There is a bit of tension on the air for all the Non-Resident Indians (NRIs), as the Government has shut the window that led to small savings for the NRIs. Till now, the NRIs had the liberty to keep their Public Provident Fund (PPF) accounts and National Savings Certificate(NCS), but they did not have the liberty to extend them after maturity, the new rules by the Government may come as a complete shocker to NRIs, we will tell you why.
According to the new rules the PPF accounts will be closed and the NSCs will be considered as encashed when belongs to the NRI category. These investments will only earn 4% till maturity.
These new rules are an addon to the unending list of financial discrimination that NRI’s face in India. The tax rules for NRIs certainly different than those for the resident citizens. There is no tax for the foreign income and the tax reporting is very elaborate, not only this, the tax deduction at source is quite rigid and NRIs don’t get to enjoy a few privileges that are enjoyed by the resident citizens. This is not the end of troubles for NRIs, adding fuel to the fire NRIs are not eligible for a couple of tax deductions like medical treatment of the disabled dependent under section 80DD, the treatments of a family member suffering from specified diseases under section 80DDB, disability of self or dependent under section 80U or royalty income under section 80QQB.
TDS is a major problem for NRIs. The resident investors in stocks and mutual funds are not subjected to TDS, but unfortunately, NRI’s are. Short-term capital gains from stocks are subjected to 15% TDS, while those from debt funds and debentures are hard-hit by 30% TDS. Even your long-term gains like gold and property are also subjected to 20% TDS. Bank deposits are a major security for masses across the globe but there is no relief for NRIs here as well, as they must shell out 30% TDS on bank deposits which is way more than the 10% TDS paid by the resident citizens.
If an NRI is getting rent for a property, the tenant is supposed to deduct 30% TDS from the rent. NRIs need to submit form 15CA for the remittance of their rental income.
Well, you can take care of all these troubles by following some of the tricky yet easy steps: –
Say bye to TDS
One way by which NRIs can get relief from high TDS is by becoming the second holder in the joint investments. The first holder is always subjected to tax liability and if the first holder is an Indian resident then he/she is not subjected to TDS. Similarly, if an NRI is the second holder of the property, TDS will not apply if the rent is not more than 50,000 per month.
Another way to dodge tax is by thinking about your children and spouse, that is by investing in the name of your adult children and spouse. In order to save tax, you can also gift your adult children or parents Fixed Deposits before going to abroad, as NRIs don’t have the liberty to hold resident fixed deposits.
Well, you should always keep in mind that joint ventures are only to avoid TDS, but in both the investors as well as the property owners will have to bear the tax liability on the income.