Home / Money / Personal Finance /  Can NRI claim deduction u/s 80TTA for interest on bank savings account in India?

My daughter was resident till 15th August 2019. She then went to USA to do her Ph.D. studies there. She is provided financial assistance by the university in the form of teaching assistantship for which she has to assist professors in their teaching and evaluation. She pays her tax on her assistantship there. She has had several fixed deposits with few banks in India.As the interest on these is crossing taxable limit and since tax is deducted, she has to file returns in India. My questions are as below:

1) Will she be a non-resident for IT purpose for the FY 2019-20, as her total stay abroad is more than 182 days ? If so, while filing return, should she provide her permanent address in India or local address in USA ?

2) If she is a Non resident for tax purposes does she qualify for deduction under Section 80TTA for interests on savings account ?

3) Lastly, the banks so far have deducted TDS @ 10.36 % on the interest on fixed deposits. Will that rate continue considering that the FDs were made long back when she was a resident? Can she submit form no. 15G for receipt of interest income without deduction of tax at source?

4) Is it mandatory to inform the banks about change of residential status? I was advised by the bank today to maintain it as resident account only (as my daughter will return to the country finally after a few years) which I guess will result in TDS at 10.36 %.

-Santosh Jain

By Balwant Jain, Chief Editor, ApnaPaisa

Since she was outside India for more than 182 days, she will be treated as a non-resident for income tax purpose. She can still furnish her Indian address in her Income Tax Return (ITR).

She can claim the benefit under Section 80 TTA in respect of interest earned on saving bank accounts.

The TDS rate will be applicable depending on whether one is a resident or non resident at the time of credit of the income and not when the money was invested. So in case the bank has been informed about her becoming non resident the bank will deduct TDS at higher rate.

Since she is a non-resident for tax purposes she can not submit form no. 15G. The rate of TDS for NRI bank interest is 30% including interest credited in the saving bank account on which TDS provisions are not applicable for residents.

I would advise you to intimate the bank about change in her residential status. It is always better to be on the right side of the law than face the consequences even if she intends to come back within a few years. As per law it is mandatory to intimate the bank about change in your residential status and the bank will re designate her existing bank accounts as NRO account.

(Views as expressed by the expert.)

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