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FAQs - NRI Taxation


Q1.: What does the term Residential Status under the Income Tax Act mean?
Q2.: What are the tax benefits available to an NRI?
Q3.: How can NRIs, residing in other countries, take benefit of 'Double Taxation Avoidance Agreements (DTAA)?

Q1.: What does the term Residential Status under the Income Tax Act mean?
Ans.: Under the Income-tax Act, 1961, the three residential status are defined: Resident and Ordinarily Resident (ROR) Resident but Not Ordinarily Resident (RNOR) Non Resident Indian (NRI)

Q2.: What are the tax benefits available to an NRI?
Ans.:

  • Bank Deposits investment in shares, units of Mutual Funds etc. are exempt from wealth tax in India.
  • Interest earned on NRE and FCNR accounts is completely tax-free.
  • Gift tax has been abolished for all types of gifts from the 1st October 1998.
  • However, gifts received on the occasion of marriage or from relative or under will or inheritance would not be subject to tax

Q3.: How can NRIs, residing in other countries, take benefit of ‘Double Taxation Avoidance Agreements (DTAA)?
Ans.: To avail benefit of lower rates of tax as per double taxation avoidance treaty entered in by India, NRIs need to submit the Residency Certificate issued by Tax Authorities of the country of his residence. These documents should be submitted to the designated bank branch at the time of opening the bank account or subsequently. New TDS rate shall be applied only after the acceptance of the Residency Certificate by the designated bank.




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