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NRI deriving income in India is required to file tax return in India under the provisions of section 139(1) of the Act if his ‘total income’ during the previous year exceeds the maximum amount which is not chargeable to income-tax.

For this purposes “total income” means the income computed under the five heads of income after giving effect to the specified deductions.

Thus your friend can claim deduction of Rs.9,000 before arriving at total income. Since his total income falls below the basic exemption limit of RS. 50,000 after claiming deduction he is not obliged to file a return of his income.

Again non residents are exempt from filing the tax return under one-by-six-clause as clarified by the Central Government through notification No: SO 710(E) dated 20th Aug, 1998.

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There have been decided cases relating to the problem as yours whereby it has been decided that any loss of interest incurred by the assessee on account of premature encashment of fixed deposits with bank and the interest whereon was assessed on accrual basis in earlier years can be set off from income under any other head in the current year.

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Lump sum compensation under a decree from ex-husband is a capital receipt and is out of tax purview. On the other hand annuity or periodic payments for life assumes the nature of income chargeable to tax. (Maheshwari Devi of Pratapgarh (Princess) v CIT)

Court decree has diminished and partly extinguished your right to lump sum compensation by way of carving out a portion as monthly alimony payment to you. Had this not been the case the lump sum under the decree to you would have been a larger compensation. But it is equally true that what you would receive, as monthly alimony is not payment of any installment out of lump sum compensation. Condition that you are entitled to monthly payments till you are alive clearly indicate that such monthly payments are not tied to any agreed gross sum and the arrangement is not that by the periodical payments such gross shall gradually be paid off. It is in fact conversion of capital into income and is fully taxable.

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Ad-hoc payment received by you would not be liable to tax until case is finally disposed off. Where compensation awarded is enhanced by a lower court in favour of the assessee but the enhancement is contested by the acquiring agency in higher court, the receipt of ad-hoc compensation would be out of the purview of capital gains until the case is finally decided. If the higher court decides in your favor, tax liability would arise in the year of judgement. If however the case is decided against you, ad-hoc payment received would have to be returned and no tax liability would arise.

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For carrying forward loss to be adjusted in the future years the Income tax return must be filed and that too with in the time limit prescribed under the law. However an exception has been provided in case of income from house property wherein late filing of return does not debars you from carrying over the loss. You should file the return before 31st March 2002 in order to carry forward the loss.

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Normally amounts received under life insurance policies including sum allocated by way of bonus are tax-free. But annuities or pension received under various schemes of LIC where the motive is to provide return on investment or annuity for life are subject to tax.

In cases where annuity amount is based on some assured known return and it is possible to separately identify the capital amount and interest thereon, the capital portion may be treated as tax- free and only interest component should be taxable.

However where the annuity is payable by way of promise over the life of annuitant, the capital invested by the annuitant ceases to exist as such and gives rise to income in the form of annuity which is fully taxable as in case of Jeewansuraksha.

In fact CBDT in its circular no. 762 dated 18th Feb 1998 clarified that any amount received on the maturity of such pension scheme as a commuted value in lump sum is exempt from tax but the pension received by the scheme holder is taxable.

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Tax-payers earning salary income are not treated at par with their counterparts earning business income as far as the deduction of damages paid towards repudiation of contract is concerned. Businessman can claim deduction of amount paid as compensation towards non -fulfillment of contract while salary earner has to pay tax on full salary received. The income tax act do not provide for deduction of damages or compensation or payments made to relieve oneself, of an inconvenient contract from wage or salary receipts. Once the employee provides services for a particular period the salary is earned even if it in not received. It is well setlled that tax will be payable on salary which has been accrued or received even if later on it is surrendered or refunded.

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Unfortunately you have to pay tax on full compensation of Rs.1, 75,000. Though one can claim maximum deduction of VRS compensation up to Rs.5, 00,000 but it is restricted to only once in lifetime. You have already claimed deduction at the time of first voluntary retirement and therefore you shall not be eligible to claim any other deduction in future. Once popular as ‘Golden Handshakes’ the Voluntary Retirement Schemes are being doled out by large numbers of Companies and Banks to facilitate restructuring process. But the exemption limit of five lacs fixed way back in the year 1993 needs relook in view of high inflation and decreasing re-employment opportunities to the retiring employees.

Salient features of tax law on VRS are discussed hereunder for the benefit of readers at large: The ‘eligible employees’ are the employees of:

• A public sector company
• An authority established under a central, state or provincial act
• A local authority
• Co-operative society
• University 
• Indian institute of Technology
• Such institute of management as the central government may notify,
• Any other company (other than a public sector company), provided the scheme is approved by the Chief commissioner/Director General.

It has also to be kept in mind that:

• It applies to only those employees who has completed 10years of service or completed 40 years of age but it does not apply to director employees of the company.
• The scheme of voluntary retirement should have drawn to effect overall reduction in the existing employee strength of the company and the vacancy caused by the voluntary retirement should not be filled up. I am not sure whether your company is eligible under the scheme. Also the retiring employee should not be re-employed in the company or concern belonging to the same management.
• Quantum of Exemption is least of (a) Last drawn salary X 3 X Completed years of service (b) salary for remaining period before due date of retirement (c) RS. 5,00,000 (d) actual compensation received.

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Better be late than never : pay tax on the gains made by you. Even if you have not received any payment from the broker still you are liable to pay tax. This is a harsh provision but there is no escape from it even to genuine taxpayers. You should pay the tax now with interest and also revise the return filed by you. But if you don’t get the money from the broker at all then the same may be claimed as bad debt in future.

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Keyman Insurance Policy is a policy taken on the life of one person by another person in whose organisation the first mentioned plays a key role. The relationship between these two persons could be that of employer-employee or that of a principal and agent or a contractor and contractee. The concept of this policy is to cover the insurer in case of untimely demise or inability of the insured due to accidents/ disease of the key persons on whose shoulder the growth of the organization depends.The premium paid by the insurer is deductible as expenditure while calculating profit or loss of the organisation but the amounts received in the nature of claim, maturity amount, bonus or other receipts are taxable in the hands of recipients in the year of receipt .The terms of the policy indicate the beneficiary at the time of maturity.

If the policy matures in the hands of the person who has taken the policy, it is taxable as “profits and gains of business or profession”. If the policy is assigned to the employee in whose name it has been taken, then the maturity proceeds is taxable under the head “Salaries”. Hence the amount receivable by you will be liable to tax as “profit in lieu of salary” in computing the income under the head Salary.

There may be a third case. If the beneficiary of the policy is a person who is neither the employee nor the employer but a third person (he may be a relative of the employer or the employee), the amount received under the policy is taxable in the hands of the recipients as “Income from Other Sources”.

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In India, it is the residential status of the person, which determines the taxability of any income, and not the tax laws of the Country from whom the income is earned. No doubt there is no tax in Dubai, but you would be liable to pay tax according to Indian-tax laws. If you want to save Indian tax, then you must not stay in India for 182 days or more and your status will be of non-resident. If you are a resident in India during the particular financial year, then all of your income whether earned in India or abroad is taxable in India. If you are non-resident, then income earned or accrued outside India is taxed as per the laws of that country.

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According to section 2(12) of " the Code of Civil Procedure ", mesne profits of the property means those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom" . These are in the nature of damages payable, for wrongful detention of the immovable/movable property of the assessee by the tenant.

Similar view was held in CIT v Rani Prayag Kumari Debi (Patna High court) where the assessee was paid damages for wrongful detention of the properties. It was also held that since these damages were not paid under any 'contract to pay', therefore it would not be a revenue receipt.

The Supreme Court has also held in Lucy Kochuvareed v. P. Mariappa Gounder that mesne profit being in the nature of damages and no invariable rule governing their award and assessment in each and every case can be laid down. Courts may mould it according to the justice of the case.

In CIT v Lila Ghosh, Calcutta High Court has held that the mesne profit received by the assessee were in the nature of damages and therefore Capital receipts and the same was held to be non taxable.

In my opinion, rupees seven lacs, awarded to your mother by the court are in the nature of damages to be paid by the tenant for unauthorized use. They are in the nature of capital receipt and are not taxable. Since the damages are to be received by you as a legal heir, you are also not liable to pay any tax on this amount.

Rs.13,000 received as court expenses are only reimbursement of expenses and are not taxable.

You have been rightly clubbing the rental income with your other income as an executor /rightful owner of the property.

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Insurance compensation received by you under a group insurance scheme is not taxable in your hands since it is a capital receipt in your hands. As far as perquisite value of the premia paid by your employer is concerned section 17(2), amongst other items, defines perquisite as any payment made by an employer on behalf of the employee which otherwise the employee was legally bound to pay. In this case since the scheme has been opted by the employer himself and there was no obligation on your part to pay such premium therefore it shall not be treated as a perquisite in your hands and hence not taxable

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A. Yes, You can offset losses of one business activity against income from other business activities provided the other activity, i.e., share sale-purchase activity amounts to business and not speculation. Usually share sale-purchase transactions are classified in three broad categories:

(a) Business Activity i.e. sale and purchase of shares with a view to make trading profit. Shares are treated as stocks and those left in hand on the closing day of the accounting year are treated closing-stock, valued at lower of cost or market value.

(b) Investment Activity wherein you do not intend to trade in the shares but instead of investing money in any other avenue, investment is made by you in shares for a period. The appreciation in the value over a period results in 'capital gain'. If the period of holding is less than 12 months, the gain would be treated as short term capital gain, otherwise it would be treated as long term capital gain.

(c) Speculative transactions involves buying and selling of shares without actually possessing them. No delivery or transfer of shares takes place on settlement day and profit or loss is purely speculative in nature.

You can adjust profits of property dealing business only against losses incurred in the (a) type of activity. Losses from (b) type of activity are adjustable only against capital gains and that of (c) only against speculative profits.