I'm a permanent resident of Singapore, planning to take up Singaporean citizenship.

* What happens to the agricultural land I hold in my name when I take up a foreign citizenship? Can I continue to keep it?

* What happens to the properties I may inherit from my parents? Can I sell them and repatriate the proceedings?

* What if I want to come back to India for work? The procedure for NRIs holding a foreign passport to work in India is not clear, although I am aware that they are given a 10-year visa to visit India. Is it so?

-- Nanda Kumar, Singapore

There is no restriction on your continuing to hold any of your Indian assets acquired before or inherited after your becoming an NRI or a foreign citizen. The capital amount cannot be repatriated at the present juncture. However, there are plans to make the rupee free in a phased manner over a period of three years. The income earned thereon can be repatriated after the payment of Indian tax. There is no restriction on a foreigner having a job in India, though there are restrictions on the repatriability of the salary income in some cases.

* I am a little confused with regard to the tax provisions on long-term capital gains as applicable to NRIs. I have read somewhere that the rate has been reduced to 10 per cent by FA97, but some of my friends strongly feel that it has remained at 20 per cent. Again, a few of them say that NRIs are offered protection against the exchange risk and also the benefit of the indexation of cost of acquisition.

-- Venkatasubramanian, Saudi Arabia

The reference to the first provision of Section 48 will make it clear that it is applicable only to shares or debentures of an Indian company. In this case, the NRI is given the privilege of converting the full value of consideration resulting from transfer of a capital asset, into the same foreign currency as was initially utilised in the purchase of the share or debentures. Consequently, for all other foreign exchange assets, including units of MFs/UTI, the NRI has to apply the indexation for computing capital gains, whether the units are purchased by application of foreign exchange or his Indian assets. In other words, the tax provisions for NRIs and resident individuals are identical for other assets.

* Since I draw a high salary, I fall in the highest income slab. In the current year, my employer has given us a performance incentive on the basis of performance achieved by us during the last year. I would like to know whether I can claim the benefit u/s 89(1)?

-- Ravi Iyer, Mumbai

Incentive bonus does not bear the character of advance or arrears of salary. Therefore, you are required to consider this as income of the year. Even if you were entitled to the benefit of Section 89(1), you would have found that the tax liability, with or without the benefit, would be almost equal. This section allows you to apply the average tax rate and in your case, since your tax zone does not change, it would make only a marginal difference.

* On attaining the age of 60 years recently, I retired. My employer has asked me to opt for one of LIC's superannuation-linked annuities. Which annuity is best?

-- P Divecha, Pune

There are three types of SAF annuities. The first is life annuity, wherein the annuity ceases to be paid by LIC immediately after the death of the annuitant. The second type is annuity guaranteed for a certain specified number of years even if death occurs prior to this period. If the annuitant survives this period, the annuity is continued to be paid till death. On both these types, capital is lost on the death of the annuitant or expiry of guarantee period, whichever is later. The third type provides not only regular payments during the annuitant's lifetime, but also whole-life assurance equal to Notional Cash Option/Purchase Price (amount standing to the credit of the employee) utilised to purchase the pension. A Group Pension Terminal Bonus, depending on the period elapsed since the date of vesting to the date of death, will also be paid along with the capital on death. This bonus will depend upon the profitability of G&S Business and, hence, will differ from and understandably will be much less than the rates declared for ordinary business.

The `Life Only' annuity breaks even with `Life with Return of Capital' when the period is 15 years and three months. In other words, if one assumes that the after-tax rate of interest is 12 per cent per annum, payable yearly in arrears, the annuity that returns the capital (neglecting the unknown quantum of bonus) is identical with the other if the annuitant dies within 15 years from the date of commencement. If he lives longer, the new annuity is profitable to LIC.

It appears that LIC does return the capital, but retains an equivalent amount in terms of interest.

Those who desire to leave behind them a lump-sum for their family should choose the life annuity that returns capital after death and those who desire to enjoy the fruits of their labour during their lifetime (like bachelors) should opt for the pure life annuity.

* When an NRI returns to his motherland, is it advisable to take advantage of the permission to keep assets abroad?

-- K Pandiyan, Coimbatore

It is my considered opinion that the downward trend of depreciation of the rupee has been successfully halted. The interest rates in India are significantly higher than those abroad. I do not think that the rate of depreciation in future will outpace the sacrifice in terms of interest income.

Yes, the relationship with our neighbouring countries, especially Pakistan, is at its lowest ebb. The bomb blasts, riots, communal tensions, political instability of the current government, etc, are also not very heartening. Acts of God like floods, droughts and earthquakes take their toll of the rupee. The fear of the unknown like looming wars, changes in government, etc, also cannot be lost sight of.

Nevertheless, it is submitted that these are common factors faced by all the countries, especially the US, which was actively involved in the Vietnam and Gulf Wars. I, therefore, suggest that a minimum fund be retained outside for future use, if any. The rest should be brought to India.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.