How to get tax exemption for domestic deposits for nri

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2013 Hi,

I am a NRI. I don't have any income (or income through properties)in India. I would like to deposit Rs. 22,00,000 as Domestic Deposit. Commonly TDS will be deducted @ 10% (if PAN is submitted) on the FD interest. I want to avoid this TDS and I found below things from the web :

1. FORM 15G : Since, I don't have any income in India. can I Submit this form to avoid TDS and AM I eligible?
Ex :
Principal : Rs 20,00,000
Interest : 8.00%
Interest Paid on maturity : 1,60,000 (which is less than income limit of Rs 1,80,000)

2. Tax Exemption Certificate

I read few article that I can get Tax Exemtion Certificate for certain period which can be used to avoid TDS. Is it correct ? How can I apply for it ? Whats te process ?

Please suggest me on this.

Thanks for your help in Advance.

@VaibhavJ

@VaibhavJ (Expert)
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11 January 2013 Hey Hi,

If you open NRE A/c no interest will be taxable.

Please refer article:

https://www.caclubindia.com/forum/closer-look-to-nre-nro-a-c-taxability-231692.asp

Thanks!!

Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2013 @Vaibhav - Thanks for the reply. I already have NRE accunt and having term deposits on NRE(for which FD interests are not taxable).

But I have some amount on my savings account which I need to go for Domestic Deposit (Not NRO/NRE). I would like to know how to avoid TDS.

1. can I submit FORM 15G ?
2. Do I need to apply for Tax Exemption certificate ?
3. Anythng else I can do ?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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28 July 2024 As an NRI (Non-Resident Indian), you need to handle the taxation of interest income from domestic deposits carefully. Here’s a detailed guide on how you can address the issue of TDS on your domestic deposits in India:

### **1. Form 15G and Form 15H**

**Form 15G** and **Form 15H** are used to avoid TDS on interest income under specific conditions. Here’s how they apply to your situation:

#### **Form 15G**
- **Eligibility:** Form 15G is applicable to residents of India whose total income is below the taxable limit (i.e., Rs 2.5 lakh for individual taxpayers below 60 years of age). Since you are an NRI, you are not eligible to submit Form 15G.
- **Reason:** Form 15G is meant for individuals whose total income is below the taxable limit and who are residents. Since you are an NRI, you cannot use this form to avoid TDS on your domestic deposits.

#### **Form 15H**
- **Eligibility:** Form 15H is also meant for resident individuals above 60 years of age. Since you are an NRI, this form is not applicable to you either.

### **2. Tax Exemption Certificate**

A **Tax Exemption Certificate** can be applied for specific categories of income if you are eligible. However, for general domestic fixed deposits, this process is generally not used. Here’s how you could consider this:

- **Application:** This certificate is generally applied for by entities rather than individuals for specific tax exemptions.
- **Process:** For most individual cases, especially for NRIs, applying for a Tax Exemption Certificate for regular domestic FD interest might not be practical or possible.

### **3. Alternative Measures**

Since Form 15G and 15H do not apply to NRIs, and obtaining a Tax Exemption Certificate is not practical for regular domestic FD interest, here are the alternative steps you can take:

#### **1. Open an NRE Account**
- **Advantages:** Interest earned on NRE (Non-Resident External) accounts is exempt from Indian income tax. You should consider transferring funds to an NRE account and then making FD deposits. This way, you avoid TDS entirely as the interest is tax-free.

#### **2. Open an NRO Account**
- **Advantages:** Interest on NRO (Non-Resident Ordinary) accounts is subject to TDS at 30% (plus applicable surcharge and cess). While this rate is higher, the interest is subject to tax in India. You can claim a refund if your total Indian income is below the taxable limit and you can file an income tax return.

#### **3. File an Income Tax Return**
- **If TDS is Deducted:** If TDS is deducted from your domestic deposits, you should file an Indian income tax return. You can claim a refund for the TDS deducted if your total taxable income (including the interest from FD) is below the tax threshold.

### **4. Steps to Claim a Refund (If TDS is Deducted)**

1. **File Income Tax Return:** You need to file an income tax return in India using the appropriate form for NRIs, such as ITR-2.
2. **Claim Refund:** Report the interest income and the TDS deducted in your return. If your total income is below the taxable threshold, you can claim a refund of the TDS deducted.

### **Summary**

- **Form 15G/15H:** Not applicable for NRIs.
- **Tax Exemption Certificate:** Generally not applicable for regular domestic FD interest.
- **Alternative Options:** Consider using NRE accounts for tax-free interest or file a tax return to claim a refund if TDS is deducted from your domestic deposits.

By following these steps, you can manage the taxation on your domestic deposits effectively.