Transferring nre funds between nri spouse(s)

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2011 Dear Expert(s),
I would be highly obliged if you could kindly help me answering the following questions.
Please accept my sincere thanks.
Regards,
Background information: I am working in UAE for the last 5 years, and lives with my wife on UAE residence visa, she is housewife and has no income in India or UAE, we both have individual NRE and NRO accounts, and we both own PAN.
I own a commercial property in India (bought through NRE funds), which is generating rental income of around INR 50,000/- a month after TDS of (30% + 3%). For the last two years I am filing ITR regularly as per ITA, for claiming returns, and I have no other income in India except this.
I want to take advantage of higher NRO deposit interest rates, whilst saving Tax, for which I am planning to transfer NRE funds to my wife's NRE account, and she will deposit through her NRO account, and obtain TDS and Tax relief under Indo UAE DTAA.
Q1. Can I transfer funds from my NRE account to my wife's NRE account? Will this be a legitimate transaction according to IT Act and other Indian laws? Up to what amount can I transfer, are there any restrictions?
Q2. Can my wife seek Tax and TDS relief under Indo UAE DTAA for NRO interest income? Will there be any additional Taxes for NRO interest income? Does educational cess be levied on DTAA based TDS/Tax? Is it mandatory to file ITR if she is generating only interest income in India?
Q3. Will she be able to deposit the interest and principal (NRO deposit maturity) proceeds to her NRE account? Will there be any future tax implication due this arrangement that we have to be aware of?
Q4. Alternatively, can I place a deposit through my NRO account and seek for TDS/Tax relief under Indo UAE DTAA, and not disclose interest income when filing rental income ITR? Can I seek TDS and Tax relief for my rental income under Indo UAE DTAA??

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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21 November 2011 1. Yes, but subject to certain conditions.

2.Yes,

3. needs to be checked.

4. Will be risky.

Anuj
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