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Business News/ Money / Calculators/  NRE fixed deposit interest taxable for resident Indians
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NRE fixed deposit interest taxable for resident Indians

It is only tax exempt in India if the individual qualifies as a person resident outside India

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An assessee made non-resident external (NRE) fixed deposits (FDs) from the income earned abroad and he is now resident for the fiscal 2013-14 but still holds the NRE account and FDs, and earns interest income. Will the interest be taxable or exempt if the assessee is a resident?

—Sumukh

As per the Indian tax laws, interest income earned by an individual on NRE accounts is only tax exempt in India if the individual qualifies as a “person resident outside India", as per the Foreign Exchange Management Act, 1999.

Interest earned on NRE account will be taxable in year 2014-15 as the assessee is a resident in India in fiscal 2013-14 and on becoming resident the onus is on him to notify the bank of the change in the status from non-resident to resident so that the bank account can be re-designated to non-resident ordinary from NRE.

I have invested in the Sri Lankan stock market. What are the tax rates for dividend, short-term and long-term gains?

—Karthik

Income earned from equity investment in listed Indian companies is eligible for tax exemption. However, no such benefit is available from overseas equity investments.

For individuals who qualify as “resident and ordinarily resident" as per Indian tax laws, the tax treatment of income earned from overseas equity investment would be as follows:

Dividend: Subject to tax at progressive rates ranging from 10% to 30% (education cess of 3% and surcharge of 10% extra). Surcharge is only levied in case total taxable income exceeds 1 crore subject to marginal relief.

Short-term capital gain (STCG): Equity investments held for less than 36 months are subject to STCG tax at progressive rate of tax ranging from 10% to 30% (education cess of 3% and surcharge of 10% extra).

Long-term capital gain (LTCG): Equity investment held for more than 36 months are subject to LTCG tax at a rate of 20% (education cess of 3% and surcharge of 10% extra).

In case of double taxation of income in Sri Lanka and India, as per the double tax avoidance agreement between these two countries, a tax credit of taxes paid in Sri Lanka may be claimed in India.

Any long-term and short-term capital loss can be carried forward up to eight years from the year of sale in order to offset future LTCG or STCG.

Details of investment are required to be reported in India.

Queries and views at mintmoney@livemint.com

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Published: 23 Apr 2015, 07:41 PM IST
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