India to tax investment independently

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This makes it good tax free investment option for girl child.

Life insurance policy Maturity Amount

Maturity Amount of life insurance policy is tax free if the premium paid for all the years are less than 10% of the maturity amount. Surrender amount for endowment/traditional insurance is exempt from tax after 3 years while its tax free for ULIPs after 5 years.

Long Term Gains on Stocks & Equity Mutual Funds

The long term capital gains in equities & equity mutual funds used to be 100% tax free. However Budget 2020 introduced tax on capital gains. Now long term capital gains up to Rs 1 Lakh is tax free. Any gains above that is taxed at flat rate of 10.4% (including cess).

Sovereign Gold Bonds

There is no capital gains tax if the bonds are held till maturity. However the interest received is taxable.

For those employed, you can itemize qualified medical expenses to get a deduction.

8. College Savings Plans

You can enroll in a college savings account, otherwise known as a 529 plan. A 529 plan is provided by a state or educational institution that allows for several tax benefits. For example, account earnings aren’t federally taxed when used for qualified educational expenses.
Also all qualified withdrawals aren’t subject to federal taxes.

In addition, many states offer partial tax deductions or tax credits based on their unique 529 plan. For example, Pennsylvania residents can deduct contributions up to $15,000 from their taxable income, and up to $30,000 for married couples.

9. Owning a Business

As a business owner, you can deduct a variety of qualified expenses used to maintain the operation of your business.

The statutory threshold amounts are:

  • Married filing jointly — $250,000,
  • Married filing separately — $125,000,
  • Single or head of household — $200,000, or
  • Qualifying widow(er) with a child — $250,000.

In general, net investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, and non-qualified annuities.

Net investment income generally does not include wages, unemployment compensation, Social Security Benefits, alimony, and most self-employment income.

Additionally, net investment income does not include any gain on the sale of a personal residence that is excluded from gross income for regular income tax purposes.

However, India has significantly altered the terms of this engagement.

India has not been quite successful in developing a model that balances investment protection with the state’s right to regulate.

India claims that the change in the terms of this engagement is to strike a balance between investment protections with host state’s right to regulate. However, this paper shows that barring the Model BIT, India has not been able to reconcile the interests of foreign investors with the host state’s right to regulate. The Model BIT contains a narrow definition of investment, an extremely narrow fair and equitable treatment-type provision, excludes Most Favoured Nation clause and taxation measures from the purview of the BIT.
Furthermore, it provides for a general exception provision without a chapeau and contains a complicated and sequential ISDS.

This follows the agreements reached by India and Mauritius in May 2016 and India and Cyprus in November that year, when they similarly amended their respective DTAAs by implementing a Limitation of Benefits (LOB) clause.

Meanwhile, India has gradually adopted OECD standards to regulate residency and transfer pricing norms, and became a signatory to the OECD’s Multilateral Competent Authority agreement for the automatic exchange of Country-by-Country reports (CbC MCAA) in 2016.

  • Place of Effective Management (POEM) regulations in India came into effect on April 1, 2017; POEM is an internationally recognized test for determining the residence of a company incorporated in a foreign jurisdiction. The new norms will apply to the assessment year 2017-2018 and subsequent assessment years.

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Managing Your Accounting and Bookkeeping in India In this issue of India Briefing Magazine, we spotlight three issues that financial management teams for India should monitor. Firstly, we examine the new Indian Accounting Standards (Ind-AS) system, which is expected to be a boon for foreign companies in India.

Double taxation has been dubbed “one of the most visible obstacles to cross-border investment,” leaving room for a significant amount of money to be saved under the over 3,000 double taxation avoidance agreements (DTAs or DTAAs) signed between nations across the globe. To combat such obstacles, DTAAs aim to prevent the same income from being taxed by two or more states, while also eliminating tax evasion and encouraging cross-border trade efficiency.

DTAAs are mostly of a bilateral nature, and while DTAA-signing countries are not all members of the Organisation for Economic Cooperation and Development (OECD), DTAAs are generally based on model conventions developed by the OECD or (less commonly) the United Nations.

Any excess interest is taxed at marginal income tax rates.

Interest on NRE Accounts

The interest earned on NRE (Non Resident External account) deposits for NRIs are completely tax free. The money in NRE account is fully repatriable – means if you are in US and you invest some money in India in your NRE account, the principle and interest money can be taken back to US. So NRE deposits is good tax free investment for NRIs.

Interest on Fixed Deposit for Senior Citizens

Budget 2018 introduced a new Section 80TTB.
According to this Senior citizen can claim tax exemption up to Rs 50,000 on interest income from bank/ post office fixed deposit, recurring deposit or savings account. If a senior citizen opts to take advantage of Section 80TTB, he cannot claim further tax benefit u/s 80TTA.

Buy a Home

Purchasing real estate is another way to set up a tax shelter because you can claim several deductions that renters cannot. The IRS allows you to deduct qualified expenses related to owning a home, including real estate taxes, home mortgage interest and mortgage insurance premiums. You can also deduct the sales tax you paid on your home, such as for a manufactured or modular home, or for building materials for a new construction.

Get the Scoop: Only 18% of Americans Believe Their Tax Dollars Are Being Spent the Right Way

Protect Your Capital Gains

If you earn a significant profit from selling your home, you can protect it from being taxed if you meet certain requirements.

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