You are allowed to remit up to $1 million per FY outside India from NRO account2 min read . Updated: 04 Dec 2018, 08:33 AM IST
Remittance exceeding $1 million will require special permission from the Reserve Bank of India
I am an Indian resident for tax purposes for the current financial year. I travelled to the UK on a business visa for six weeks in May 2018. I met with an accident there in which my leg got fractured after a car hit me. I was hospitalised in the UK and got a plaster for a month. The treatment is still on in India. The car insurance company paid me compensation and sent the sum to my Indian bank account. Will this remittance be tax-exempt in India because it is not an income but an accident compensation?
From the facts provided, it is presumed that the compensation was paid by the insurance company pursuant to insurance contract with the car owner (akin to third-party motor car insurance in India). The compensation is paid for personal injury and suffering and not for loss of earnings. If so, the compensation is arguably in the nature of capital receipt. Therefore, it will not be taxable in India. It is advisable to retain all the documents related to the accident, hospitalisation and correspondence with the insurance company to support the claim of non-taxability.
I am an NRI. I have non-resident (ordinary) or NRO and non-resident (external) or NRE accounts in India. I need to transfer my savings from salary (all taxes paid) to Australia. Am I required to produce Form 15CB?
Under the exchange control law, remittances outside India from NRE account is generally allowed. However, remittance outside India up to $1 million per financial year is allowed out of balances held in NRO account on submission of documentary evidence and certificate from a chartered accountant in the prescribed format. Remittance exceeding $1 million will require special permission from the Reserve Bank of India (RBI).
Under the income-tax law, the remitter is required to furnish prescribed information electronically in Form 15CA (self-declaration) based on a certificate obtained from a chartered accountant in Form 15CB, wherever applicable, on any payments made to an NRI.
However, no information is required to be furnished for the following payments which are not chargeable to income tax under the income tax law:
(a) Payments made by an individual which does not require prior approval from RBI; or (b) Payments given in the specified list—linked to RBI codes.
One of the payments mentioned in the specified list is “S1301 - Remittance by non-residents towards family maintenance and savings". Assuming that you intend to transfer your savings for maintenance of family, there is no requirement to furnish Form 15CA/Form 15CB in terms of exemption granted under Rule 37BB(3)(ii) of Income Tax Rules 1962.
However, in practice, some banks may insist for Form 15CA/Form 15CB and/or additional documents to substantiate that India income tax has been paid for the funds being remitted.
Sonu Iyer is tax partner and people advisory services leader, EY India. Queries at email@example.com