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These are a set of queries raised by ET Wealth readers, which have been answered by our panel of experts.
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I have taken foreign citizenship. I would like to send to my mother living in Delhi amounts of Rs.5-10 lakh annually. Will that invite FEMA/tax scrutiny? How much can I send like that without facing tax dilutions?
Umesh Kumar Jethani, Founder, ApkiReturn: Your plan to annually send your mother Rs.5-10 lakh is highly tax-efficient and compliant with the Foreign Exchange Management Act, 1999 (FEMA). As per Indian laws, gifts received from a “relative,” such as a mother from her child, are fully exempt from tax under Section 56(2) of the Income Tax Act, regardless of the amount. Therefore, your mother will face no tax liability on the gifted funds. There is no upper limit on the amount you can send as a gift to an immediate family member in India. Regarding FEMA, there are no restrictions or caps on the inward remittance of funds from a non-resident to a resident relative. To ensure smooth compliance and minimise the risk of any review, you must transfer the money through official banking channels (like SWIFT/wire transfer). It is also advisable to keep a record, such as a simple declaration or gift deed, confirming the transfer is a gift from you to your mother.
I work as a freelancer for a US company and receive a monthly fee, paid directly by bank transfer into my Indian bank account. I am not an employee of the company. How should I file my income tax returns in India?
Shubham Agrawal Senior Taxation Adviser, TaxFile.in: Income earned from a US company for freelancing is fully taxable in India. Since there is no employer–employee relationship, such income is not treated as salary but is classified as Income from Business or Profession under the Income Tax Act. Accordingly, you are required to file ITR 3, or ITR-4 if opting for the presumptive taxation scheme and otherwise eligible. Else, normal business deductions can be claimed if books of account are maintained. If the gross receipts are within the prescribed limits and conditions are satisfied, the individual may opt for presumptive taxation under Section 44ADA. Under this scheme, a minimum of 50% of the gross receipts are deemed as taxable income, and the balance is considered to cover all expenses, thereby eliminating the requirement to maintain detailed books of accounts. Since foreign clients typically do not deduct any tax at source, advance tax must be paid in India during the financial year. From a GST perspective, freelancing services provided to a foreign client generally qualify as export of services. Such exports are zero-rated, meaning GST is not payable, though GST registration and procedural compliances, such as filing a Letter of Undertaking (LUT), may be required depending on turnover and other conditions.
Our panel of experts will answer questions related to any aspect of personal finance. If you have a query, mail it to us right away. Email ID: etwealth@timesgroup.com
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