I am a non-resident Indian (NRI) living in the US. I plan to invest in fixed deposits (FDs) through my NRI account in India. Will it attract income tax on interest and principal? What is the tax structure? I was told that for seven years, I will get tax rebate on the principal and interest earned. Is that true? Say, I split the income among my family members
when investing, will it help?
—Prakash Assuming that you are a non-resident for Indian tax purposes, any income that is received by you in India or is deemed to be received or any income that accrues or arises to you in India or is deemed to accrue or arise in India will be taxable in India. Income earned and received outside India would not be taxable in India. Consequently, the principal portion of the investment would not be taxable in India. However, the interest income arising from the investments made into such accounts would be taxable on the basis of the residential status of the investor at the time of receipt of the income and also on the type of account maintained.
If you have maintained a non-resident ordinary rupee account, then the interest income earned from investment in FDs would be taxable in India. However, if you hold a non-resident external rupee account, then the interest income arising from such account would be exempt from taxes in India. Interest income earned from deposits maintained in foreign currency non-resident account is exempt from tax up to such period you are a non-resident or a resident but not ordinarily resident. Any money and value of assets brought into India by a person of Indian origin or a citizen of India who was ordinarily residing in a foreign country and who on leaving such country has returned to India with the intention of permanently residing in India is exempt for wealth tax purposes for a period of seven successive assessment years. This exemption is with respect to money and value of assets brought into India and would be available only when non-resident returns to India.
The exemption is provided from a wealth tax perspective and does not extend to income earned from the assets brought into India. You could consider distributing your income to your family members. However, by virtue of clubbing provisions under the income tax laws in India, there could be a possibility of such income being clubbed and taxed in your hands. As clubbing provisions would have to be examined individually based on facts, you could consider approaching a tax adviser with specific facts. Queries and views at mintmoney@livemint.com
Source- Livemint.com
Shah Mohammad Abdul Qadir
PGDM 3rd Sem
IIMT college of Management
Greater Noida, U.P.
when investing, will it help?
—Prakash Assuming that you are a non-resident for Indian tax purposes, any income that is received by you in India or is deemed to be received or any income that accrues or arises to you in India or is deemed to accrue or arise in India will be taxable in India. Income earned and received outside India would not be taxable in India. Consequently, the principal portion of the investment would not be taxable in India. However, the interest income arising from the investments made into such accounts would be taxable on the basis of the residential status of the investor at the time of receipt of the income and also on the type of account maintained.
If you have maintained a non-resident ordinary rupee account, then the interest income earned from investment in FDs would be taxable in India. However, if you hold a non-resident external rupee account, then the interest income arising from such account would be exempt from taxes in India. Interest income earned from deposits maintained in foreign currency non-resident account is exempt from tax up to such period you are a non-resident or a resident but not ordinarily resident. Any money and value of assets brought into India by a person of Indian origin or a citizen of India who was ordinarily residing in a foreign country and who on leaving such country has returned to India with the intention of permanently residing in India is exempt for wealth tax purposes for a period of seven successive assessment years. This exemption is with respect to money and value of assets brought into India and would be available only when non-resident returns to India.
The exemption is provided from a wealth tax perspective and does not extend to income earned from the assets brought into India. You could consider distributing your income to your family members. However, by virtue of clubbing provisions under the income tax laws in India, there could be a possibility of such income being clubbed and taxed in your hands. As clubbing provisions would have to be examined individually based on facts, you could consider approaching a tax adviser with specific facts. Queries and views at mintmoney@livemint.com
Source- Livemint.com
Shah Mohammad Abdul Qadir
PGDM 3rd Sem
IIMT college of Management
Greater Noida, U.P.
