Q693. Sell shares held in India

from Australia and transfer money

abroad . . .

Question: Dear All I have few questions regarding outward remittance. My wife & I are living in Australia from 2011 as permanent resident. My wife is having a bank account with HDFC bank which was opened in 2007 when we all were in India. She also purchased some share (held with DP) as Indian resident in 2008. Now she wants to sell those share & transfer the money to Australia to purchase property. Can you please let us inform that this could be done while her being in Australia? Is there any tax deduction involved? Thanks & kind regards Somenath Gope Melbourne, Australia Answer: Generally, no tax is payable on the sale of shares that have been held for more than one year provided that the such shares are sold through a recognized stock exchange and STT has been paid. In case you are wondering what STT is, it stands for Securities Transaction Tax. STT is a tax paid on buy/sell transactions on a recognized stock exchange. NRIs can repatriate the proceeds of the sale of shares in India through their NRO bank accounts by submitting a certificate from a chartered accountant certifying the source of funds. There are some things that your wife needs to rectify to have her shares sold and funds repatriated to Australia. As per rules and regulations in India, when your wife became a Non-Resident (NRI) in 2011, she should have notified HDFC bank of the change in her resident status from resident to non-resident. NRIs are not allowed to hold resident bank accounts. Only residents of India can maintain and operate resident Indian bank accounts. Non-residents on the other hand are allowed to have NRO/NRE bank accounts. Your wife needs to close her resident Indian bank account, open a NRO account and transfer the funds in her resident account to the NRO account. Similarly, on becoming a NRI, existing demat accounts opened before acquiring NRI status have to be closed and the shares transferred to a NRO demat account. The reasoning behind resident and non-resident demat accounts perhaps is to ensure that RBI restrictions imposed on NRIs share purchases are adhered to and can be tracked. NRIs on closing their resident demat accounts can transfer shares held in such accounts to a NRO demat account. Shares in NRO demat account can then be held or sold and funds repatriated after depositing the sale proceeds in a NRO bank account. As mentioned above, repatriation requires a certificate from a chartered accountant declaring source of funds and the repatriation amount cannot exceed 1 million US$ per calendar year. These days with Internet, overnight courier services and easy access to telephone, many transactions can be done without personally traveling to India. Sending Power of Attorney to a trusted person in India is also an option. Speak to your bank about the easiest way to sell your shares and repatriate the sale proceeds. Please note: Even though taxes on certain income such as sale of shares etc. may be exempt from taxes in India, such tax exemptions do not apply overseas. Readers should keep in mind that dividend income etc from India may be taxable in the country where they reside.