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| NRI tax queries on fixed deposits
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Q : My friend residing in USA has now acquired USA citizenship. He wants to buy a property in India and wants to know what will be his tax status/liability when he sells the property.
---
Mitali
A : In the case of Indian assets, the tax treatment for NRIs is not different from
that what it is for Indian Residents. One property is free of income and wealth
taxes. If your friend sells the property before 3 years of owning it, then he
will earn short-term gains else the gains will be long-term in nature. Long-term
gains are taxable @ 20% after computing the gains using indexed cost. Short-term
gains on the other hand are to be added to one's income and taxed at the applicable
slab rates.
Q : I want to invest in fixed deposits (FDs) from the foreign transfers accumulated in my NRO (Rupee) Account. My earnings in India are only dividends from mutual funds which are less than Rs. 25,000 per year. Will my interest from FDs be taxable in India? Can I submit 15 G (my age is 34), as my income in India including the expected FD returns of 8.5 % will be less than my taxable threshold ? Thanks
--- Magesh
A : As per the law, final taxability and TDS are two separate issues. Since
your total Indian income will be less than the tax threshold of Rs. 1,50,000,
you will not be liable to tax in India. However, as per the provisions of Sec.
195, your NRO interest will be subject to a TDS of 30.9% irrespective of the
amount thereof. In other words, the TDS is applicable on the NRO interest without
any basic threshold. The facility of filing Form 15G is not available to NRIs.
Your only recourse is to file a tax return and claim refund of the tax deducted.
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