I had invested in bonds of public sector units (PSUs) through my non-resident external (NRE) account. The bonds have matured now. How should I repatriate the amount and what will be the tax implications?
Any non-resident Indian (NRI) can open an NRE account with funds remitted to India through a bank abroad. The funds held in the NRE account are freely repatriable. Interest earned out of balances in NRE account is exempt from tax.
In your case, on maturity of the PSU bonds, you would receive the principal and the interest amount. As per the Indian income tax laws, if the interest income received by you is from bonds notified by the central government, then it would be exempt from tax, provided the conditions, if any, stated by the government are satisfied.
But if these are not notified bonds, interest income will be taxable. In case interest income is taxable, you will be able to repatriate the interest amount only if appropriate income tax has been deposited.
It is recommended to check the type of PSU bonds to determine the taxability of the interest income.
I want to send around $20,000 to my parents in India this year. Do I need to pay tax? Also, what is maximum tax-free amount one can send to India?
There is no gift tax in India under the present Income-tax laws. However, under the income tax laws, gift comprising a sum of money exceeding Rs.50,000 is considered as income in the hands of the recipient. The income is liable to tax as “income from other sources”. If such a gift is received from relatives or on special occasions (like marriage or under a Will), it would be exempt from income tax.
Relatives for this purpose include lineal ascendants and descendants, and, hence, the gift received by your parents from you will not be considered as taxable in their hands. Also, as the gift received by your parents is not taxable, there is no maximum tax-free limit that you can remit as gift.
However, the income tax officer might request for the source of the funds that your parents receive, and may also seek credibility or evidence of capacity of the donor of the gift. The officer could call for your tax returns and/or other documents to assess the genuineness of the gift.
It would be advisable to have in place a gift deed and other remittance documents to answer any questions later.
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