Tax Column

Whatever income you have earned outside India as a non-resident is not taxable in India under the provisions of the Income Tax Act.

Jayesh Dadia, Chartered Accountant

I am an individual and I own a residential flat. I had entered into an agreement with Mr A who has agreed to purchase flat for a total consideration of Rs.2 crore. Mr A paid an advance of Rs.50 lakh and the balance was to be paid after three months. Mr. A could not arrange balance amount and therefore I forfeited Rs.50lakh. Are there any tax implications of Rs.50 lakh in my handsor is it a capital receipt? 

The entire Rs.50 lakh is taxable in your hands as income from other sources and the same is subject to tax @ 30%. Under Section 56 (ix) of the Income Tax Act,1961, any sum of money received as an advance in connection with transfer of capital assets and if such advance is forfeited, then the entire amount would be taxable under the head ‘Income From Other Sources'.These provision is applicable from the A.Y. 2015-16. 

If I win lucky draw and prize money in the form of a Honda City car, then am I liable to tax on winning the lucky price? If yes, then at what rate and what would be the value? Winning from lottery is subject to income tax under Section 115BB of the Act. Under the said section, income from lottery prize is taxable at flat rate of 30%. 

The fair market value of the Honda City car as on the date of winning would be considered as deemed income and on that amount 30% would be your tax liability. There could be a situation where the organisers may not part with the car till you make payment of taxes and show challan to them as under Section 194B the organisers are responsible for deduction of TDS. Therefore, winning in kind is not free and it is subject to tax. 

I am an individual and my main source of income is salary/ capital gains and rentals. During the current financial year, I have received Rs3,00,000 through account payee cheque and deposited it in my bank account. Due to certain reasons, I cannot disclose the source of Rs.3,00,000. However, I have agreed to offer the same as income when I will file the return of income for assessment year 2018-19 and accordingly will pay the tax. Whether I will be subject to any penal action or additional tax liability, particularly when I have offered to show Rs.3,00,000 as income and paid taxes accordingly. 

Under Section 68 of the Income Tax Act, any credit in the books of the assessee maintained for any previous year and the assessee offers no explanation about the nature and the source thereof, or the explanation offered is not satisfactory in the opinion of the Income Tax Officer, then the said credit may be charged to income tax as income of the assessee. In your case, you cannot explain the source of the credit, but still you are going to offer the same as income from other sources. In absence of proper explanation regarding the source of credit, the Income Tax Officer may tax the amount of Rs.3,00,000 as unexplained cash credit under Section 68 of the Income Tax Act. Once the income is taxed under Section 68, then the same will be taxed at 60% in view of the Provision of Section 115BBE of the Income Tax Act. Further, he may levy penalty under Section 270A of the Income Tax Act, which could be equivalent to 25% of the amount taxed under Section 68. Therefore, you must explain the source of Rs.3,00,000 with documentary evidence to avoid invocation of provision of Section 68, 115BBE and 270A of the Income Tax Act. 

I am a non-resident Indian presently settled in Dubai. I have been working in Dubai since last 20 years. During the current financial year, I have decided to return to India. On my return, I will also transfer all my savings in Dubai to my Indian bank account. Kindly let me know whether such transfer of past savings to India would have any tax implications. 

Whatever income you have earned outside India as a non-resident is not taxable in India under the provisions of the Income Tax Act. It seems all your past savings are earned by you when you were a non-resident. Therefore, when you transfer your past savings on your return to India, it will not have any tax implications. However, you have to ensure that your funds are transferred from your account in Dubai to your account in India. The beneficiary in both these accounts should be you to avoid unnecessary litigations. Further, even if you don't bring money back to India and continue to park the funds in Dubai, then also the past savings cannot be taxed in India. However, income earned on these funds lying in Dubai would be taxable in India once you become a resident under the Income Tax Act. Further, if you bring money back in India even after two years, then also the same is not taxable in India.