Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: Central Excise rule to resale the machines to a new company :: list of goods taxed at 4% :: VAT RATES :: cpt :: ACCOUNTING STANDARDS :: due date for vat payment :: ACCOUNTING STANDARD :: TDS :: form 3cd :: empanelment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: articles on VAT and GST in India :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TAX RATES - GOODS TAXABLE @ 4% :: VAT Audit
News Headlines »
 Integrated Goods and Services Tax (IGST) Rules, 2017 (As on 15.11.2017)
 Central Goods and Services Tax (CGST) Rules,2017 (As on 15.11.2017)
  101st Constitution Amendment Act, 2016
 Pr. Commissioner Of Income Tax-6 Vs. Mccain Foods India Pvt. Ltd.
 Section 10 of the Income-tax Act, 1961
 Income tax returns filing: No tax on gift received from relatives in form of cash
 Income tax returns (ITR): Here is why you need to pay higher tax on other incomes
 GST Update On Issuance Of Debit Notes And Credit Notes
 How Mutual Fund Investments Can Help Save Income Tax
 Income tax returns (ITR) filing: Why small service providers need to get this benefit
 How NRIs can avoid tax troubles
 Calculating your income tax
 Five-day training course on GST begins at 10 institutes from today
 Steps to ease process of filing GST returns

How NRIs can avoid tax troubles
November, 06th 2017

The government has closed the small savings window for non-resident Indians (NRIs). Till now, NRIs were allowed to keep their PPF accounts and NSCs but not extend them after maturity. The new rules say that existing PPF accounts will be deemed closed and NSCs will be treated as encashed when one becomes an NRI. These investments will now earn just 4% till maturity.

These new rules add to the long list of financial discrimination that NRIs face in India. The tax rules for NRIs are quite different from those that apply to resident citizens. Though there is no tax on foreign income, the tax reporting is very elaborate, the TDS rules are quite stiff and NRIs don’t enjoy some of the tax privileges that normal citizens are eligible for.

For instance, NRIs are also not eligible for certain tax deductions, including medical treatment of disabled dependent (under Sec 80DD), treatment of family member suffering from specified diseases (under Sec 80DDB), disability of self or dependent (under Sec 80U) or royalty income (under Sec 80QQB).

TDS can be a pain
Tax deduction at source (TDS) is a major pain point for NRIs. Resident investors in stocks and mutual funds are not subjected to TDS, but NRIs are. Short-term capital gains from stocks are subject to 15% TDS, while those from debt funds and debentures, gold and property are slapped a higher rate of 30%. Even long-term gains from property and gold are subject to 20% TDS. The TDS on the interest on bank deposits is only 10% for resident Indians, but NRIs have to cough up 30%.

If an NRI earns rent from property in India, the tenant has to deduct 30% TDS from the payment. The various procedures required add to the problems. NRIs need to submit Form 15 CA for remittance of their rental income.

In certain cases, a certificate is also necessary wherein a chartered accountant certifies the details of the payment, TDS rate, and TDS deduction as per Section 195, if any DTAA (Double Tax Avoidance Agreement) is applicable, and other details of the remittance.

The TDS can be particularly painful for older individuals whose income doesn’t fall in the tax net. Unlike resident Indians, NRIs cannot submit Form 15G or H to escape the TDS. Even a person earning less than Rs 2.5 lakh a year will be subjected to 20-30% TDS.

How to avoid TDS
One way NRIs can avoid the high TDS is by being the second holder in joint investments. For all investments, the tax liability is always that of the first holder’s. If the first holder is a resident Indian, the gain will not be subjected to any TDS. Similarly, if the NRI is the second holder in a property, the TDS will not apply unless the rent is above Rs 50,000 a month.

Another way to escape tax is by investing in the name of adult children or spouse, if they have resident status. It is also a good idea to gift fixed deposits to major children or parents before going on an overseas assignment. NRIs are not allowed to hold resident fixed deposits.

If one already holds a fixed deposit jointly with a resident family member, the bank may allow the deposit to be held till maturity, but not renew it further. If an NRI still wishes to hold a deposit jointly, then he can open an NRO (non-resident ordinary) savings account, with the resident family member as a second holder.

Mutual funds can be bought with the resident Indian as primary holder and the NRI as the joint holder. However, equities cannot be held jointly because NRIs who want to trade in the Indian stock markets have to register with a bank offering portfolio investment schemes.

Keep in mind that the joint holding is only to escape TDS. Both investors and property owners would ultimately have to bear the tax liability on the income.

Claim tax benefits
Though NRIs are beaten by the TDS stick, they also get some carrots. The interest earned on NRE account is tax-free and continues to be exempt for two years after the individual returns to India.

It’s best to retain deposits held in foreign currency in the NRE account to earn tax-free interest for two more years. After two years, when the tax status changes, these deposits can be moved to the regular savings account.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Company Overview

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions