Nri return and nre account

CA Pavan Sharma (Balakrishna Consulting LLP) (29 Points)
Replied 07 August 2013

Hello Preeti

Let us look at this question in two parts

1. The residential status of your friend and the impact on taxation in India, and

2. Opening of a bank account in India by him

Residential status and taxation

We have to appreciate that the taxation of income in India is closely linked to the residential status. In your case, your friend has stayed in India for 90 days (approx), i.e. from April 2012 to June 2012. However, your friend has left India for the purpose of employment in UK. In such a case, your friend shall be a non-resident as he does not satisfy any of the conditions prescribed under the Income tax Act, to be a resident of India.

As he is now a non-resident, only income that has accrued in India, i.e. salary for the period April 2012 to June 2012 shall be taxable in India. He does not have to pay any tax on the income earned beyond that period unless the same is received (and not "repatriated to" - in this case it is still not taxable) in India

Opening of bank account by him

A non-resident can open two types of bank accounts, 1> NRE - Non resident external and 2> NRO - non resident ordinary

These accounts can be in the form of a savings account, current account or a deposit account. What should be noted is that NRO account can be used to deposit amounts which have been earned from within India only. Thus, he will not be able to use the NRO account to deposit the moneys from outside India.

Please contact your banker for any additional informtion in this regard.

Trust this helps,

Warm regards,

CA Pavan Sharma

Preeti (Volunteer Internal Auditor loan assessor) (50 Points)
Replied 08 August 2013

Hello,

Thank you for the reply. But what about the money already transferred to normal indian saving account from overseas bank. Would that bring taxability as its not deposited in nre account? Or is it compulsory to open nre account?

Preeti (Volunteer Internal Auditor loan assessor) (50 Points)
Replied 11 August 2013

Hello,

Can anyone please reply to my above query? I am concerned about the money already transferred to saving. Will that be taxable?

Thanks in advance.

Rajendra singh rawat (Student) (39 Points)
Replied 12 August 2013

hi preeti

as per my info he isnt laible to pay tax on the transfers. im saying this because my brother is also in australia on permanent basis and he also had 3 months salary in india . So he is an NR , howver on a monthly basis he credit money into his nre account in india then to my acccount . also it is permitted by rbi that a person can transfer who is on employment subject to certain conditions. if uwr a law student refer FEMA chapter in final course. And if he is transferring the money he is already paying a transaction cost (for example that is somewhere arund 1$ on evry 1000$ in australia ) to the bank so he is just routing the money via bank on which he is paying tax.

Guys if im wrong plz correct me as it will help me too .

Preeti (Volunteer Internal Auditor loan assessor) (50 Points)
Replied 12 August 2013

Hello Rajendra,

Thanks for the reply. Your brother has opened NRE account and he is depositing in that right. My question is if a person has not opened nre account and has directly transferred the money to his normal saving bank account. Because I guess NRE account has to be compulsorily opened by NRI if he is transferring money to India. So what can be done in that case?