FAQs on NRI Taxes

Q) I am an NRI working in the UK for the last
4 years. I have just received my PF settlement from the Indian
company I worked for in Mumbai. Can I deposit my PF earnings into
the NRE account?
A) The PF funds originated in India and therefore
cannot be credited to the NRE account, which receives foreign
currency only. You can credit these funds to your NRO account.

Q) Is interest earned on NRE Recurring Deposit
taxable?
A) No, the interest on all types of NRE accounts
is tax-free.

Q) If I sell my property in India and if there
is a "white" value and a "non-white" value,
how do I legally repatriate the total proceeds of the sale?
A) Money which cannot be accounted for or is
"non-white" cannot be repatriated.

Q) Is the capital gains tax when selling property
same for both long and short term gains?
A) Short-term capital gains are taxed as normal
income and long-term gains with indexation are taxed @20%.

Q) I am an NRI and now due to acquire American
citizenship. What happens to my property, residential and agricultural,
which I am inheriting from my parents? Is it a problem to keep
an inherited agriculture property with an OCI status?
A) Obtaining OCI status gives you additional
rights and privileges over and above the ones you enjoyed in your
capacity as a Person of Indian Origin. You had a right to own
and maintain inherited agricultural property and therefore, you
continue to enjoy this right. However, if and when you decide
to sell or gift away the property, note that you can do so to
a Resident Indian only and not to an NRI or PIO.

Q) My son remits funds to my savings account
every month – how is the tax levied on it?
A) There is no tax liability on the funds which
your son is gifting to you. However, you can follow a procedure
to protect your savings from tax by accepting the gift in writing,
mentioning the relationship between the donor and donee.

Q) Is it mandatory as a NRI PAN Card holder
to submit yearly returns with IT Department even if all my income
is through my earnings from outside India?"
A) There is no legal obligation to file tax returns
unless the income chargeable to tax exceeds the minimum tax threshold
of Rs. 1, 00,000.

Obtaining a PAN card has nothing to do with the above requirement.
In other words, if your Indian income does not exceed Rs. 100,000,
regardless of whether you have a PAN card or not, you do not have
to file a tax return.

Q) Do I need to declare all the money that I
have in my NRE account for the last 5 years? Do I need to pay
any taxes on it?
A) If you have maintained your NRI status for
the last 5 years, the income in your NRE account is free from
tax. Note that tax is collected only on interest, not on the capital.
You can include the information on your NRE account in your annual
return, even though you do not need to pay tax on it.

Q) I will be posted to the UK shortly, but I
wish to continue with my savings bank account from which I can
make transfers to my family in India. Is this possible, and what
are my tax liabilities?
A) On becoming an NRI, you are required to inform
all your banks and also all the companies where you have investments
about the change in your status within a reasonable time. The
banks will re-designate your accounts as NRO. You can use this
account the same way as you used it before becoming an NRI.

You must also inform all the companies of whose shares you hold,
about change in your status. If you have a demat account, it is
not necessary to inform the companies but informing the DP is
a must.

You will also start filing your tax returns in your new NRI status.
If the Indian income is below the taxable threshold, there is
no need to file the returns but it is practical to do so for maintaining
the continuity.

Even after you become an NRI, you are free to deal with all your
investments and assets you held prior to becoming an NRI. The
only restriction is that the original amount is non-repatriable.

It is better to open an NRE account since the interest on it
is tax-free in India as long as you are an NRI.

Q) I will be earning a rental income of around
Rs. 6 lakh a year from my property in India. I don’t have any
deduction to claim and I haven’t taken any loans from an Indian
Bank. How much tax am I liable to pay? Do I fall in the 30% tax
bracket and TDS from rental income 15%? Do I need to pay totally
30% + 15% tax or only 30% (out of that 15% will be TDS (like Tax
withholding) and remaining 15% when I file the taxes.
A)