Sanjiv Chaudhary

My query is regarding the sale of a plot of land. The buyer wants to purchase the plot on registered power of attorney basis. Will this kind of arrangement of sale and sale documents be valid for income tax purposes and, if so, is there any additional documentation needed? Also, what will be the tax implications for me?

Sandesh Govekar

As per the provisions of the Income-tax Act, subject to the various available exemptions and deduction, any gains arising from the transfer of a capital asset shall be chargeable to tax under the head “capital gains”. The Act explains the meaning of transfer but does not provide any specific documents to be executed for effecting the transfer. There is no provision in the Act which prohibits the transfer of property by way of executing a registered power of attorney (‘POA’). However, the validity of the POA should be examined legally and in light of the local state laws for registration of the property for completing the transfer.

The tax implicationswould depend on the period for which the plot of land is held by you before sale. In case it is held for more than 36 months, the gain shall be termed as long-term capital gain and will be subject to tax at 20 per cent (with indexation benefit for cost). However, if the plot is held for 36 months or less, then the gain shall be considered as short-term and will be subject to tax at the applicable slab rates (without indexation benefit for cost and exemptions under the Act).

I am an NRI earning ₹4 lakh in India as rent and salary in the US. I am investing ₹1.5 lakh in PPF which was opened when I was a resident. Am I eligible to claim deduction under 80C for PPF even now? Is there any requirement to make 80C investment only from Indian income ? Is it mandatory to receive rent or interest in NRE account only?

Swanand Lele

I understand that you qualify as non-resident under the Income-tax Act, applicable for 2016-17 (AY 2017-18) and thus subject to tax only in respect of the incomes sourced in India. Further, since you are employed outside India, you may qualify as a non-resident as per the provisions of Foreign Exchange Management Act, 1999.

The deduction under Section 80C for contribution to PPF is available to an individual taxpayer, irrespective of the residential status under the IT Act, provided he holds a PPF account ( before becoming a non-resident in India). is immaterial whether the investment is made from Indian earnings. On receiving rent and interest incomes in Indian bank accounts, I presume that the interest income being referred to is received in India. Please note that the NRE account can be used only for receiving payments in foreign currency. Every person who qualifies as a non-resident, as per FEMA, is required to re-designate the regular rupee savings account into non-resident ordinary (‘NRO’) account. Thus, your rental and interest incomes should be credited to NRO account.

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in

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