Interest on NRO account taxable in India : The Tribune India

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Interest on NRO account taxable in India

Q. My son, who left India for Kuwait in 2014, has a PPF account since 2007. After his two years of stay in Kuwait, he got the PR of Canada and went there along with his family in 2016. We (the parents) are depositing some amount in his PPF account regularly.



SC Vasudeva

Q. My son, who left India for Kuwait in 2014, has a PPF account since 2007. After his two years of stay in Kuwait, he got the PR of Canada and went there along with his family in 2016. We (the parents) are depositing some amount in his PPF account regularly. My query is:

1.  Can the existing PPF account be transferred in savings account of post office. As this account is deemed to be  closed.

2.  Please guide if his presence is required to open a savings account in the post office.

3. If the interest will be considered as income and is it taxable?

4.  Can we as parents withdraw the PPF before 15 years (which is due in 2023)? He has got Aadhaar and PAN.   — Veena Mahajan

A. Your queries are replied hereunder:

a) Your son having acquired the status of an NRI can maintain his savings account which will be designated as ‘NRO account’ in which receipts and payments in Indian rupees can be made.

b) In case your son does not have a savings account, his signatures for opening of a new account should be required so as to conform to the KYC details.  However, you can check this aspect with the bank in which you intend to open his account.

c) The amount of interest earned on NRO account would be taxable in India.

d) The issue whether the amount deposited in PPF account of a NRI can be withdrawn before 15 years shall have to be checked up with the bank or post office where such account has been maintained and has to be closed on account of his NRI status.


Q. I am a retired Punjab Government official and filing my  income tax returns regularly and paying the income tax as admissible. My date of birth is 10-11-1938 and became 80 years old on 10-11-1918. I understand that  I am now super senior citizen in financial year 2018-19 and will be eligible to avail the benefits of super senior citizen for the assessment year 2019-20. Kindly confirm my version. Please also explain the term Resident Super Senior Citizen (who is 80 years or more on the last day of the previous year), the Section, rule, or circular of the Income Tax Act, 1961, may kindly be quoted.

— Jagdish Singh

A. You will be entitled to claim the benefits allowable to a very senior citizen. There is no section or rule which provides for such an interpretation. The acceptable interpretation is that a person should be 80 years of age as on the date of close of the financial year in respect of which income-tax return is to be filed.


Q. I am a PSPCL pensioner. I am regularly filing my I-T return. I intend to sell my old house measuring 100 sq yards. The collector rate is Rs 3,500 per sq yard. Thus I will receive Rs 3,50,000 towards sale of house.  Recently, I have got constructed my new house by taking home loan from a nationalised bank. Please advise my tax liability in case I deposit Rs 3,50,000 in the bank.

— Ramesh Kumar

A. The amount of tax liability in respect of capital gain can be computed only if the cost and the year of acquisition of the old house is available. In the absence of such details, it is not possible to compute the amount of tax liability in respect of the amount of capital gain. You may deposit the amount of consideration on the sale of the old house amounting to Rs 3,50,000 in your bank account.


Q. My son is immigrating to the US with his wife and two children. His immigration was sponsored by his elder sister (my daughter, a US citizen). Please guide me on the following issues:

1) How much foreign exchange his family can carry with them and in what form - cash or draft?

2) What are current rules under which I being his father, can remit funds for his help, as and when his family may need in future? What formalities I may have to go in for if such remittances are made through banking channels out of my own bank account and/or out of the bank account of my immigrant son?

- AarPee

A. a) A person wanting to emigrate can draw foreign exchange from authorised dealer (AD) category I bank and AD category II up to the amount prescribed by the country of emigration or $250,000. Remittance of any amount of foreign exchange outside India in excess of this limit may be allowed only towards meeting incidental expenses in the country of immigration and not for earning points or credits to become eligible for immigration by way of overseas investments in government bonds; land; commercial enterprise; etc.

b) You, being a father and resident individual can remit up to $2,50,000 in a financial year to your son’s foreign bank account under Liberalised Remittance Scheme (LRS). The said can be remitted as gift or as a maintenance of close relative abroad. The individual will have to designate a branch of an AD through which all remittances under this scheme will be made. The resident individual seeking to make the remittance should furnish Form A2 for purchase of foreign exchange under LRS. It is mandatory for the resident individual to provide his/her PAN to make remittance under the scheme.

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