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NRIs must convert resident FDs to NRE accounts when going abroad

NRIs must not hold resident FDs

I am an NRI. I want to withdraw a fixed deposit (FD) I made 10 years ago. I didn’t have NRI status, but was living in the US. What’s my tax liability?

—Prateek Singh

NRIs must not hold resident FDs. If they are going to another country for long term, they must convert their resident accounts to non-resident external (NRE) or non-resident ordinary (NRO) account.

If these were resident FDs, the bank deducts TDS on interest at 30%, for each financial year. This TDS is deposited with the government by the bank. This TDS then reflects in your Form 26AS, which you can claim while filing your tax return in India. If these deposits were held as NRE deposits, interest from them is exempt from tax, till you continue to hold NRI status and live abroad. Upon your return to India for good, you must convert your NRE or NRO accounts to resident accounts.

For now, you must review your Form 26AS and see whether TDS has been deducted and file your returns accordingly. You can file a return and take credit of TDS deducted and pay the remaining tax, if any, online or you may receive a refund. Remember to include all your incomes from India in your tax return.

I am working as a representative of a foreign company in India on contract basis since June 2017. My salary is transferred in foreign currency into my Indian savings account and is net of taxes paid by the company in its country. Do I need to pay tax in India?

—Abdul

Indian income tax laws specify that salary, which is paid for services rendered in India, is considered as income earned in India. Without regard to where it may have been paid, in India or outside India, it shall be taxed in India. Therefore, you must report this income while filing your tax return in India (refer Section 9(1) of the Income-tax Act, 1961). However, relief may be available from paying tax on the same income twice, if a DTAA (Double Tax Avoidance Agreement) exists between the two countries. By applying the provisions of the relevant DTAA, you can avoid paying tax on the same income again.

Archit Gupta is founder and chief executive officer, ClearTax. Queries and views at mintmoney@livemint.com

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