at present 2. Iam sending on monthly basis some amount from this account to my parents residing in India for their household expenses. Can I deduct this amount while calculating my income tax as i hear that gift to parents is tax free. This will reduce my tax liability. Appreciate your response and thank you very much. Regards
Dear Sir,
1. Yes, you can continue using this account for buying/selling of shares or any other property transactions.
2. Gift to parent will be exempt from tax in your parents hand So it will neither increase nor decrease the tax liability of your parents. It will not reduce your tax liability.
Please feel free to call/revert in case you need any clarification.
Thanks and Regards,
Abhishek Dugar
CA CS B.Com
Sir I appreciate your prompt replies but still iam not fully convinced on the second part of the answer. Just to clarify again on what i understood regarding your replies 1. I am NRI but still can continue to use my local savings account(ICICI) (this is neither NREor NRO) for share and property transactions without any questions being asked. 2. The rental income i earn is deposited to this account directly by tenants (say 80 K max per month). From this i am transferring on monthly basis 30 K to my parents for their household expenses so that i can avoid sending money from abroad. Now for tax calculations, why i should not consider only balance 50k as my monthly taxable income as that is what is remaining in my hands at the end of the day. Why should i have to consider full 80 k for my tax calculations. Kindly clarify. Thanks and Regards
Dear Sir,
Your receive 80k per month income from house property would be 56K (80K-30% of 80k). You get 30% standard deduction as per law from your house property income.
Whatever amount you give to your parents cant be deducted from your income. Govt is collecting tax on your income and not on your savings.
Please feel free to call/revert in case you need any clarification.
Thanks and Regards,
Abhishek Dugar
CA CS B.Com
Dear Concern,
1. You can use this account for buying/selling of shares or any other property transactions.
2.You have to pay tax on 80000-30%*80000=56000*12 as per slab applicable to you.
In calculation of income personal expenses are not allowed to be deducted. In case of House property income, income tax is calculated on notional amount i.e actual expenditure are not relevant.
If you are doing business (buying/selling of shares or any other property transactions) personal expenses are not allowed to be deducted (As per section Section 37)
For any further clarification lease feel free to contact us,
Hello Sir,
As per your second question it appears that your 1st query is resolved.
For your Second Query, Yes you will have to pay taxes on the entire 80K and not on the balance 50K. Since spending money to your parents is your personal responsibility and has no bearing or relation to the income that you are earning from the rent. So it is a mere application of funds and not an expense in Income Tax per se.
And in the case of Income Tax you get a Standard Deduction of flat 30% u/s 24B on the amount of rent that you earn. So technically speaking if you earn rental income of Rs.100/- you get a deduction of Rs.30/- and you pay tax on the balance Rs.70/- only.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
Dear Sir Apart from standard deduction of 30% , can you please advise me 1. what else could be deducted (property tax, water tax, etc ) from the rental income and what will be the maximum limit for such deductions. 2. How much can be deducted as maintenance expenses for the house / flats like painting , sump work , etc and what will be the maximum limit for such deductions. Thank you v.much. Regards
Dear Sir,
All these expenditure which you have mentioned is included in the standard deduction of 30% and nothing else can be deducted from house property except municipal taxes and interest on home loan taken for that property.
Please feel free to revert in case of any doubts
Hello Sir,
No maintenance or repair expenses can be claimed instead of it only the govt allows you a standard deduction.
Other than the Standard Deduction you can also claim Municipal Taxes paid during the year by you.
If the house is on loan, then interest paid on loan can be claimed.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
Dear Sir,
As per section 24 you can take standard deduction @ 30% of annual value irrespective of actual expenditure.
Further you can claim exemption of municipal taxes paid without any limit in the year of actual payment.
For any further clarification feel free to contact us.
As per Income Tax Act only 30% is deductible irrespective of the amount of expenditure incurred.
