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I left India three years back and now I am a non-resident Indian. Will my Employees’ Provident Fund (EPF) account continue to accrue interest till I turn 58 years old? Also, if my account becomes inoperative after three years, should I withdraw the funds, and will this be taxable ?

—Name withheld on request

 

An account is classified as an inoperative account in which contribution has not been received for three years after retirement or permanent migration abroad or in case of death.

At present, all accounts will earn interest till a member attains the age of 58 years. Your account will turn inactive only when you reach that age.

In case a member withdraws funds from his EPF and has rendered less than five years of service and accumulated amount is more than 50,000, tax deducted at source (TDS) at 10% will be deducted on the interest amount and the member has to pay tax on the interest amount received.

However, if the member has completed five years of continuous service, then from the date of non-contribution to the EPF account to the time of withdrawal, you are eligible to earn the interest. However, such interest is taxable. The interest income earned during your employment remains tax-exempted though.

 

What happens if there is no double taxation avoidance agreement (DTAA) between India and another country, and income is earned in that country?

—Name withheld on request 

 

Even if the country in which tax is paid has not entered into any agreement with India, relief as per Section 91 in the Income Tax Act shall be provided on doubly taxed income.

The deduction of lower of the following shall be allowed:  tax paid on such income outside India and tax payable on such doubly taxed income in India as per the tax rates.

 For the purpose of claiming tax credit, the taxpayer has to submit Form 67 before filing the income tax return. It shows details of the source and amount of income earned abroad in INR, taxes paid outside India in INR, country in which taxes are paid, exchange rate for computation of tax credit, etc. 

Along with Form 67, the taxpayer needs to submit a statement of foreign income offered to tax (it can be a return of income filed in the foreign country or certificate issued by the foreign tax authority) or  a statement specifying the nature of income and the amount of tax deducted or paid by the taxpayer (similar to TDS certificates issued in India), or some other certificate specifying income and taxes. 

Taxpayer also should provide a self-attested statement specifying the income earned and taxes paid abroad, accompanied by proof of payment of taxes paid or deducted abroad. 

 Since the taxes paid in foreign countries are in foreign currencies, the credit shall be determined by conversion of the currency of payment of foreign tax at the telegraphic transfer buying rate on the last day of the month immediately preceding the month in which such tax has been paid or deducted.

Archit Gupta is founder and chief executive officer, Clear.in.

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