Rakesh (libi789@yahoo.com) (102 Points)
22 February 2011I have been filling my IT returns for assessment years 2009-2010 and 2010-2011 as NRI and during the Assessment Year 2011-2012 my status will be Resident
I have got some fixed deposits in FCNR and also a NRE account :
1. Is the interest earned on FCNR and NRE account will attract tax liability as I will be filing the IT return as Resident for the AY 2011-2012
2. Am I allowed to keep FCNR and NRE account or I need to convert into the normal resident saving rupee account
Karan Teli
(Life Is just an Illusion...!!)
(4573 Points)
Replied 23 February 2011
Any income recieved in india and accrued in india,
recieved in india or accrued outside india,
recieved outside india or accrued in india; by a reident is taxable under the act..
so if the money is recieved in india by u then it is taxable and it is clear that it is accrued outside india only......
Juzer Sadikot
(CA - innovative solutions for Imports and Exports)
(1309 Points)
Replied 23 February 2011
Dear Rakesh
Interest earned from NRE deposits account shall be exempted from tax u/s. 10(4)(ii) and exemption shall be available untill NRI/PIO becomes person resident in India as per FEMA (Section 2(v) of FEMA).
As per provision of FEMA, when an NRI/PIO return to India for good, he needs to re-designate his non resident account to resident accounts i.e. NRE to either Resident Foreign Currency or Resident Saving Account, and so shall be considered as Resident for FEMA.
So, technically speaking, Interest earned from NRE Account shall be exempted irrespective of your Residential Status as per Income Tax.
For interest on FCNR deposits, Section 10(15)(iv)(fa) provide exemption to Non resident and Resident but not ordinary resident (RNOR).
Now, for your case, if you are RNOR then interest on FCNR shall be exempt otherwise taxable.
Regards
Juzer
Rakesh
(libi789@yahoo.com)
(102 Points)
Replied 24 February 2011
Dera Juzer and Karen,
Thanks for your time and explaining in such a detail.
I have one more question
I don't intend to be a in India for long time and will be going back to abroad in July this year. Only for some reasons I am here for more than 182 days in this financila year due to which I may be now having the resident status.
I have earned the salary in abroad during this year from April to July 2010 for which my employer already deducted Tax as per their country laws.
Now if I file a return of Income as resident for AY year 2011-2012 do I need to include my salary received abroad in the total income and show as Global income even I have already paid the tax in that country and the country has already Double tax avoidance treaty with India.
Regards
Rakesh
Karan Teli
(Life Is just an Illusion...!!)
(4573 Points)
Replied 24 February 2011
The reciept of salary does not comes into consideration here..
The main point to conssider here is the PLACE OF SERVICE RENDERED...
Even if you are a resident (either ordinary resident or not an ordinary resident) the place where you have rendered the service has to be noted..
It is assumed that you have rendered the services outside india and thus the same income from salary is not taxable in your hands under indian income tax...
Juzer Sadikot
(CA - innovative solutions for Imports and Exports)
(1309 Points)
Replied 24 February 2011
Dear Mr. Rakesh
Now, on an understanding that you hold all the your Banking Accounts and Securities as an NRI, your Interest on NRE Account shall be exempted u/s. 10(4)
FCNR, you need to find out your residential status as per Income Tax Act.
Coming to Salary earned outside India, if you are Ordinary resident then you need to pay taxes on such salary income. However, you can claim credit of Tax paid in foreign countries or you may be allowed complete exemption subject to conditions of DTAA.
Regards
Juzer
CAclubindia
