I am working with The Ramco Cements Limited. I am also an employee of a firm and I pay/ file my annual tax returns. My son is working in the US. How much amount can I send to him every year out of my annual savings? How does it affect him in terms of tax returns there?
As per the provisions of Foreign Exchange Management Act, 1999 (‘FEMA’), under the Liberalised Remittance Scheme (LRS), all resident individuals are allowed to freely remit up to USD 250,000 per financial year (April-March) for permissible transactions under LRS.
Remittances outside India in the nature of gifts or for maintenance of close relatives abroad are permitted transactions under the LRS.
Hence, you may remit up to USD 250,000 under LRS for such purpose to your son who is living outside India. As per provisions of section 56 (2)(x) of the Income-tax Act, 1961 (‘the Act’) income tax is payable on any sum of money (if aggregate value exceeds ₹50,000) received by an individual without consideration.
However, any receipts from specified relatives (includes lineal ascendant or descendant of the individual) or on specified occasions such as marriage and inheritance would not be considered as taxable. Hence, a gift of money to your son will not be subject to tax in the hands of your son in India.
In relation to your US tax query, I am not a subject matter expert of US tax laws and therefore would not comment on the same.
Axis Direct has a reporting system for dividends paid. In that, dividend amounts are shown in March 2021 based on declaration date whereas the actual credit is made to savings bank account in April 2021. Please clarify for income tax purpose what should be considered. Is the dividend amount to be shown in the financial year of month in which declared or in the financial year based on the credit in bank account? Also, which is the document considered by the Income Tax department?
S R Subramani
As per the provisions of section 8 of the of the Income-tax Act, 1961 (‘the Act’) along with related clarifications provided by Income-tax Department (via tutorial uploaded in Income-tax website), final dividend, which is chargeable under the head Income from Other Sources, should be considered as taxable in the year in which it is declared, distributed or paid, whichever is earlier.
In the instant case, I understand that the subject dividend was declared in March 2021 (i.e. FY 2020-21) and was subsequently paid in April 2021 (i.e. FY 2021-22). As such, the dividend would be required to be offered to tax in the year in which it is declared i.e. FY 2020-21.
Further, it may be noted that at the time of filing of your income tax return, you are not required to submit any proofs / documents. However, the same should be kept on records for the purpose of assessment / revenue audit, if any. In that case, the dividend report can be submitted with the authorities.
The writer is a practising chartered accountant
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