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Property gifted to parents is exempt from tax in India
January, 15th 2016

I have been working with an airline company in Dubai for a few years now. I have a few fixed deposits in India. Will the interest earned on these deposits be taxed?

Any income earned or received in India is taxable in India. Therefore, interest earned on the fixed deposits in India is taxable in India.

However, there are certain exemptions available under the Income-tax Act, 1961. Any interest earned on the deposit in an non-resident external (NRE) account (savings or fixed deposit) is exempt under section 10(4)(ii) of the Act for an individual who is a person resident outside India as per the Foreign Exchange Management Act,1999 (Fema) or a person who has been permitted by the Reserve Bank of India (RBI) to maintain the aforesaid account.

Interest on a non-resident ordinary (NRO) account or other resident accounts is fully taxable (special exemptions apply for NRE and foreign currency non-resident, FCNR, accounts only). Interest is taxable at progressive rates of 10-30% (excluding surcharge and education cess).

We would recommend that you check the type of account you hold in India and your residential status in India under Fema rules to determine the taxability of the interest income.

I am a non-resident Indian (NRI) based out of Sweden. I have been living here for the past 25 years. I want to buy a house in my father’s name in India. Will either of us be taxed for it if I do so? I also wanted to know the tax aspect of the same.

If you buy a house in your father’s name, it will be termed as gift. Gift of any immovable property, where the stamp duty value of the property exceeds Rs.50,000, is taxable as “Income from other sources” in the hands of the recipient of the gift. However, certain gifts are not subject to tax.

In case the property is gifted to a relative, then there would be no tax implications, on the recipient or on the giver. The term ‘relative’ is defined under the income tax laws. This definition includes one’s parents.

Therefore, immovable property gifted by you to your father will fall under the exception and will not be subject to tax in India at the time of purchase.

However, any income from the property (for example, rental income) or subsequent gain from sale of the property shall be taxable in India.

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