Is it correct for the company to deduct professional tax from the employees posted in Delhi as no professional tax is levied by Delhi government?

-- Pawan Kumar Bhatia, New Delhi

Professional tax or tax on employment, a state subject, is levied by a state under article 726 of the Constitution. Union territories including Delhi do not levy professional tax.

The answer to your question would depend upon the modalities through which you receive your salary. If you receive your salary through your registered office in AP by means of a specific funding arrangement to the regional office, effectively it is the registered office that is paying you.

Consequentlyprofessional tax would be payable. If on the other hand, the regional office functions as a full-fledged unit, independently paying salaries and incurring other business expenses, professional tax is not leviable.

I have a suggestion. Your company should shift its head office to Delhi and fund the salaries from to all its branches, regional offices and the works from Delhi.

I live in the US. I've been considering changing my status from green card to a US citizenship. But I'm not sure if I may want to come to India later for a job etc. So here are a bunch of questions:

i) Can a US citizen stay in India indefinitely?

ii) Can he obtain employment in non-Indian government entities (e.g. Larsen & Toubro, Tatas, Hind Lever etc)?

iii) What is rupee convertibility on capital and current a/c?

--Anu A Gokhale, US

i) Depends upon your Indian visa status.

ii) If you have a work permit, there should be no difficulty.

iii) When the rupee becomes convertible on capitalaccount, it can be freely exchanged with any other currency.

a) I came to the US in March 1998 and I plan to go back in May 1999. So, I will be treated as NRI for the financial year 1998-99, but not for 1999-2000.

b) In May 1998, I entered into a partnership with an Indian resident. Together we did some software export to the US in July and the export consideration was realised in India in convertible foreign currency - in US dollars through proper banking channel in August 1998.

c) My Indian resident partner had taken RBI export/import code number in April 1998 in his proprietorship firm in which we did software export. I joined the firm in May 1998 only. Further, bank account is being operated by the Indian partner only.

d) Our partnership is duly supported by partnership deed. Other conditions are like getting export consideration within time limit, CA certificate in form number 10 CCAF, etc, are being met. Can I also claim deduction u/s 80HHE for my share of profit? Orwill it be treated as my taxable income?

-- Rakesh Garg, US

I'm afraid, you are mixing up your two distinct identities as an individual (non-resident) and a partner in the firm (resident). Then again, your partner has two identities, one as an individual having a proprietary business (not a firm as mentioned by you) and other as your partner in a firm. From the facts presented by you, I feel that you may face problems because:
i) Your partner has the RBI export/import code in his capacity as a proprietor and it is not clear whether he is crediting the export proceeds to the bank account of his proprietorship concern or a separate account of the firm in which you are a partner. In the former case, I think he is cheating you.

In the latter case, the firm is entitled to the concessions, (hopefully, because the licence belongs to the proprietor). Once the firm has paid tax on its income (or not paid it because it is deductible), any distribution of the assets, as defined by the partnershipdeed, are not taxable in the hands of the partners. This concession is available only to resident persons. You are a non-resident individual but a partner of a resident firm.

You are not entitled even as a supporter in your individual capacity. The idea of using a firm is super-excellent, but I am afraid, it lacks some fine finishing touches.

It does appear that the CA of your partner is very knowledgeable and, your partner willing, he can manage to pass on the benefit to you which you deserve.

I own a residential flat purchased in 1991 mainly through a bank loan. I have been paying an EMI of Rs 619 per month for the last few years. The original cost of the flat was Rs 60,000, and it was subsequently enhanced to Rs 66,000. I have deposited a total of Rs 71,000 up to March 1998.

Further, if I continue with the EMI up to the end of the term of the loan which is the year 2005, the flat will cost me about Rs 1,25,000.

Now, I want to sell the flat. On which cost (original, enhancedor the amount which I have deposited as on the date of sale) should the indexation be applied and what would be the indexed cost at the current inflation rate? Please realise that I am still not full owner of the flat since I have paid only a part of the cost of acquisition.

-- Vinod Kumar Vij, Chandigarh

It is absolutely clear that you have become an owner of the flat from the financial year 1990-91 or 1991-92, depending upon whether you took possession before or after April 1, 1991. The cost of acquisition is Rs 66,000. The fact that you have taken a loan for this purpose and are still paying installments is an extraneous and inconsequential matter. However, you may claim tax rebate on repayment of principal amount of loan (up to Rs 10,000) u/s 88 and tax deduction on interest paid (up to Rs 30,000) every year.

The inflation index was 182 in 1990-91, 199 in 1991-92 and is 351 this year. The indexed cost will be 66,000 X 351/relevant index.