Taxation is dependent upon the supply and place of income

I am an Indian citizen working in Singapore. I have invested in insurance policies invested in mutual funds in Singapore. Now I am planning to return to India for good. In this context, do I have to pay capital gains tax on the profits I generate from the investments mentioned?

—Name withheld upon request

Taxation in India depends on housing status, source of income and location of income. Residency status is determined based on an individual’s physical presence in India during a fiscal year (FY) and the previous 10 FYs. The residential status has to be determined anew every year.

An individual who qualifies as a Resident Ordinarily Resident (ROR) is taxable in India on their worldwide income and must report all foreign assets on the Indian Income Tax Return (ITR).

In addition, the income generated from such overseas assets for the year in question must be reported in relation to each overseas asset along with the type of income and the type of income under which that income was offered for taxation in the Indian ITR.

In your case, if you qualify for the ROR of India in the year the Shares are sold, matured or transferred, the capital gains on the sale of Shares will be India’s Singapore investment policy for tax purposes. According to Indian tax law, there is an exemption for the due proceeds of an insurance policy if certain conditions are met (example: insurance policy is issued on or after the 1st% of the sum insured).

Such an exemption can be checked after examining the terms of the insurance product in your case. If you qualify as an NR or RNOR, capital gains from the sale of shares in Singapore are not taxable in India unless receipts are received directly in India.

The benefits under the Double Taxation Agreement (DTAA) between India and Singapore may be assessed depending on your residential status in India, your residential status in Singapore and your residential status under the DTAA.

Accordingly, in your case, it is important to find out your India Housing Status, Singapore Housing Status and DTAA Housing Status in order to analyze the taxation of Singapore capital gains.

I am a non-resident Indian with an Overseas Citizen of India card. I do not live in India and I have no income in India. However, I have both a Permanent Account Number (PAN) and an Aadhaar card. Do I have to link my PAN card to the Aadhaar card?

—Name withheld upon request

Section 139AA of the Income Tax Act 1961 stipulates that any person who has been assigned a PAN and is eligible to receive an aadhaar number must provide their aadhaar number to the income tax authority. Otherwise the PAN will become inoperable until the date the Aadhaar number is announced / linked.

However, according to notification number SO (E) 1513 dated May 11, 2017, the government has exempted the following groups of people from the provisions of Section 139AA:

Residents of Assam, Jammu and Kashmir and Meghalaya; Non-residents according to the income tax law; Seniors aged 80 and over and foreign nationals.

The main condition for liberation is that the person has neither the aadhaar number nor the aadhaar enrollment ID.

Sonu Iyer is a tax partner and head of HR at EY India.

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