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If you are an NRI, you need to convert your existing savings account to an NRE or NRO Account; or you may open a new account. Read on to find out if NRIs holding such accounts need to pay income tax.
As someone who earns and lives abroad, you may want to know your tax liability in India. But before calculating your tax, you should check your residential status during the financial year.
In Budget 2020, the government changed the definition of non-resident Indian in the Income Tax Act. Currently, the period of stay and total income plays a role in your residency status. Here are the new NRI Status Rules:
Income > 15 lakh
Stay in India less than 120 days = NRI
Stay in India more than 120 days = Resident
Income < 15 lakh
Stay in India less than 182 days = NRI
Stay in India more than 182 days = Resident
Open an NRI account remotely from your home.
As an NRI cannot hold a savings account in any Indian bank, they need to get their accounts converted to either an NRE or an NRO account when the residential status changes.
There are three main types of NRI Accounts:
A Non-Resident External (NRE) Account lets you transfer income earned in a foreign land to India. You can only deposit funds in international currencies in the NRE account. The amount at the time of deposit is converted to Indian rupees.
The interest on an NRE account is not taxable -- you don’t need to pay any tax on the interest received in these accounts.
You can open a Non-Resident Ordinary (NRO) Account to deposit income earned in India along with foreign earnings.
In NRO accounts, the interest earned is taxable in India. TDS @ 30% will be applicable on the interest earned in the NRO account.
You can open Foreign Currency Non-Resident (FCNR) Account in nine currencies: USD, GBP, EUR, JPY, AUD, CAD, CHF, SGD and HKD. It is a fixed deposit (FD) account for foreign currency. The tenures of FCNR ranges from one to five years.
NRIs do not have to pay tax on either the principal or the interest amount on a FCNR account.
Interest from NRE accounts and FCNR accounts are not taxable while interest earned on an NRO account is taxable. If you are an Indian resident working abroad, the bank will deduct TDS on interest paid on an NRO account.
You can file an IT return to get a refund of the TDS deducted on your NRO account interest if you are eligible.
At DBS Treasures, you can open NRI accounts from anywhere at your convenience. Reach out to us and our Relationship Managers will be happy to guide you.
*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.
The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.