Taxation is one of the most confusing and often difficult to understand part of finance and investments
Even seasoned investors find it difficult. As NRI's it is important to know the taxation before making any investment in India.
Tax on FDs
NRIs can have 3 types of Bank a/c in India - NRE, NRO or FCNR NRE and NRO can be either Current, Savings or FD a/c FCNR can only be FD a/c
NRE a/c Taxation
Interest earned in tax free in India. Principal and Interest have to be fully repatriated. Check whether you are taxed in your local country.
NRO a/c taxation
Interest is taxable in India under Income from Other Sources. TDS will be deducted in India.
FCNR a/c Taxation
The interest earned on FDs in FCNR a/c is tax free. However interest earned has to be disclosed in the Income Tax Return in India.
TDS on NRO a/c
30% TDS is deducted on NRO a/c while NRE and FCNR have no
TDS on Capital Gains
Short Term Capital Gains are subject to 15% TDS and Long Term Capital Gains are subject to 10% TDS
Double Tax Avoidance Agreement (DTAA) needs to be checked by NRIs to avoid double taxation in India as well as their country of residency
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