My sister, who is an Indian resident in Mumbai, and I, an NRI living in the US with US citizenship, are in the process of inheriting our parents' house in Delhi. We want to sell the house, which is in the final stages of a ``mutation'' process.

I want to look for a buyer in the US to avoid the problem of repatriation of sales proceeds from the house of foreign currency. Can the transaction take place in US dollars and the sale deed be registered in Delhi? Is RBI clearance needed for it? What are my tax liabilities going to be?

-- Sitosh Sanyal, Oklahoma

It is not possible to buy a house in India with foreign exchange without bringing the same into India.

Section 10 (iv) of ITA exempts all receipts, which are of casual and non-recurring nature, with a ceiling of Rs 5,000 on the aggregate of such receipts. I know that winnings from gambling, crossword puzzles, lotteries, horse races, etc, come under the umbrella of this section with a sub-ceiling of Rs 2,500 for horse races. I would like to know the other areas that can be treated by me as receipts, which are of casual and non-recurring nature. Some of my friends have told me that if I come across a leftover bag containing some cash, I can treat this as my casual income. However, I am afraid I cannot claim to have found such bags every year. Please guide me so that I can claim exemption of up to Rs 5,000 under this section every year. -- R K Agarwal, Ranchi

If you go through the various court rulings on this issue, you will find that all of them have ruled that the income, claimed to be casual by the appellant, cannot be treated as casual and non-recurring. I haven't come across a single case that was in favour of the assessee. In other words, if you are lucky enough to find bags containing money every year, the department would construe that it is your business to locate such bags, and tax it accordingly.

I'm an NRI having an FCNR account. Recently, when I visited India en route to Singapore, I approached my bank for withdrawal of cash dollars for my expenses in Singapore. I was stunned to find that the bank was refusing to pay me my own money. What action can I take against the bank?

-- Mr Taxpayer, Singapore

It's difficult to withdraw cash from FCNR for two reasons. One, it is a fixed deposit account from which cash pay-outs are not made as a rule. Two, the branch does not have any cash dollars and will direct you to its head office. However, you could have easily obtained travellers' cheques. You may be able to withdraw cash of up to $2,500 from your NRE account with the branch, though you may have to collect the cash from their head office.

In the open-ended schemes of MFs, switching between different schemes is allowed at NAV. If we exercise this option, should we pay capital gains tax, either short-term or long-term, even though money is not withdrawn?In investment of close-ended MF schemes, under the cumulative option, US-64 Reinvestment Plan and bank FDs in particular, do we have to include the interest accrued in our gross income every year or during the year of maturity or receipt of money?Is the cost inflation index benefit available on US-64, IVP, KVP and close-ended schemes with an assured return (cumulative option)? -- M G Mohiuddin, Hyderabad

When you switch from one scheme to another of the same MF, essentially (though notionally) you are selling the units of one scheme at its prevalent repurchase price and purchasing units of another scheme at its sale price. The time and wastage involved in receiving a cheque, crediting it to your bank account and issuing a cheque for purchase of new units is eliminated, but that does not mean that a constructive transfer has not taken place. Such a transaction will attract provisions of capital gains.

It is necessary to pay tax on UTI's Reinvestment Plan as well as cumulative bank deposits on an accrual basis.

Whether close-ended or open-ended cumulative schemes will attract tax on an accrual basis or not, will depend upon the structure of the scheme. Normally, such schemes have two options, a regular income plan and a growth plan. Unfortunately, the word `growth' (or appreciation) is used synonymously by the Funds. In essence, if the amount of dividend paid on their regular option is credited to the growth option, it essentially becomes a reinvestment plan. On the other hand, if the fund has two distinct corpuses, unrelated with each other, the growth option becomes amenable to the concessions of capital gains. Here also there is a hitch.

Some of the funds have been giving assured returns for the entire term of the close-ended scheme, even if it is a growth scheme. In that case, I strongly feel that tax will have to be paid on an accrual basis to the extent of the assured returns. Additional growth, if any, paid at maturity will attract the provisions of long-term capital gains.

In the case of US-64, the extent to which the prices will grow is not known and, therefore, it attracts the provisions of capital gains. That is not the case with Kisan and Indira Vikas Patras.

I intend to sell my 25-year-old flat situated in central Bombay and buy another spacious one in the suburbs. I have been advised that if the flat is nicely painted before taking it to market, I can claim the expenditure as part of the selling cost for calculating long-term capital gains.

-- B K Rangan, Mumbai

If you have a marriageable daughter, invest in clothes, ornaments, creams and perfumes for her. For you will obtain excellent returns on this investment by way of getting a nice groom for her. However, they will not be allowed to set off these expenses as a part of the dowry, if the boy's family insists on one.

The same tenet is applicable here. You will get handsome returns on your investment in painting by way of a higher ceiling price.

Expenditure of capital nature incurred by you on the flat will be allowed to be added to the indexed cost of acquisition. Painting the house is not considered as a capital expenditure.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.