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What are the tax implications when children who are working abroad transfer money to their parents’ savings accounts in India? 

— Name withheld on request

 

Under the Indian Income-tax (I-T) Act, tax is levied on any sum of money, specified movable or immovable property received in excess of 50,000 by an individual without consideration (i.e., without a quid pro quo) or for inadequate consideration, except gifts received from a “relative" or on marriage or by way of inheritance or other specified exclusions.  The term ‘relative’ also includes  any lineal ascendant or descendant. Thus, funds remitted from outside India to the savings accounts of parents here will not have any tax implications in India.

 

Can an NRI get a tax refund if  a bank deducts more than the final tax liability on non-resident ordinary (NRO) account fixed deposits.

— Name withheld on request

 

Interest income from a resident bank account and NRO bank account is liable to be taxed at the same rates as ordinary income. Interest income from any savings bank account is eligible for deduction from taxable interest income up to 10,000 ( 50,000 for senior citizens aged 60 years or more for both, interest income on savings account and fixed deposits).

However, under the Double Taxation Avoidance Agreement (DTAA) between India and the relevant country, such interest may be taxable at a special/beneficial rate of tax. To apply for the beneficial rate under DTAA, you will need to qualify as a “Resident" of the other country under the DTAA and obtain a Tax Residency Certificate from the other country’s tax authorities and other specified documents.

If the individual qualifies as a “Non-resident" of India, the bank would deduct TDS on the interest income from the NRO bank account at 30% (plus applicable surcharge and cess). If the TDS deducted by the bank is higher than the final tax liability, such excess TDS may be claimed as a refund in the income-tax return.

Sonu Iyer is tax partner and people advisory services leader, EY India.

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