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Business News/ Money / Calculators/  Interest income from NRO account is taxable in India
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Interest income from NRO account is taxable in India

The entire interest income earned from the NRO account is taxable in India

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Is there a minimum tax exemption limit for interest earned on my non-resident ordinary (NRO) account?

—Kalyani Nair

The entire interest income earned from the NRO account is taxable in India. However, individuals are eligible for a basic exemption of 2.5 lakh on their total income. If your interest income along with any other source of income accrued or received in India exceeds this, then such excess amount would be subject to tax in India at applicable slab rates. In computing the total income, you could consider a deduction of 10,000 under section 80 TTA of the Income-tax Act on interest earned on deposit in a savings account.

Who is a non-resident Indian (NRI) under the Income-tax Act? How different is the definition than that in the Foreign Exchange Management Act (Fema)?

—Kumar

Any person who stays in India for a period of 182 days or more during the relevant previous year or has stayed in India for 365 days or more in aggregate in the previous four years and for 60 days in the relevant previous year, shall be considered to be a resident for tax purposes in India.

Further, if such a person is a citizen of India who is leaving India for the purpose of employment or as a member of a crew of an Indian ship or is of Indian origin/citizen of India who being outside India comes on a visit to India, then the stay in India would have to be 182 days or more in the relevant previous year instead of 60 days to qualify as a resident in India. If the above conditions are not satisfied, such a person will qualify to be an NRI.

Under Fema, the term ‘person resident outside India’ is defined as a person who is not a resident in India. To be a resident as per Fema, a person would have to reside in India for more than 182 days in the preceding financial year. But if such a person leaves India or stays abroad for employment, business or vocation or for any other purpose which indicates her intention to stay abroad for an uncertain period, then irrespective of the number of days stayed in India, she would qualify to be a person resident outside India.

So, if a person resides for less than 182 days in India in the preceding financial year or leaves for any of the aforementioned purposes, she would qualify to be a person resident outside India.

For the purpose of taxation, residential status is determined on the basis of the stay of the person in India during the financial year, whereas under Fema, residential status is determined on the basis of stay in the previous financial year.

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Published: 05 Mar 2015, 07:47 PM IST
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