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Power of Attorney and Tax Laws


Scope of power of Attorney:

  • Its not an instrument of transfer in regard to any right, title or interest in an immovable property.
  • Its a creation of agency where by grantor authorizes the grantee to do the acts specified there in.
  • This is quite common in the case of NRIs who invest in india but are not in a position to sign the various documents or do the follow-up on these investments.
  • All the actions taken by the attorney under the PoA are the actions of the grantor
Income Tax on (guarantee) power of attorney holder:
  • As attorney acts as an agent he is not taxable under tax laws for the acts done or receipts or incomes received by him on behalf of the grantor. However the tax officers may raise tax demand on the attorney as recent income tax tribunal decisions are in their favour.
  • It is advisable to take the following precautions (preventive measures) to minimize the risk of such amounts being treated as income of attorney.
Preventive Measures:
  • Funds received as attorney to be kept in separate account and not to be mixed with own funds.
  • All investments should be made in the name of the grantor, and under the PAN of the grantor.
  • The funds should remain the the grantor's account and operated by the attorney under PoA.
  • Income tax return to be filed by the grantor showing the income from such investments made by attroney under PoA.

 By
CA.R.Jeyarajan FCA., CISA., Cert.IFRS
JEYARAJAN@RAREASSOCIATES.IN 
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