How NRE account curiosity revenue is taxed

Is it true that NRE revenue just isn’t taxable in India however solely within the nation of residence?

— Name withheld on request

Interest revenue from non-resident (External), or NRE, accounts (financial savings and stuck deposits) earned by a person is exempt from tax in India, offered the person qualifies as a “particular person resident outdoors India“ underneath the alternate management regulation or is an individual who has been permitted by the Reserve Bank of India (RBI) to keep up NRE account. The guidelines for figuring out residential standing underneath the alternate management regulation are completely different from India’s I-T regulation.

Under the alternate management regulation, when an individual leaves India for the aim of employment or enterprise, or for every other objective indicating his intention to remain outdoors India for an unsure interval, he could also be thought of  a “particular person resident outdoors India“. Further, when an individual returns to India completely, he could also be thought of a “particular person resident in India”.

Accordingly, relying in your residential standing underneath the alternate management regulation or permission by the RBI to keep up such an account, curiosity revenue from an NRE account is exempt from I-T in India. You are required to report the identical within the Indian ITR underneath Schedule exempt revenue as exempt “curiosity revenue”.

I’m an NRI. I’ve NRO and NRE accounts in India. How do I switch my financial savings from my wage (all taxes paid) to Australia?

— Name withheld on request

Under the alternate management regulation, the stability held within the NRE Account will be freely remitted outdoors India. However, the stability held in NRO account is allowed to be remitted outdoors India as much as $1 million per monetary 12 months on submission of documentary proof and fee of tax in India. Remittance exceeding $1 million per monetary 12 months requires particular permission from the RBI.

At the time of remittance from NRO account, the financial institution will ask for a declaration in Form 15CA specifying the quantity of remittance, the rationale for that, and whether or not the quantity is taxable in India. Form 15CA is required to be filed on-line. 

The financial institution can also request Form 15CB issued by a chartered accountant certifying that I-T has been paid on the quantity that’s being remitted outdoors India. However, such a certificates will not be required if the quantity is being remitted outdoors India by the NRI for the upkeep of his/her household.

Typically, the remitting financial institution will specify whether or not Form 15CA and Form 15CB are required for the remittance being made outdoors India.

Sonu Iyer is tax companion and folks advisory providers chief, EY India.

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