No tax on NRE FD interest if account holder is a resident outside India

By Chirag Nangia

-Is Non-Resident External (NRE) fixed deposit (FD) exempt from tax?
– Nikhil Gonsalves

As per Section 10(4)(ii), interest income earned on NRE account is exempt from tax if account holder is treated as a person resident outside India under Foreign Exchange Management Act (FEMA). Thus, taxability of interest earned on NRE FD account would depend on residential status of account holder under FEMA. Such interest would be exempt if account holder is a person resident outside India and taxable if he is a person resident in India in accordance with the provisions of FEMA.

– I initiated EPF withdrawal without filling form 15G and my PAN. As a result, 34.6% tax was deducted on total PF amount. How can I get tax refund?

—Manoj Rathor

The amount deducted and deposited as TDS by the payer of consideration gets reflected in the Form 26AS of the person from whose income TDS has been deducted. In a case where TDS deducted exceeds the tax liability of a person for the year, such a person can claim refund of such excess tax while filing the income-tax return, referring the Form 26AS. Thus, TDS deducted by your employer on PF withdrawal would reflect in your Form 26AS and basis the same, you can claim refund of excess tax.

– Can my NRI son transfer Rs 15,000 per month from his NRO account to my NRI daughter’s Non-Resident Ordinary (NRO) account to pay her mutual fund SIP installment?
—Dolly Moga

Yes, transfer between two NRO accounts is permissible. And yes, a resident can transfer same amount in her account and this is permissible subject to certain conditions such as the transferee and transferor must be relatives in terms of Section 2(77) of Companies Act. This transfer will be treated as transfer overseas and has to comply with the Liberalized Remittance Scheme norms.-l If I buy a property for Rs 80 lakh, do I have to deduct 1% TDS?
—Nikhil Sood

Tax has to be deducted at the rate of 1% as the purchase price exceeds the threshold limit of Rs 50 lakh. Tax is required to be deducted at the time of credit of such sum or payment to the seller, whichever is earlier. It to be deposited electronically through challan-cum-statement in Form No. 26QB within seven days from the end of the month in which the deduction is made.

The writer is director, Nangia Advisors LLP.