It is subject to the overall ceiling of $1 million per fiscal
I am a non-resident Indian (NRI). I transferred remittance from my non-resident external (NRE) rupee account to domestic account, which was then invested in a fixed deposit (FD). The interest is attracting income tax. How can I reverse the same to NRE account or save tax?
We are assuming that your domestic account is a non-resident ordinary (NRO) account. The Reserve Bank of India (RBI) now permits transfer of funds from an NRO account to an NRE account within the overall ceiling of $1 million per financial year subject to payment of tax, as applicable. You could consider transferring the funds back to your NRE account after paying taxes.
You could also consider utilizing your NRO account rupee balance to invest in domestic equity-linked mutual funds or National Savings Certificates. The income from these are tax-exempt. Regarding the tax liability on the interest already earned on your NRO deposits, assuming that you are a non-resident for income-tax purposes as well, you can avail the beneficial tax rates under the Double Taxation Avoidance Agreement (DTAA), which India may have with the country where you are a tax resident. To claim the benefits, you need a valid tax residency certificate (TRC) from the country of your residence. If the TRC does not have the prescribed details, you could submit those in Form 10F to your banker. You may also have to submit the form to the revenue authorities.
I work in the US. Last year, I bought a flat in Bangalore and invested in bank FDs in India. Do I need to furnish these details to the income tax authorities or RBI? Will rental income from the flat be taxable?
RBI permits acquisition of immovable property and investment into FDs by a non-resident under general permission. You don’t have to report your investments either to RBI or the tax authorities.
The rental income and FD interest will be taxed in India. But, at present, income up to 2 lakh is exempt from tax. Any excess income is taxed incrementally at slab rates. If your total income from rent (after deductions), FD interest and any other income taxable in India exceeds 2 lakh, you have to file an income-tax return in India.
You will be eligible to claim the benefits of DTAA, which India has with the country where you are a tax resident, provided you have a valid TRC. Use Form 10F to provide certain details not given in TRC.
You may also be liable to pay wealth tax if you own more than one house property in India and if that is rented out for less than 300 days in a year. At present, wealth tax of 1% is payable on net wealth exceeding 30 lakh.