Failure to meet norms would result in taxation
By HP Ranina/NRI Biz Matters
Question: Indians have great attraction for gold and gold ornaments which may be received either by way of inheritance or on marriage. Substantial quantity of gold is purchased every year. Can gold be kept at home without any restriction? Would tax authorities be entitled to question the source of funds for acquisition of the gold?
ANSWER: Gold ornaments can be kept in a residential house with risk of theft. It would therefore be advisable to keep them in bank lockers. According to the regulations of the Central Board of Direct Taxes, gold ornaments can be kept at home or in a locker. Upto the specified limits, no proof of the amount invested is required to be disclosed to the tax authorities. The limits for this purpose are upto 500 grams of gold ornaments for a married woman, 250 grams for an unmarried woman, and 100 grams for men.
If a person has gold in addition to these limits, the source of the funds used for acquiring the ornaments would need to be explained to the satisfaction of the tax authorities. Failure to do so would result in the value of the excess gold ornaments being treated as unexplained income which would be taxable at the flat rate of 60 per cent. When gold ornaments are purchased, Goods & Services Tax is charged at the rate of three per cent on the value of gold plus the making charges. As and when the gold ornaments are sold, capital gains would be taxable at the normal rate of tax if the gold ornaments have been held for less than three years; otherwise, the capital gains would be taxed at the rate of 20 per cent as long-term capital gains. Gold exchange traded funds would be an alternate form of investment as physical gold would not have to be held, but the investor would have the advantage of enjoying appreciation in the value of the gold.
Question: My uncle in India has a health insurance policy which is cashless. However he had a difficult experience when he had to avail of the benefits recently when he was hospitalised. Are any steps being taken to streamline the procedures?
ANSWER: Fresh guidelines have been issued recently by the Insurance Regulatory and Development Authority of India (IRDAI), which is the regulatory authority for medical/health insurance. Under these guidelines, insurance companies will have to approve cashless claims within one hour and provide final authorisation for discharge from a hospital within three hours. Under the master circular which has been issued recently, an insurance company cannot repudiate a claim without the approval of the Claims Review Committee.
Further, the Third Party Administrators are required to collect documents directly from the hospitals and not ask the insured person to furnish the same. Under the new rules, insurance companies will need to reward policy holders where there has been no claim by offering either an increased sum insured or by discounting the renewal premium. Further, policy holders who wish to cancel their policies would be entitled to receive a refund of the premium paid for the unexpired policy period. Insurance companies have been directed to provide a one month grace period for annual renewal of health policies and ensure that all benefits are protected during this grace period.
Question: Will the objective of rupee globalisation be achieved in the near future whereby the Indian rupee will be used internationally?
ANSWER: The Reserve Bank of India is determined to boost its efforts towards the internationalisation of the rupee. This is proposed to be done by making it possible to make settlements in bilateral trade by using the rupee. The first step is to support local currency settlement with partner countries and liberalise regulations relating to Indian rupee accounts for non-residents. The Reserve Bank’s agenda for the current financial year includes permitting persons resident outside India to open rupee accounts in foreign countries which can be freely used.
Further, Indian banks are encouraged to lend Indian rupees to persons resident outside India. Foreign direct investment and foreign portfolio investment will be permitted through special Non-Resident (rupee) and Rupee Vostro accounts. Another step taken by the Reserve Bank is the facilitation of rupee settlement for Asian Currency Union countries for trade related transactions as well as non-trade related transactions. The existing regulatory framework is being simplified for improving ease of doing business by dispensing with redundant provisions/processes and unnecessary approvals. It is also proposed to extend the domestic Structured Financial Messaging System through a global SFMS hub to other countries which can connect their local messaging system for cross border payments.
HP Ranina is a practising lawyer, specialising in corporate and tax laws of India.