Global income is taxable in India if you qualify as a resident of the country

  • NRIs are not eligible to open a PPF account in the country. However, they are allowed to contribute towards it
  • If an individual qualifies as 'resident and ordinarily resident' in India, their global income would be taxable in India

My son is an NRI. He opened a public provident fund (PPF) account when NRIs were allowed to do so. After the recent restrictions, he stopped paying the regular instalments, but as per bank guidelines, I am paying 500 every year to keep the account active. My son wants to close his account right away but the bank is unable to clarify and give a proper reply whether he can do so. As he is restricted from operating the account before the completion of 15 years, is he not entitled to close the account?

—KGS Krishnan

NRIs are not eligible to open a PPF account. However, they are allowed to contribute towards it.

In 2017, a notification was issued by the Ministry of Finance amending the provisions of the PPF scheme, stating that if a resident who opened an account under the PPF scheme subsequently becomes a non-resident during the currency of the maturity period, the account will be deemed to be closed from the date of change of residential status from resident to non-resident. However, the amendment notification has been kept in abeyance till further instructions.

Accordingly, an NRI can continue to contribute towards PPF in India on a non-repatriation basis till the maturity of an account that was opened when he or she was resident of the country.

A subscriber is allowed premature closure of his account after the fifth financial year, only if the amount is required for (a) treatment of serious ailments or life threatening diseases of the account holder, spouse or dependent children or parents or (b) for higher education of the account holder or minor account holder on production of supporting documents. There will be a penal interest deduction of 1% from the date of opening the account to the date of premature closure.

In your case, your son, as an NRI, can continue to contribute towards PPF till maturity. The PPF account can be closed prematurely only for specified circumstances as discussed above.

My son is based in India and is working for a foreign client. He gets his salary transferred to his Indian bank account by the client from a foreign country. Will his income be taxable in India? Does he need a goods and services tax (GST) registration number?

—Pradip Kapil

If an individual qualifies as “resident and ordinarily resident" in India , their global income would be taxable in India. It is presumed that the relationship between foreign client and your son is that of employer-employee and receipt is in the nature of “salary". In this case, the salary received in India from the foreign client in his Indian bank account is taxable in India.

Services rendered by an employee to the employer in the course of or in relation to employment is exempt from GST.

If the relationship with foreign client is not in the nature of employer-employee and the receipt is by way of fees for rendering services to foreign client, it will not be taxable as “salary" but as business income. In that case, the nature of services rendered will need to be evaluated for ascertaining whether presumptive taxation is applicable. Further, while GST is not payable on export of goods or services, GST registration may need to be obtained depending on the turnover quantum and other activities carried out by the individual. Also, GST registration is required if the individual is keen on claiming refund of input tax credit or integrated GST.

Sonu Iyer is tax partner and people advisory services leader, EY India. Queries and views at mintmoney@livemint.com

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