Interest earned by NRI

Tax queries 141 views 2 replies

Sam

Human

39 Points Joined January 2022

Hi.

To beat negative return post taxation I am gifting 30 lakh to my sister (no deed). This she shall invest in RBI floating rate bond. As it's linked to NSC rate there won't be interest rate risk also. She shall be going to USA for 6 years this August onwards. Now,

1. As these bonds cannot be bought by NRIs can she buy these?

2. How interest earned on this investment once she goes will be taxed?

3. Can interest credited every 6 months be used to buy FD by her in India?

4. Will she get tax rebate u/s 87A if total interest income becomes 4lakh after she leaves India?

Replies (2)

CA Raj Doshi

Practising CA

8944 Points Joined December 2013

Give a Loan instead of Gift because you would take back the amount in future.

1. If she is a resident at the time of investment, then she can buy.

2. It will be taxed as income from other sources ( irrespective of she goes abroad or stays in India )

3. Yes. it can be done.

4. No. Rebate not available to non residents.

Sam

Human

39 Points Joined January 2022

Thank you sir.

Cannot give it as loan because I read an article which implied if non-earning person gets a loan & earns interest on it, it must be added to income of family member who Lent loan.

Giving gift avoids it & moreover she can gift it back in times of requirement.